<PAGE>
Registration Nos. 2-10653
811-82
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ |_|
Post-Effective Amendment No. 82 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 37 |X|
(Check appropriate box or boxes)
CGM TRUST
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(Exact Name of Registrant as Specified in Charter)
One International Place, Boston, Massachusetts 02110
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(Address of Principal Executive Offices)
(617) 737-3225
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(Registrant's Telephone Number, including Area Code)
Edward T. O'Dell, Jr. P.C. and Philip H. Newman, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to |_| on ----------- pursuant to
paragraph (b) paragraph (b)
|_| 60 days after filing pursuant to |X| on May 1, 1997 pursuant to
paragraph (a)(1) paragraph (a)(1)
|_| 75 days after filing pursuant to |_| on ------------ pursuant to
paragraph (a)(2) paragraph (a)(2) of rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
STATEMENT UNDER RULE 24f-2(a)(1)
Registrant has registered an indefinite number of shares of CGM Mutual Fund, CGM
Fixed Income Fund, CGM American Tax Free Fund and CGM Realty Fund under the
Securities Act of 1933, as amended, in accordance with Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant filed on approximately
February 20, 1997, the Rule 24f-2 Notices for CGM Mutual Fund, CGM Fixed Income
Fund, CGM American Tax Free Fund and CGM Realty Fund for the year ended December
31, 1996.
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER
THE SECURITIES ACT OF 1933(1)
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Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Share(2) Price (3) Fee
- --------------------------------------------------------------------------------
Shares of
Beneficial
Interest
Name of Series:
CGM Mutual Fund 3,078,137 $33.45 $0 $0
- --------------------------------------------------------------------------------
(1) The shares being registered as set forth in this table are in addition to
the indefinite number of shares of beneficial interest of CGM Mutual Fund
which Registrant has registered under the Securities Act of 1933, as amended
(the "1933 Act"), pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended (the "1940 Act"). The Registrant's Rule 24f-2 Notice with
respect to CGM Mutual Fund for its fiscal year ended December 31, 1996, was
filed on February 20, 1997.
(2) Based on the Fund's net asset value on February 19, 1997 pursuant to Rule
457(d) under the 1933 Act and Rule 24e-2(a) under the 1940 Act.
(3) In response to Rule 24e-2(b) under the 1940 Act: (1) the calculation of the
maximum aggregate offering price is made pursuant to Rule 24e-2; (2)
8,241,929 shares of beneficial interest of CGM Mutual Fund were redeemed by
the Registrant during the fiscal year ended December 31, 1996; (3) 5,163,792
shares are being used for reductions pursuant to Rule 24f-2(c) during the
current fiscal year, and (4) 3,078,137 shares are being used for reduction
in this amendment pursuant to Rule 24e-2(a).
<PAGE>
CGM TRUST
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No.
of Form N-1A Location/Caption in Prospectus
- ------------ ------------------------------
1 ..................................... Cover Page
2 ..................................... Schedule of Fees
3 ..................................... Financial Highlights
4 ..................................... Investment Objective and
Policies, Risk Factors
Additional Facts About the Fund,
Cover Page
5 ..................................... The Fund's Investment Manager;
How to Purchase
Shares; Back Cover Page;
Additional Facts About the
Fund
5A ..................................... Financial Highlights
6 ..................................... How to Purchase Shares; Cover
Page; Dividends,
Capital Gains and Taxes
7 ..................................... Back Cover Page; How to Purchase
Shares;
Shareholder Services, Pricing the
Shares
8 ..................................... How to Redeem Shares
9 ..................................... None
<PAGE>
Item No. Location/Caption in Statement
of Form N-1A of Additional Information
- ------------ ------------------------------
10 ..................................... Cover Page
11 ..................................... Table of Contents
12 ..................................... Introduction
13 ..................................... Investment Objective, Policies
and Restrictions;
Portfolio Turnover
14 ..................................... Management of the Fund
15 ..................................... Description of the Trust
16 ..................................... Management of the Fund--Investment
Advisory and
Other Services
17 ..................................... Portfolio Transactions and
Brokerage
18 ..................................... Description of the Trust
19 ..................................... How to Buy Shares; Net Asset
Value and Public
Offering Price; Shareholder
Services
20 ..................................... Income Dividends, Capital Gain
Distributions and Tax
Status
21 ..................................... Not Applicable
22 ..................................... Advertising and Performance
Information
23 ..................................... Financial Statements
<PAGE>
PART A.
Prospectuses for CGM Mutual Fund, CGM Realty Fund,
CGM Fixed Income Fund, and CGM American Tax Free Fund
follow
<PAGE>
CGM MUTUAL FUND
CGM Mutual Fund (the "Fund") is a diversified and flexibly managed mutual
fund and a series of CGM Trust (the "Trust"), a registered, open-end, no-load
management investment company. The Fund's objective is reasonable long-term
capital appreciation with a prudent approach to protection of capital from undue
risks. Current income is a consideration in the selection of the Fund's
portfolio securities, but it is not a controlling factor. The Fund's investment
manager is Capital Growth Management Limited Partnership ("CGM" or the
"Investment Manager").
PROSPECTUS
May 1, 1997
This prospectus sets forth information you should know before investing in
the Fund. It should be retained for future reference. A Statement of
Additional Information about the Fund dated May 1, 1997, (the "Statement") has
been filed with the Securities and Exchange Commission (the "SEC") and is
available free of charge. Write to the Trust, c/o CGM Investor Services, 222
Berkeley Street, Boston, MA 02116 or call the telephone number listed below to
obtain a Statement. The SEC maintains a web site (http://www.sec.gov) that
contains the Statement, material incorporated by reference and other information
regarding the Fund. The Statement contains more detailed information about the
Fund and, as amended or supplemented from time to time, is incorporated into
this prospectus by reference.
- -------------------------------------------------------------------------------
For additional information about:
[] Account procedures and status [] New account procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800-345-4048
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TABLE OF CONTENTS
Page
Schedule of Fees ................................................ 2
Financial Highlights ............................................ 3
Investment Objective and Policies ............................... 4
The Fund's Investment Manager ................................... 5
The Portfolio Manager ........................................... 5
How to Purchase Shares .......................................... 5
Shareholder Services ............................................ 6
How to Redeem Shares ............................................ 7
Telephone Transactions .......................................... 9
Dividends, Capital Gains and Taxes .............................. 10
Pricing of Shares ............................................... 11
Performance Information ......................................... 11
Additional Facts About the Fund ................................. 12
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
CGM MUTUAL FUND
SCHEDULE OF FEES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) ............................... None
Redemption Fees* .................................................. None
Exchange Fees ..................................................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees ................................................... 0.84%
12b-1 Fees ........................................................ None
Other Expenses .................................................... 0.18%
----
Total Fund Operating Expenses ..................................... 1.02%
- ----------
*A wire fee (currently $5.00) will be deducted from proceeds if a shareholder
elects to transfer redemption proceeds by wire.
The purpose of this fee schedule is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly if you
invest in the Fund. This fee schedule has been adjusted to give effect to the
revised management fee that became effective on December 13, 1996. For
additional information about the Fund's fees and expenses, please see "The
Fund's Investment Manager" and the Statement.
The following example illustrates the approximate expenses that you would
incur on a $1,000 investment over a ten-year period, assuming a 5% annual rate
of return and redemption at the end of each period.
CUMULATIVE
------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$10 $32 $56 $125
Please keep in mind that the example shown above is hypothetical. The
information above should not be considered a representation of past or future
return and expenses; the actual return and expenses may be more or less.
<PAGE>
CGM MUTUAL FUND
FINANCIAL HIGHLIGHTS
(For a share of the Fund outstanding throughout the indicated years)
These financial highlights have been examined by Price Waterhouse LLP,
independent accountants. The table below should be read in conjunction with the
financial statements and the notes thereto, which, together with the Report of
Independent Accountants thereon, are included in the Fund's Annual Report and
incorporated by reference into the Statement. In addition to the highlights set
forth below, further information about the performance of the Fund is contained
inthe Annual Report and the Statement, which may be obtained from the Trust free
of charge.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990* 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year . $29.43 $25.05 $28.88 $26.02 $26.80 $21.64 $22.34 $19.94 $20.40 $22.86
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income ................ 0.75 0.73 1.09 0.92 0.93 0.97 0.87 0.97 1.08 0.87
Dividends from net investment income . (0.74) (0.77) (1.04) (0.86) (0.93) (0.97) (0.88) (1.02) (1.10) (1.06)
Net realized and unrealized gain
(loss) on investments ............... 6.13 5.31 (3.88) 4.73 0.64 7.80 (0.64) 3.31 (0.44) 2.25
Distributions from net realized gain
on investments ..................... (4.15) (0.89) -- (1.81) (1.42) (2.64) -- (0.86) -- (4.52)
Distributions in excess of net
realized gain ....................... -- -- -- (0.12) -- -- -- -- -- --
Distributions from paid-in capital ... -- -- -- -- -- -- (0.05) -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) in net
asset value ......................... 1.99 4.38 (3.83) 2.86 (0.78) 5.16 (0.70) 2.40 (0.46) (2.46)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at end of year ....... $31.42 $29.43 $25.05 $28.88 $26.02 $26.80 $21.64 $22.34 $19.94 $20.40
Total Return (%) ..................... 23.7 24.3 -9.7 21.8 6.1 40.9 1.1 21.7 3.2 13.7
Ratios:
Operating expenses to average net
assets (%) .......................... 0.87 0.91 0.92 0.93 0.93 0.93 0.97 0.97 1.01 0.94
Net income to average net assets (%) . 2.33 2.55 4.39 3.45 3.74 3.80 4.00 4.26 5.25 3.69
Portfolio turnover (%) ............... 192 291 173 97 121 201 159 218 218 197
Average commission rate** ............ $0.0695 -- -- -- -- -- -- -- -- --
Net assets at end of year
(in thousands) ($) ................. 1,216,523 1,154,439 1,063,375 947,115 548,630 401,887 295,868 312,080 292,735 303,053
</TABLE>
*On March 1, 1990, the Capital Growth Management Division of Loomis, Sayles &
Company, Incorporated was reorganized into CGM, which assumed management of
the Fund.
** SEC regulations require portfolios to disclose average commission rate paid
on trades for which commissions were charged for fiscal years beginning on or
after September 1, 1995.
<PAGE>
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INVESTMENT OBJECTIVE AND POLICIES
The Fund has as its investment objective reasonable long-term capital
appreciation with a prudent approach to protection of capital from undue risks.
While consideration is given to current income in the selection of the Fund's
portfolio securities, it is not a controlling factor. There can be no assurance
that the Fund will achieve its objective.
The Fund seeks to attain its objective by investing substantially all of the
Fund's assets in equity securities and in debt or fixed-income securities. The
Fund is "flexibly managed"; it sometimes will be more heavily invested in equity
securities and at other times will be more heavily invested in debt or
fixed-income securities, depending on management's view of the economic and
investment outlook. The Fund's investments are subject to the market risks
inherent in all securities.
Equity securities are common stocks and securities convertible into common
stock. Equity securities are volatile investments, subject to price declines as
well as advances, and involve greater risks than some other investment media.
The Fund may invest up to 25% of its total assets in securities issued by
companies in any single industry, including the real estate industry. Securities
issued by companies in the real estate industry, including those issued by real
estate investment trusts, may be subject to certain risks associated with the
direct ownership of real estate as well as credit and market risks generally
associated with fixed-income securities.
Debt or fixed-income securities include notes, bonds, preferred stock and
money market instruments including repurchase agreements. Such securities are
subject to credit risk (the risk that the obligor will default in the payment of
principal and/or interest) and to market risk (the risk that the market value of
the securities will change as a result of changes in market rates of interest).
The Fund may invest up to 35% of its total assets in debt or fixed-income
securities of a quality below investment grade at the time of investment (i.e.
securities rated lower than Baa or baa by Moody's Investors Service, Inc.
("Moody's") or lower than BBB by Standard and Poor's Corporation ("S&P"), or
their equivalent as determined by the investment manager), including up to 10%
of its total assets in fixed income securities rated at the time of investment
Caa or lower by Moody's or CCC or lower by S&P, or their equivalent as
determined by the investment manager.
Securities rated non-investment grade (lower than Baa or baa by Moody's or
lower than BBB by S&P) are sometimes referred to as "high yield" or "junk"
bonds. See Appendix A for further information about securities ratings.
Investors should consider the following risks associated with high yield
securities before investing in the Fund.
High yield securities may be regarded as predominantly speculative with
respect to the issuer's continuing ability to make principal and interest
payments. Analysis of the creditworthiness of issuers of high yield securities
may be more complex than for issuers of higher quality debt securities, and the
ability of the Fund to achieve its investment objectives may, to the extent of
its investments in high yield securities, be more dependent upon such
creditworthiness analysis than would be the case if the Fund were investing in
higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to
interest-rate changes than more highly rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. Yields on a
high yield security will fluctuate. If the issuer of high yield securities
defaults, the Fund may incur additional expenses to seek recovery.
The secondary markets on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect the price at which the Fund
could sell a particular high yield security when necessary to meet liquidity
needs or in response to a specific economic event, such as a deterioration in
the creditworthiness of the issuer, and could adversely affect and cause large
fluctuations in the daily net asset value of the Fund's shares. Adverse
publicity and investor perceptions may decrease the value and liquidity of high
yield securities.
It is reasonable to expect any recession to severely disrupt the market for
high yield securities, have an adverse impact on the value of such securities,
and adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon. New laws and proposed new laws may adversely
impact the market for high yield securities.
Although the Fund's objective is long-term capital appreciation, it
frequently sells securities to respond to changes in market, industry, or
individual company conditions or outlook, although it may only have held those
securities for a short period. This policy may result in higher securities
transactions costs.
THE FUND'S INVESTMENT MANAGER
The Fund's investment manager is Capital Growth Management Limited
Partnership, One International Place, Boston, Massachusetts 02110. CGM, an
investment advisory firm founded in 1989, manages eight mutual fund portfolios
and advisory accounts for other clients. The general partner of CGM is a
corporation controlled equally by Robert L. Kemp and G. Kenneth Heebner, who are
trustees and officers of the Fund.
In addition to selecting and reviewing the Fund's investments, CGM provides
executive and other personnel for the management of the Fund. The Trust's Board
of Trustees supervises CGM's conduct of the affairs of the Fund. In 1996, the
Fund paid 0.69% of its average annual net assets in management fees to CGM.
The advisory agreement between CGM Mutual Fund and CGM provides for a
management fee at an annual percentage rate of 0.90% of the first $500 million
of CGM Mutual Fund's average daily net asset value, 0.80% of the next $500
million of such value, and 0.75% of such value in excess of $1 billion.
THE PORTFOLIO MANAGER
G. Kenneth Heebner manages the Fund. In 1989, Mr. Heebner founded CGM with
Robert L. Kemp. Prior to establishing the new company, Mr. Heebner managed
mutual fund portfolios at Loomis, Sayles & Company, Incorporated. He currently
manages CGM Capital Development Fund, CGM Realty Fund and, with Janice H.
Saul, co-manages CGM Fixed Income Fund.
HOW TO PURCHASE SHARES
The Trust sells shares of the Fund directly to investors without any sales
load. You may make an initial purchase of Fund shares by submitting a completed
application form and payment to:
The CGM Funds
P.O. Box 449
Boston, Massachusetts 02117-0449
The minimum initial investment is $2,500 for regular accounts and $1,000 for
retirement plans (see "Shareholder Services -- Retirement Plans") and accounts
set up under the Uniform Gifts to Minors Act ("UGMA") or the Uniform Transfers
to Minors Act ("UTMA"). Subsequent investments must be at least $50. See
"Shareholder Services" below for further information about minimum investments
in certain other circumstances.
All investments made by check should be in U.S. dollars and made payable to
CGM Mutual Fund. Third party checks (i.e. checks not payable to CGM Mutual Fund)
are generally not accepted and checks drawn on credit card accounts will not be
accepted. The Trust reserves the right to reject any third party checks and
checks drawn on credit card accounts.
After accepting an order, the Trust forwards the application and payment to
the CGM Shareholder Services Department ("CGM Shareholder Services") of Boston
Financial Data Services, Inc. ("BFDS"), which is the shareholder servicing agent
for State Street Bank and Trust Company ("State Street Bank"). CGM Shareholder
Services then opens an account, applies the payment to the purchase of full and
fractional shares, and mails a statement of the account confirming the
transaction.
After your account has been established, you may send subsequent investments
at any time directly to the shareholder servicing agent at the following
address:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The remittance for any subsequent investment must be accompanied by either the
Additional Investment Stub detached from a statement of account, or a note
containing sufficient information to identify the account, i.e., the Fund name,
your account number, your name and social security number.
Subsequent investments may also be made by federal funds wire. Instruct your
bank to wire federal funds to State Street Bank and Trust Company, ABA
#011000028. The text of the wire should read as follows: "DDA99046336, $ Amount,
STATE ST BOS ATTN Mutual Funds. Credit CGM Mutual Fund, Shareholder Name,
Shareholder Account Number." Your bank may charge you a fee for transmitting
funds by wire.
The Trust reserves the right to reject any purchase order, including orders
in connection with exchanges, for any reason the Trust, in its sole discretion,
deems appropriate. Although the Trust does not anticipate that it will do so,
the Trust reserves the right to suspend, change or withdraw the offering of
shares of the Fund.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust or by CGM Shareholder
Services.
If you wish transactions in your account to be effected by another person
under a power of attorney from you, special rules apply. Please contact the
Trust or CGM Shareholder Services for details.
An investor will not receive any certificates for shares unless the investor
requests them in writing from CGM Shareholder Services. The Trust's system for
recording investments eliminates the problems of handling and safekeeping
certificates.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services as more fully described
in the Statement. Explanations and forms are available from the Trust.
EXCHANGE PRIVILEGE
Shares may be exchanged for shares of money market funds currently
distributed by New England Funds, L.P. ("Money Market Funds"). You may also
exchange shares for shares of CGM Fixed Income Fund, CGM American Tax Free Fund
and CGM Realty Fund. Additionally, you may exchange shares for shares of CGM
Capital Development Fund, but only if you were a shareholder on September 24,
1993, and have remained a shareholder in CGM Capital Development Fund
continuously since that date. CGM Capital Development Fund shares are not
generally available to other persons except in special circumstances that have
been approved by, or under the authority of, the Board of Trustees of CGM
Capital Development Fund as described in the Statement.
All exchanges may be made without charge. You may make an exchange by
written instruction or, if a written authorization for telephone exchanges is on
file with CGM Shareholder Services, you may call 800-343-5678. See "Telephone
Transactions." Under certain circumstances, before an exchange can be made,
additional documents may be required to verify the authority or legal capacity
of the person seeking the exchange. Exchanges must be for amounts of at least
$1,000. If you wish to make an exchange into a new account, the exchange must
satisfy the applicable minimum initial investment requirement. Exchange requests
cannot be revoked once they have been received in good order.
Investors should not view the exchange privilege as a means for taking
advantage of short-term swings in the market, and the Fund limits the number of
exchanges each shareholder may make to four exchanges per account (or two round
trips) per calendar year. Monthly automatic exchanges from the Money Market
Funds to the Fund are exempt from this restriction. The Trust also reserves the
right to prohibit exchanges during the first 15 days following an investment in
the Fund. The Trust may terminate or change the terms of the exchange privilege.
In general, shareholders will receive notice of any material change to the
exchange privilege at least 60 days prior to the change. For federal income tax
purposes, an exchange constitutes a sale of shares, which may result in a
capital gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
If the value of your account is at least $10,000, you may have periodic cash
withdrawals automatically paid to you or any person you designate. If checks are
returned to the Fund as "undeliverable" or remain uncashed for more than six
months, the plan will be cancelled. Undeliverable or uncashed checks shall be
cancelled and such amounts shall be reinvested in the Fund at the per share net
asset value determined as of the date of cancellation of such checks.
AUTOMATIC INVESTMENT PLAN ("AIP")
Once your account has been established, voluntary monthly investments of at
least $50 may be made automatically by pre-authorized withdrawals from your
checking account. Debits from savings banks and credit unions generally are not
acceptable. Additional information about this Plan is set forth in the Statement
and also in Sections 7 and 9 of the Account Application.
RETIREMENT PLANS
The Fund's shares may be purchased by certain types of tax-deferred
retirement plans. CGM makes available retirement plan forms and plan documents
for IRAs, SEP-IRAs, 403(b)(7) custodial accounts, and money purchase pension and
profit sharing plans ("CGM Retirement Plans").
SHAREHOLDER REPORTS
Shareholders will receive the Fund's financial statements and a summary of
the Fund's investments at least semiannually. The Fund intends to consolidate
mailings of annual, semiannual and quarterly reports to households having
multiple accounts with the same address of record and to furnish a single copy
of each report to that address. Mailings of prospectuses and proxy statements
will not be consolidated and if a report is included in such mailings, each
shareholder will receive a separate copy. You may request additional reports by
notifying the Fund in writing, or by calling the Trust.
Shareholders will receive statements confirming all purchases, redemptions
and changes of address. You may call CGM Shareholder Services and request a
duplicate statement for the current year without charge. A fee may be charged
for any duplicate information requested for prior years.
HOW TO REDEEM SHARES
You can redeem all or part of your shares in the Fund in three different
ways: by sending a written request for a check or wire representing the
redemption proceeds, by making a telephone request for redemption by check
(provided that the amount to be redeemed is not more than $25,000 and the check
is being sent to you at your record address, which has not changed in the prior
three months) or by making a telephone request for redemption proceeds to be
wired to a bank that you have predesignated. The redemption price will always be
the net asset value per share next determined after the redemption request is
received by CGM Shareholder Services in good order (including any necessary
documentation). Necessary documentation may include, in certain circumstances,
documents verifying the authority or legal capacity of the person seeking to
redeem shares. Redemption requests cannot be revoked once they have been
received in good order.
If you elect to redeem shares in writing, send your written request to:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The written request must include the name of the Fund, your account number, the
exact name(s) in which your shares are registered, the number of shares or the
dollar amount to be redeemed and mailing or wire instructions. All owners of
shares must sign the request in the exact name(s) in which the shares are
registered (which appear(s) on your confirmation statement) and should indicate
any special capacity in which they are signing (such as trustee or custodian or
on behalf of a partnership, corporation or other entity). If you are signing in
a special capacity, you may wish to contact CGM Shareholder Services in advance
to determine whether additional documentation will be required before you send a
redemption request.
Redemptions from CGM Retirement Plans for which State Street Bank is the
trustee must contain additional information. Please contact CGM Shareholder
Services for instructions and forms. Complete information, including tax
withholding instructions, must be included in your redemption request.
If you are redeeming shares worth more than $25,000 or requesting that the
proceeds check be made payable to someone other than the registered owner(s) or
be sent to an address other than your record address (or sent to your record
address if such address has been changed within the previous three months), you
must have your signature guaranteed by an "eligible guarantor institution" as
defined in the rules under the Securities Exchange Act of 1934 (including a
bank, broker, dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association, but not a notary
public).
If you hold certificates representing your investment, you must enclose the
certificates and a properly completed redemption form or stock power. You bear
the risk of loss of such certificates; consequently, you may wish to send your
certificates by registered mail.
If you elect to redeem shares by telephone, call CGM Shareholder Services
directly at 800-343-5678. See "Telephone Transactions." Telephone redemptions
are not available for CGM Retirement Plans. When you make a redemption request
by telephone, you may choose to receive redemption proceeds either by having a
check mailed to the address of record on the account, provided the address has
not changed for three months and you are redeeming $25,000 or less, or by having
a wire sent to a bank account you have previously designated.
Telephone redemptions by check are available to all shareholders of the Fund
automatically and no special application is necessary. You may select the
telephone redemption wire service when you fill out your initial application or
you may select it later by completing the Service Options Form (with a signature
guarantee), available from the Trust or CGM Shareholder Services.
A telephone redemption request must be received by CGM Shareholder Services
prior to the close of the New York Stock Exchange (the "Exchange"). If you
telephone your request to CGM Shareholder Services after the Exchange closes or
on a day when the Exchange is not open for business, the Trust cannot accept
your request and a new one will be necessary.
Wire redemptions by telephone may be made only if your bank is a member of
the Federal Reserve System or has a correspondent bank that is a member of such
System. If your account is with a savings bank, it must have only one
correspondent bank that is a member of the Federal Reserve System. A wire fee
(currently $5) will be deducted from the proceeds. If you decide to change the
bank account to which proceeds are to be wired, you must send in this change on
the Service Options Form with a signature guarantee.
Proceeds resulting from a written or regular telephone redemption request
will normally be mailed to you within seven days after receipt of your request
in good order. Telephone wire redemption proceeds will normally be wired to your
bank within seven days (and generally on the first business day) following
receipt of a proper redemption request. If you purchased your Fund shares by
check (or through your AIP) and elect to redeem shares within 15 days of such
purchase, you may experience delays in receiving redemption proceeds. The Trust
will generally postpone sending your redemption proceeds from such investment
until the Trust can verify that your check (or AIP investment) has been or will
be collected. There will be no such delay for redemptions following investments
paid for by federal funds wire or by bank cashier's check, certified check or
treasurer's check. If checks representing redemption proceeds are returned
"undeliverable" or remain uncashed for six months, such checks shall be
cancelled and such proceeds shall be reinvested in the Fund at the per share net
asset value determined as of the date of cancellation of such checks.
The Fund may not suspend the right of redemption or postpone payment for
more than seven days except when the Exchange is closed for other than weekends
or holidays, when trading on the Exchange is restricted, during an emergency (as
determined by the SEC) which makes it impracticable for the Fund to dispose of
its securities or to determine fairly the value of its net assets, or during any
other period permitted by the SEC for the protection of investors.
Because the expense of maintaining small accounts is disproportionately
high, the Fund may close accounts with 20 shares or less, and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of the Fund's intention to close the account and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to CGM Retirement Plans and UGMA/UTMA
accounts.
TELEPHONE TRANSACTIONS
You may initiate three types of transactions by telephone:
[] Telephone Exchanges
[] Telephone Redemptions By Wire
[] Telephone Redemptions By Check
The terms and provisions for each of these services are explained fully in the
preceding sections. Once a telephone transaction request has been placed, it
cannot be revoked.
The Telephone Exchange privilege and/or Telephone Redemptions By Wire
privilege must be elected by you when you fill out your initial application or
you may select either option later by completing the Service Options Form (with
a signature guarantee) available from the Trust or CGM Shareholder Services. The
Telephone Redemptions By Check privilege is available to shareholders of the
Fund automatically, and no special application is necessary.
The telephone redemption privileges are not available for IRAs, SEP-IRAs,
403(b)(7) custodial accounts or for money purchase pension and profit sharing
accounts under a CGM Retirement Plan (in which State Street Bank is the
trustee).
The Fund will employ reasonable procedures to confirm that instructions
received by telephone (including instructions with respect to changes in
addresses) are genuine, such as requesting personal identification information
that appears on your account application and recording the telephone
conversation. You will bear the risk of loss due to unauthorized or fraudulent
instructions regarding your account, although the Fund may be liable if
reasonable procedures are not employed.
DIVIDENDS, CAPITAL GAINS AND TAXES
The Fund intends to declare and pay quarterly dividends consisting of
substantially all of its net investment income. Any capital gains distributions
are normally made annually in December (after applying any available capital
loss carryovers) but may be made more frequently as deemed advisable by the
Board of Trustees. The Fund's dividend and capital gains distributions may be
reinvested in additional shares or received in cash. Certain restrictions may
apply to participants in CGM Retirement Plans.
If you elect to receive distributions in cash and checks are returned
"undeliverable" or remain uncashed for six months, your cash election will be
changed automatically and your future dividend and capital gains distributions
will be reinvested in the Fund at the per share net asset value determined as of
the date of payment of the distribution. In addition, following such six-month
period, any undeliverable or uncashed checks shall be cancelled and such amounts
shall be reinvested in the Fund at the per share net asset value determined as
of the date of cancellation of such checks.
The Fund intends to qualify annually as a "regulated investment company"
under the Internal Revenue Code. To qualify, the Fund must meet certain income,
distribution and diversification requirements. In any year in which the Fund so
qualifies it generally will not be subject to federal income or excise tax to
the extent that its taxable income is distributed to shareholders.
The distributions received by the Fund from its investments may, for federal
income tax purposes, consist of ordinary income, long-term capital gains or a
return of capital. The characterization of these distributions to the Fund may,
in turn, affect the tax treatment of the Fund's distributions to its
shareholders. Dividends and distributions are taxable to shareholders in the
same manner whether received in cash or reinvested in additional shares of the
Fund.
Dividends paid by the Fund from net investment income, including dividends,
interest and net short-term capital gains, will be taxable to shareholders as
ordinary income. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) which are designated by the
Fund as capital gains distributions are taxable as long-term capital gains,
regardless of the length of time shareholders have owned shares in the Fund. To
the extent that the Fund makes a distribution in excess of its current and
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing the tax basis in a shareholder's shares,
and then, to the extent the distribution exceeds such basis, as a taxable gain
to be realized upon sale of such shares.
Distributions that the Fund receives from a real estate investment trust,
and dividends of the Fund attributable to such distributions, will not
constitute "dividends" for purposes of the dividends-received deduction
applicable to corporate shareholders.
A distribution will be treated as paid by the Fund and received by its
shareholders on December 31 of the current calendar year if it is declared by
the Fund in October, November or December of that year with a record date in
such a month and paid by the Fund in January of the subsequent year.
Any dividends or distributions paid shortly after a purchase of shares will
have the effect of reducing the per share net asset value of the shares by the
amount of the dividends or distributions. Although in effect a return of
capital, these distributions are subject to taxes, even if their effect is to
reduce the per share net asset value below a shareholder's cost. The Fund will
notify you annually as to the tax status of dividend and capital gains
distributions paid by the Fund.
The sale or other disposition of shares of the Fund, including a redemption
of shares or an exchange of shares into another fund, is a taxable event and may
result in a capital gain or loss which will be long-term or short-term,
depending upon the shareholder's holding period for the shares.
Dividend distributions, capital gains distributions and capital gains or
losses from redemptions and exchanges may be subject to state and local taxes.
In certain states, a portion of the Fund's income derived from certain direct
U.S. Government obligations may be exempt from state and local taxes. The Fund
will indicate each year the portion of the Fund's income, if any, which is
derived from such obligations.
The Fund is required to withhold a portion of taxable dividends, capital
gains distributions, and redemptions paid to individuals and certain other
classes of shareholders if they fail to furnish the Fund with their correct
taxpayer identification number and certain certifications regarding their tax
status, or if they are otherwise subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against a shareholder's normal federal income tax liability. For additional
information about withholding, please see the Statement.
BFDS, the shareholder servicing agent, will send you and the Internal
Revenue Service an annual statement detailing federal tax information, including
information about dividends and distributions paid to you during the preceding
year. If you redeem or exchange shares in any year, following the end of the
year, you will receive a statement providing the cost basis and gain or loss of
each share lot that you sold during such year. Your CGM account cost basis will
be calculated using the "single category average cost method," which is one of
the four calculation methods allowed by the IRS. Shareholders of the Fund will
receive these cost basis statements only for accounts opened after January 1,
1991. Be sure to keep these statements as permanent records. A fee may be
charged for any duplicate information that you request.
The tax discussion set forth above is included for general information only.
Shareholders and prospective investors should consult their own tax advisers
concerning the tax consequences of an investment in the Fund.
PRICING OF SHARES
The share price or "net asset value" per share of the Fund is computed daily
by dividing the total value of the investments and other assets of the Fund,
less any liabilities, by the total outstanding shares of the Fund. The net asset
value per share of the Fund is determined as of the close of the regular trading
session of the Exchange on each day the Exchange is open for trading. Portfolio
securities are generally valued at their market value. In certain cases, market
value may be determined on the basis of information provided by a pricing
service approved by the Board of Trustees. Instruments with maturities of sixty
days or less are valued at amortized cost, which approximates market value.
Other assets and securities which are not readily marketable will be valued in
good faith at fair value using methods determined by the Board of Trustees. The
valuation of portfolio securities is more fully described in the Statement.
PERFORMANCE INFORMATION
The Fund may include yield and total return information in advertisements or
other written sales material. The Fund will show its average annual total return
for the one-, five- and ten-year periods through the end of the most recent
calendar quarter. Total return is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the value of
the investment at the end of the period (assuming automatic reinvestment of all
dividends and capital gains distributions). The Fund may also show total return
over other periods or on an aggregate basis for the period presented.
Yield is computed in accordance with the SEC's standardized formula by
dividing the adjusted net investment income per share earned during a recent
thirty-day period by the maximum offering price of a Fund share on the last day
of the period. The Fund may also present one or more distribution rates in its
sales literature. These rates will be determined by annualizing the Fund's
distributions from net investment income and net short-term capital gains over a
recent twelve-month, three-month or thirty-day period and dividing that amount
by the net asset value on the last day of such period.
The Fund may compare its performance to that of recognized financial indices
or groups of mutual funds. It may also include its ranking among other mutual
funds or its rating as published by mutual fund ranking services or major
financial publications. All performance information is based on past results and
is not an indication of likely future performance.
ADDITIONAL FACTS ABOUT THE FUND
[] The Trust was organized in 1986 as a Massachusetts business trust and is
authorized to issue an unlimited number of full and fractional shares in
multiple series. The Trust currently has four series -- CGM Mutual Fund (a
successor to Loomis-Sayles Mutual Fund), CGM Fixed Income Fund, CGM American
Tax Free Fund and CGM Realty Fund.
[] When a shareholder invests in the Fund, the shareholder acquires freely
transferable shares of beneficial interest that entitle the shareholder to
receive dividends and to cast one vote at shareholder meetings for each share
owned. On matters affecting the Fund, shares of the Fund vote separately from
shares of other series of the Trust, except as otherwise required by law.
[] The investment objective of the Fund is fundamental and cannot be changed
without shareholder approval. Non-fundamental policies may be changed at any
time without such approval.
<PAGE>
APPENDIX A
RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. DEBT RATINGS -- TAXABLE DEBT &
DEPOSITS GLOBALLY:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds that are rated Ca represent obligations that are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds that are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.
PREFERRED STOCK RATINGS:
aaa -- An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa -- An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
a -- An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa -- An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba -- An issue which is rated "ba" is considered to have speculative
elements, and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b -- An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -- An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
ca -- An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payments.
c -- This is the lowest rated class of preferred or preference stock. Issues
so rated can thus be regarded as having extremely poor prospects of ever
attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S CORPORATION LONG-TERM ISSUE CREDIT RATINGS:
AAA -- An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA -- An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB -- An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
BB, B, CCC, CC and C -- Obligations rated "BB", "B", "CCC", "CC", and "C"
are regarded as having significant speculative characteristics. "BB" indicates
the least degree of speculation and "C" the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued.
Plus (+) or Minus (-): The ratings from A to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r -- This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk -- such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
DESCRIPTION OF STANDARD & POOR'S CORPORATION PREFERRED STOCK RATING
DEFINITIONS:
AAA -- This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA -- A preferred stock issue rated "AA" also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA".
A -- An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB -- An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
BB, B, CCC -- Preferred stock rated "BB," "B," and "CCC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. "BB" indicates the lowest degree of speculation
and "CCC" the highest. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CC -- The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C -- A preferred stock rated "C" is a nonpaying issue.
PORTFOLIO COMPOSITION
For the fiscal year ending on December 31, 1996, the amount of the Fund's
investments represented by securities below investment grade comprised less than
5% of the Fund's total investments, based on dollar-weighted averages of
month-end portfolio holdings.
<PAGE>
INVESTMENT ADVISER
Capital Growth Management
Limited Partnership
One International Place
Boston, MA 02110
TRANSFER AND DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, MA 02102
SHAREHOLDER SERVICING AGENT FOR
STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, MA 02266
MFP96A
CGM
MUTUAL FUND
Prospectus & Application
May 1, 1997
A No-Load Fund
[FENCER LOGO]
<PAGE>
CGM REALTY FUND
CGM Realty Fund (the "Fund") is a diversified mutual fund and a series of
CGM Trust (the "Trust"), a registered, open-end, no-load management investment
company. The Fund's investment objective is above-average income and long-term
growth of capital. The Fund intends to pursue its objective by investing
primarily in equity securities of companies in the real estate industry. The
Fund seeks to provide a yield in excess of the yield of the Standard and Poor's
500 Composite Index (the "S&P 500"). The Fund's investment manager is Capital
Growth Management Limited Partnership ("CGM" or the "Investment Manager").
PROSPECTUS
May 1, 1997
This prospectus sets forth the information you should know before investing
in the Fund. It should be retained for future reference. A Statement of
Additional Information about the Fund dated May 1, 1997 (the "Statement") has
been filed with the Securities and Exchange Commission (the "SEC") and is
available free of charge. Write to the Trust, c/o CGM Investor Services, 222
Berkeley Street, Boston, MA 02116 or call the telephone number listed below to
obtain a Statement. The SEC maintains a web site (http://www.sec.gov) that
contains the Statement, material incorporated by reference, and other
information regarding the Fund. The Statement contains more detailed information
about the Fund and, as amended or supplemented from time to time, is
incorporated into this prospectus by reference.
- -------------------------------------------------------------------------------
For additional information about:
[] Account procedures and status [] New account procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800-345-4048
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Schedule of Fees .................................................... 2
Financial Highlights ................................................ 3
Investment Objectives and Policies .................................. 4
Risk Factors ........................................................ 5
Investment Restrictions ............................................. 7
The Funds' Investment Manager ....................................... 7
The Portfolio Manager ............................................... 7
How to Purchase Shares .............................................. 7
Shareholder Services ................................................ 8
How to Redeem Shares ................................................ 10
Telephone Transactions .............................................. 11
Dividends, Capital Gains and Taxes .................................. 12
Pricing of Shares ................................................... 13
Performance Information ............................................. 14
Additional Facts About the Fund ..................................... 14
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
CGM REALTY FUND
SCHEDULE OF FEES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ........................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) ........................... None
Redemption Fees* .................................................. None
Exchange Fees ..................................................... None
Annual Fund Operating Expenses, After Expense Limitation
(as a percentage of average net assets)
Management Fees, After Waiver ..................................... 0.60%
12b-1 Fees ........................................................ None
Other Expenses .................................................... 0.40%
----
Total Fund Operating Expenses, After Expense Limitation ........... 1.00%
- ----------
*A wire fee (currently $5.00) will be deducted from proceeds if a shareholder
elects to transfer redemption proceeds by wire.
The purpose of this fee schedule is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly if you
invest in the Fund. CGM has voluntarily agreed, until December 31, 1997, and
thereafter until further notice to the Fund, to limit its management fees and,
if necessary, to bear certain expenses associated with operating the Fund, in
order to limit the Fund's total operating expenses to an annual rate of 1.00% of
the Fund's average net assets. The percentage shown for Management Fees reflects
current fees after such voluntary limitation. For the fiscal year ended December
31, 1996, without the voluntary expense limitation, the Management Fees, Other
Expenses, and Total Fund Operating Expenses as a percentage of average net
assets would have been 0.85%, 0.40% and 1.25%, respectively. For additional
information about the Fund's fees and expenses, please see "The Fund's
Investment Manager" and the Statement.
The following example illustrates the approximate expenses that you would
incur on a $1,000 investment over the following periods, assuming a 5% annual
rate of return and redemption at the end of each period.
CUMULATIVE
------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$10 $32 $55 $122
Please keep in mind that the example shown above is hypothetical and assumes
that the current fee limitation and expense reimbursement will remain in effect.
The information above should not be considered a representation of past or
future return or expenses; the actual return and expenses may be more or less.
<PAGE>
- --------------------------------------------------------------------------------
CGM REALTY FUND
FINANCIAL HIGHLIGHTS
(For a share of the Fund outstanding throughout the indicated period)
These financial highlights have been examined by Price Waterhouse LLP,
independent accountants. The table below should be read in conjunction with the
financial statements and the notes thereto, which, together with the Report of
Independent Accountants thereon, are included in the Fund's Annual Report and
incorporated by reference into the Statement. In addition to the highlights set
forth below, further information about the performance of the Fund is contained
in the Annual Report and the Statement, which may be obtained from the Trust
free of charge.
FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED MAY 13, 1994(c)
DECEMBER 31, DECEMBER 31, THROUGH
1996 1996 DECEMBER 31, 1993
----------- ------------ -----------------
Net asset value at beginning
of period ....................... $10.89 $ 9.71 $10.00
------ ------ ------
Net investment income (after
waiver and reimbursement)(a) 0.52 0.54 0.31
Dividends from net investment
income .......................... (0.52) (0.54) (0.23)
Distributions from net realized
gain ............................ (0.41) -- --
Distributions from tax return of
capital ......................... -- (0.14) (0.08
---- ----- -----
Distributions in excess of net
investment income ............... (0.12) -- --
Net realized and unrealized gain
(loss) on investments ........... 4.14 1.32 (0.29)
Net increase (decrease) in net
asset value ................... 3.61 1.18 (0.29)
---- ---- -----
Net asset value at end of period $14.50 $10.89 $ 9.71
====== ====== ======
Total Return (%)(b) ............. 44.1 19.8 0.4(d)
Ratios:
Operating expenses to average net
assets (%) ...................... 1.00 1.00 1.00(d)
Operating expenses to average net
assets before expense
limitation (%)................... 1.25 1.68 2.00(d)
Net income to average net
assets (%) ...................... 4.97 5.51 7.40(d)
Portfolio turnover (%) ............ 57 85 47(d)
Average commission rate (e) ....... $0.0660 -- --
Net assets at end of period
(in thousands) .................. $161,727 $47,694 $34,277
(a) Fees waived and expenses
reimbursed amounted to ........ $ 0.02 $ 0.07 $ 0.04
(b) The total return would have been lower had management fees and certain
expenses not been waived or reimbursed during the period.
(c) Commencement of operations.
(d) Computed on an annualized basis.
(e) SEC regulations require portfolios to disclose the average commission rate
paid on trades for which commissions were charged for fiscal years beginning
on or aftrer September 1, 1995.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is above-average income and long-term
growth of capital. The Fund intends to pursue its objective by investing
primarily in equity securities of companies in the real estate industry. The
Fund seeks to provide a yield in excess of the yield of the S&P 500. There are
no assurances the Fund will achieve its objective and the Fund may change its
objective without shareholder approval.
At least 65% of the Fund's total assets will be invested, under normal
conditions, in equity securities of companies in the real estate industry. A
company is considered in the real estate industry if construction, ownership,
management, financing and sales of residential, commercial or industrial real
estate account for not less than 50% of its gross revenues or net profits.
Companies in the real estate industry include the following: real estate
investment trusts that own properties or make or invest in construction,
development or long-term mortgage loans; brokers or real estate developers; and
companies with significant real estate holdings including but not limited to
hotel chains, supermarkets and mining, lumber and paper companies. Equity
securities in which the Fund may invest include common and preferred stocks,
convertible bonds and warrants.
Up to 35% of the Fund's total assets may be invested in securities of
companies outside the real estate industry. The Fund may invest this portion of
its assets in equity securities or fixed-income securities, including investment
grade securities and, with respect to up to 25% of the Fund's total assets,
lower quality securities which have speculative characteristics and are subject
to special risks. See "Risk Factors -- Non-Investment Grade Risk" and Appendix
for a description of securities ratings. Fixed-income securities include notes,
bonds, preferred stocks, certain asset-backed securities and money market
instruments, including repurchase agreements. Fixed-income securities are
subject to credit risk (the risk that the obligor will default in the payment of
principal and/or interest) and interest rate risk (the risk that the market
value of the securities will change as a result of changes in market rates of
interest). The Fund's investments are also subject to the market risks inherent
in all securities.
REAL ESTATE INVESTMENT TRUSTS
A real estate investment trust ("REIT") is a corporation, or a business
trust that would otherwise be taxed as a corporation, which meets the
definitional requirements of the Internal Revenue Code of 1986, as amended (the
"Code"). The Code permits a qualifying REIT to deduct dividends paid, thereby
effectively eliminating corporate level federal income tax and making the REIT a
pass-through vehicle for federal income tax purposes. To meet the definitional
requirements of the Code, a REIT must, among other things, invest substantially
all of its assets in interests in real estate (including mortgages and other
REITs) or cash and government securities, derive most of its income from rents
from real property or interest on loans secured by mortgages on real property,
and distribute to shareholders annually 95% or more of its otherwise taxable
income.
REITs are sometimes informally characterized as equity REITs, mortgage REITs
and hybrid REITs. An equity REIT invests primarily in the fee ownership or
leasehold ownership of land and buildings and derives its income primarily from
rental income. An equity REIT may also realize capital gains (or losses) by
selling real estate properties in its portfolio that have appreciated (or
depreciated) in value. A mortgage REIT invests primarily in mortgages on real
estate, which may secure construction, development or long-term loans. A
mortgage REIT generally derives its income primarily from interest payments on
the credit it has extended. A hybrid REIT combines the characteristics of equity
REITs and mortgage REITs, generally by holding both ownership interests and
mortgage interests in real estate. It is anticipated, although not required,
that under normal circumstances a majority of the Fund's investments in REITs
will consist of equity REITs.
Equity REITs may be further characterized as operating companies or
financing companies. To the extent that an equity REIT provides operational and
management expertise to the properties held in its portfolio, the REIT generally
exercises some degree of control over the number and identity of tenants, the
terms of their tenancies, the acquisition, construction, repair and maintenance
of properties and other operational issues. A mortgage REIT or an equity REIT
that provides financing rather than operational and management expertise to the
properties in its portfolio will generally not have control over the operations
that are conducted on the real estate in which the REIT has an interest. It is
anticipated, although not required, that under normal circumstances a majority
of the Fund's equity REIT investments will consist of securities issued by
operating companies.
TEMPORARY DEFENSIVE POLICY
For temporary defensive purposes, the Fund may invest, without limitation,
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"); certificates of deposit,
demand and time deposits and bankers' acceptances of banks whose deposits are
insured by the Federal Deposit Insurance Corporation and have assets of at least
$1 billion, including U.S. branches of foreign banks and foreign branches of
U.S. banks; prime commercial paper, including master demand notes; and
repurchase agreements secured by U.S. Government Securities.
REPURCHASE AGREEMENTS
Up to 25% of the Fund's total assets may be invested in repurchase
agreements entered into with banks and primary dealers in U.S. Government
Securities pursuant to which the Fund buys a security at one price and
simultaneously agrees to sell it back at a specified date and higher price.
Should the counterparty in the repurchase agreement declare bankruptcy or
otherwise default on its obligation, the Fund could experience difficulties and
delays in recovering cash and a possible loss if the value of the security
decreases in the interim or as a result of such difficulties and delays.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities.
Securities that may be resold without registration pursuant to Rule 144A may be
treated as liquid for these purposes, subject to the supervision and oversight
of the Board of Trustees, in accordance with guidelines established by the Board
of Trustees to determine whether there is a readily available market for such
securities. These securities may include securities issued by certain REITs that
are not publicly traded.
PORTFOLIO TURNOVER
The Fund's objective is above-average income and long-term growth of capital
and the Fund does not purchase securities with the intention of engaging in
short-term trading. The Fund, however, will sell any particular security and
reinvest proceeds when it is deemed prudent by the Investment Manager,
regardless of the length of the holding period. This policy may result in higher
securities transaction costs. To the extent that this policy results in gains on
investments, the Fund will make distributions to its shareholders, which may
accelerate the shareholders' tax liabilities. See "Dividends, Capital Gains and
Taxes."
RISK FACTORS
REAL ESTATE AND REIT RISK
CGM Realty Fund is not intended to constitute a complete investment program.
The Fund invests primarily in companies in the real estate industry and,
therefore, may be subject to risks associated with the direct ownership of real
estate, such as decreases in real estate values, overbuilding, increased
competition and other risks related to local or general economic conditions,
increases in operating costs and property taxes, changes in zoning laws,
casualty or condemnation losses, possible environmental liabilities, regulatory
limitations on rent and fluctuations in rental income. Equity REITs generally
experience these risks directly through fee or leasehold interests, whereas
mortgage REITs generally experience these risks indirectly through mortgage
interests, unless the mortgage REIT forecloses on the underlying real estate.
REITs in which CGM Realty Fund invests may be affected by changes in
underlying real estate values, which may have an exaggerated effect to the
extent that REITs in which the Fund invests may concentrate investments in
particular geographic regions or property types. Additionally, rising interest
rates may cause investors in REITs to demand a higher annual yield from future
distributions, which may in turn decrease market prices for equity securities
issued by REITs. Rising interest rates also generally increase the costs of
obtaining financing, which could cause the value of the Fund's investments to
decline. During periods of declining interest rates, certain mortgage REITs may
hold mortgages that the mortgagors elect to prepay, which prepayment may
diminish the yield on securities issued by such mortgage REITs. In addition,
mortgage REITs may be affected by the ability of borrowers to repay when due the
debt extended by the REIT and equity REITs may be affected by the ability of
tenants to pay rent.
Certain REITs have relatively small market capitalization, which may tend to
increase the volatility of the market price of securities issued by such REITs.
Furthermore, REITs are dependent upon specialized management skills, have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. By investing in REITs
indirectly through CGM Realty Fund, a shareholder will bear not only his
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs. REITs depend generally on their ability to generate cash
flow to make distributions to shareholders.
NON-INVESTMENT GRADE RISK
The Fund may invest up to 25% of its total assets in securities rated
non-investment grade (lower than Baa by Moody's Investor Services Inc.
("Moody's") or lower than BBB by Standard and Poors Corporation ("S&P")). The
Fund may not invest in securities rated lower than Caa or caa by Moody's or CCC
by S&P. Non-investment grade securities are sometimes referred to as "high
yield" or "junk" bonds. Such securities may include both debt securities
(including asset-backed securities) and preferred stock. See Appendix A for
further information about securities ratings. Investors should consider the
following risks associated with high yield, high risk securities before
investing in the Fund.
High yield securities may be regarded as predominantly speculative with
respect to the issuer's continuing ability to make principal and interest
payments. Analysis of the creditworthiness of issuers of high yield securities
may be more complex than for issuers of higher quality debt securities, and the
ability of a Fund to achieve its investment objective may, to the extent of its
investment in high yield securities, be more dependent upon such
creditworthiness analysis than would be the case if the Fund were investing in
higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to
interest-rate changes than more highly rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. Yields on high
yield securities will fluctuate. If the issuer of high yield securities
defaults, the Fund may incur additional expenses to seek recovery.
The secondary markets on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect the price at which the Fund
could sell a particular high yield security when necessary to meet liquidity
needs or in response to a specific economic event, such as a deterioration in
the creditworthiness of the issuer, and could adversely affect and cause large
fluctuations in the daily net asset value of the Fund's shares. Adverse
publicity and investor perceptions may decrease the values and liquidity of high
yield securities.
It is reasonable to expect any recession to severely disrupt the market for
high yield securities, have an adverse impact on the value of such securities,
and adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon. New laws and proposed new laws may adversely
impact the market for high yield securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental restrictions, which may not
be changed without the approval of shareholders. Certain other fundamental and
non-fundamental restrictions are set forth in the Statement. The Fund may not:
[] With respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of any one issuer or invest more than 5% of
the value of its total assets in the securities of any one issuer, except
the U.S. Government, its agencies and instrumentalities; or
[] Borrow money, except that it may borrow from banks in an amount not to
exceed one-third of the value of its total assets and may borrow for
temporary purposes from entities other than banks in an amount not to exceed
5% of the value of its total assets.
THE FUND'S INVESTMENT MANAGER
The Fund's investment manager is Capital Growth Management Limited
Partnership, One International Place, Boston, Massachusetts 02110. CGM, an
investment advisory firm founded in 1989, manages eight mutual fund portfolios
and advisory accounts for other clients. The general partner of CGM is a
corporation controlled equally by Robert L. Kemp and G. Kenneth Heebner, who are
trustees and officers of the Fund.
In addition to selecting and reviewing the Fund's investments, CGM provides
executive and other personnel for the management of the Fund. The Trust's Board
of Trustees supervises CGM's conduct of the affairs of the Fund.
Until December 31, 1997, and thereafter until further notice to the Fund,
CGM has voluntarily agreed to limit its management fees and, if necessary, to
bear certain expenses associated with operating the Fund, in order to limit the
Fund's total operating expenses to an annual rate of 1.00% of the Fund's average
net assets. Without these waivers and reimbursements, the investment management
fee would be 0.85% on the first $500,000,000 and 0.75% on amounts in excess of
$500,000,000. In 1996, the Fund paid 0.60% of its average annual net assets in
management fees to CGM.
THE PORTFOLIO MANAGER
G. Kenneth Heebner is the manager of CGM Realty Fund. In 1989, Mr. Heebner
founded CGM with Robert L. Kemp. Prior to establishing the new company, Mr.
Heebner managed mutual fund portfolios at Loomis, Sayles & Company,
Incorporated. He currently manages CGM Capital Development Fund and CGM Mutual
Fund, and with Janice H. Saul, co-manages CGM Fixed Income Fund.
HOW TO PURCHASE SHARES
The Trust sells shares of the Fund directly to investors without any sales
load. You may make an initial purchase of Fund shares by submitting a completed
application form and payment to:
The CGM Funds
P.O. Box 449
Boston, Massachusetts 02117-0449
The minimum initial investment is $2,500 for regular accounts and $1,000 for
retirement plans (see "Shareholder Services -- Retirement Plans") and accounts
set up under the Uniform Gifts to Minors Act ("UGMA") or the Uniform Transfers
to Minors Act ("UTMA"). Subsequent investments must be at least $50. See
"Shareholder Services" below for further information about minimum investments
in certain other circumstances.
All investments made by check should be in U.S. dollars and made payable to
CGM Realty Fund. Third party checks (i.e. checks not payable to CGM Realty Fund)
are generally not accepted and checks drawn on credit card accounts will not be
accepted. The Trust reserves the right to reject any third party checks and
checks drawn on credit card accounts.
After accepting an order, the Trust forwards the application and payment to
the CGM Shareholder Services Department ("CGM Shareholder Services") of Boston
Financial Data Services, Inc. ("BFDS"), which is the shareholder servicing agent
for State Street Bank and Trust Company ("State Street Bank"). CGM Shareholder
Services then opens an account, applies the payment to the purchase of full and
fractional shares, and mails a statement of the account confirming the
transaction.
After your account has been established, you may send subsequent investments
at any time directly to the shareholder servicing agent at the following
address:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The remittance for any subsequent investment must be accompanied by either
the Additional Investment Stub detached from a statement of account, or a note
containing sufficient information to identify the account, i.e., the Fund name,
your account number, your name and social security number.
Subsequent investments may also be made by federal funds wire. Instruct your
bank to wire federal funds to State Street Bank and Trust Company, ABA
#011000028. The text of the wire should read as follows: "DDA 99046336, $
Amount, STATE ST BOS ATTN Mutual Funds. Credit CGM Realty Fund, Shareholder
Name, Shareholder Account Number." Your bank may charge you a fee for
transmitting funds by wire.
The Trust reserves the right to reject any purchase order, including orders
in connection with exchanges, for any reason the Trust, in its sole discretion,
deems appropriate. Although the Trust does not anticipate that it will do so,
the Trust reserves the right to suspend, change or withdraw the offering of
shares of the Fund.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust (in the case of an
initial investment) or by CGM Shareholder Services (in the case of subsequent
investments).
If you wish transactions in your account to be effected by another person
under a power of attorney from you, special rules apply. Please contact the
Trust or CGM Shareholder Services for details.
An investor will not receive any certificates for shares unless the investor
requests them in writing from CGM Shareholder Services. The Trust's system for
recording investments eliminates the problems of handling and safekeeping
certificates.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services as more fully described
in the Statement. Explanations and forms are available from the Trust.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of money market funds
currently distributed by New England Funds, L.P. ("Money Market Funds"). You may
also exchange shares for shares of CGM Mutual Fund, CGM Fixed Income Fund or CGM
American Tax Free Fund. Additionally, you may exchange shares for shares of CGM
Capital Development Fund, but only if you were a shareholder on September 24,
1993, and have remained a shareholder in the CGM Capital Development Fund
continuously since that date. CGM Capital Development Fund shares are not
generally available to other persons except in special circumstances that have
been approved by, or under the authority of, the Board of Trustees of that Fund.
All exchanges may be made without charge. You may make an exchange by
written instruction or, if a written authorization for telephone exchanges is on
file with CGM Shareholder Services, you may call 800-343-5678. See "Telephone
Transactions." Exchanges must be for amounts of at least $1,000. Under certain
circumstances, before an exchange can be made, additional documents may be
required to verify the authority or legal capacity of the person seeking the
exchange. If you wish to make an exchange into a new account, the exchange must
satisfy the applicable minimum initial investment requirements. Exchange
requests cannot be revoked once they have been received in good order.
Investors should not view the exchange privilege as a means for taking
advantage of short-term swings in the market, and the Fund limits the number of
exchanges each shareholder may make to four exchanges per account (or two round
trips) per calendar year. Monthly automatic exchanges from the Money Market
Funds to the Fund are exempt from this restriction. The Trust also reserves the
right to prohibit exchanges during the first 15 days following an investment in
the Fund. The Trust may terminate or change the terms of the exchange privilege.
In general, shareholders will receive notice of any material change to the
exchange privilege at least 60 days prior to the change. For federal income tax
purposes, an exchange constitutes a sale of shares, which may result in a
capital gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
If the value of your account is at least $10,000, you may have periodic cash
withdrawals automatically paid to you or any person you designate. If checks are
returned to the Fund as "undeliverable" or remain uncashed for more than six
months, the plan will be cancelled. Undeliverable or uncashed checks shall be
cancelled and such amounts shall be reinvested in the Fund at the per share net
asset value determined as of the date of cancellation of such checks.
AUTOMATIC INVESTMENT PLAN ("AIP")
Once your account has been established, voluntary monthly investments of at
least $50 may be made automatically by pre-authorized withdrawals from your
checking account. Debits from savings banks and credit unions generally are not
acceptable. Additional information about this Plan is set forth in the Statement
and also in Sections 7 and 9 of the Account Application.
RETIREMENT PLANS
The Fund's shares may be purchased by certain types of tax-deferred
retirement plans. CGM makes available retirement plan forms and plan documents
for IRAs, SEP-IRAs, 403(b)(7) custodial accounts, and money purchase pension and
profit sharing plans ("CGM Retirement Plans").
SHAREHOLDER REPORTS
Shareholders will receive the Fund's financial statements and a summary of
the Fund's investments at least semiannually. The Fund intends to consolidate
mailings of annual, semiannual, and quarterly reports to households having
multiple accounts with the same address of record and to furnish a single copy
of each report to that address. Mailing of prospectuses and proxy statements
will not be consolidated and if a report is included in such mailings, each
shareholder will receive a separate copy. You may request additional reports by
notifying the Fund in writing, or by calling the Trust.
Shareholders will receive statements confirming all purchases, redemptions,
and changes of address. You may call CGM Shareholder Services and request a
duplicate statement for the current year without charge. A fee may be charged
for any duplicate information requested for prior years.
HOW TO REDEEM SHARES
You can redeem all or part of your shares in the Fund in three different
ways: by sending a written request for a check or wire representing the
redemption proceeds, by making a telephone request for redemption by check
(provided that the amount to be redeemed is not more than $25,000 and the check
is being sent to you at your record address, which has not changed in the prior
three months) or by making a telephone request for redemption proceeds to be
wired to a bank that you have predesignated. The redemption price will always be
the net asset value per share next determined after the redemption request is
received by CGM Shareholder Services in good order (including any necessary
documentation). Necessary documentation may include, in certain circumstances,
documents verifying the authority or legal capacity of the person seeking to
redeem shares. Redemption requests cannot be revoked once they have been
received in good order.
If you elect to redeem shares in writing, send your written request to:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The written request must include the name of the Fund, your account number, the
exact name(s) in which your shares are registered, the number of shares or the
dollar amount to be redeemed and mailing or wire instructions. All owners of
shares must sign the request in the exact name(s) in which the shares are
registered (which appear(s) on your confirmation statement) and should indicate
any special capacity in which they are signing (such as trustee or custodian or
on behalf of a partnership, corporation or other entity). If you are signing in
a special capacity, you may wish to contact CGM Shareholder Services in advance
to determine whether additional documentation will be required before you send a
redemption request.
Redemptions from CGM Retirement Plans for which State Street Bank is the
trustee must contain additional information. Please contact CGM Shareholder
Services for instructions and forms. Complete information, including tax
withholding instructions, must be included in your redemption request.
If you are redeeming shares worth more than $25,000 or requesting that the
proceeds check be made payable to someone other than the registered owner(s) or
be sent to an address other than your record address (or sent to your record
address if such address has been changed within the previous three months), you
must have your signature guaranteed by an "eligible guarantor institution" as
defined in the rules under the Securities Exchange Act of 1934 (including a
bank, broker, dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association, but not a notary
public).
If you hold certificates representing your investment, you must enclose the
certificates and a properly completed redemption form or stock power. You bear
the risk of loss of such certificates; consequently you may wish to send your
certificates by registered mail.
If you elect to redeem shares by telephone, call CGM Shareholder Services
directly at 800-343-5678. See "Telephone Transactions." Telephone redemptions
are not available for CGM Retirement Plans. When you make a redemption request
by telephone, you may choose to receive redemption proceeds either by having a
check mailed to the address of record on the account, provided the address has
not changed for three months and you are redeeming $25,000 or less, or by having
a wire sent to a bank account you have previously designated.
Telephone redemptions by check are available to all shareholders of the Fund
automatically and no special application is necessary. You may select the
telephone redemption wire service when you fill out your initial application or
you may select it later by completing the Service Options Form (with a signature
guarantee), available from the Trust or CGM Shareholder Services.
A telephone redemption request must be received by CGM Shareholder Services
prior to the close of the New York Stock Exchange (the "Exchange"). If you
telephone your request to CGM Shareholder Services after the Exchange closes or
on a day when the Exchange is not open for business, the Trust cannot accept
your request and a new one will be necessary.
Wire redemptions by telephone may be made only if your bank is a member of
the Federal Reserve System or has a correspondent bank that is a member of such
System. If your account is with a savings bank, it must have only one
correspondent bank that is a member of the Federal Reserve System. A wire fee
(currently $5) will be deducted from the proceeds. If you decide to change the
bank account to which proceeds are to be wired, you must send in this change on
the Service Options Form with a signature guarantee.
Proceeds resulting from a written or regular telephone redemption request
will normally be mailed to you within seven days after receipt of your request
in good order. Telephone wire redemption proceeds will normally be wired to your
bank within seven days following receipt of a proper redemption request. If you
purchased your Fund shares by check (or through your AIP) and elect to redeem
shares within 15 days of such purchase, you may experience delays in receiving
redemption proceeds. The Trust will generally postpone sending your redemption
proceeds from such investment until the Trust can verify that your check (or AIP
investment) has been or will be collected. There will be no such delay for
redemptions following investments paid for by federal funds wire or by bank
cashier's check, certified check or treasurer's check. If checks representing
redemption proceeds are returned "undeliverable" or remain uncashed for six
months, such checks shall be cancelled and such proceeds shall be reinvested in
the Fund at the per share net asset value determined as of the date of
cancellation of such checks.
The Fund may not suspend the right of redemption, or postpone payment for
more than seven days, except when the Exchange is closed for other than weekends
or holidays, when trading on the Exchange is restricted, during an emergency (as
determined by the SEC) that makes it impracticable for the Fund to dispose of
its securities or to determine fairly the value of its net assets, or during any
other period permitted by the SEC for the protection of investors.
Because the expense of maintaining small accounts is disproportionately
high, the Fund may close accounts with 20 shares or less, and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of the Fund's intention to close the account and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to CGM Retirement Plans and UGMA/UTMA
accounts.
TELEPHONE TRANSACTIONS
You may initiate three types of transactions by telephone:
[] Telephone Exchanges
[] Telephone Redemptions By Wire
[] Telephone Redemptions By Check
The terms and provisions for each of these services are explained fully in the
preceding sections. Once a telephone transaction request has been placed, it
cannot be cancelled.
The Telephone Exchange privilege and/or Telephone Redemptions By Wire
privilege must be elected by you when you fill out your initial application or
you may select either option later by completing the Service Options Form (with
a signature guarantee) available from the Trust or CGM Shareholder Services. The
Telephone Redemptions By Check privilege is available to shareholders of the
Fund automatically, and no special application is necessary.
The telephone redemption privileges are not available for IRAs, SEP-IRAs,
403(b)(7) custodial accounts or for money purchase pension and profit sharing
accounts under a CGM Retirement Plan (in which State Street Bank is the
trustee).
The Fund will employ reasonable procedures to confirm that instructions
received by telephone (including instructions with respect to changes in
addresses) are genuine, such as requesting personal identification information
that appears on your account application and recording the telephone
conversation. You will bear the risk of loss due to unauthorized or fraudulent
instructions regarding your account, although the Fund may be liable if it does
not employ reasonable procedures.
DIVIDENDS, CAPITAL GAINS AND TAXES
The Fund intends to declare and pay quarterly dividends consisting of
substantially all net investment income. Any capital gains distributions will
normally be made in December (after applying any available capital loss
carryovers) but may be made more frequently as deemed advisable by the Board of
Trustees. The Fund's dividend and capital gains distributions may be reinvested
in additional shares or received in cash. Certain restrictions may apply to
participants in CGM Retirement Plans.
If you elect to receive distributions in cash and checks are returned
"undeliverable" or remain uncashed for six months, your cash election will be
changed automatically and your future dividend and capital gains distributions
will be reinvested in the Fund at the per share net asset value determined as of
the date of payment of the distribution. In addition, following such six month
period, any undeliverable or uncashed checks shall be cancelled and such amounts
reinvested in the Fund at the per share net asset value determined as of the
date of cancellation of such checks.
The Fund intends to qualify annually as a "regulated investment company"
under the Internal Revenue Code. To qualify, the Fund must meet certain income,
distribution and diversification requirements. In any year in which the Fund so
qualifies it generally will not be subject to federal income or excise tax to
the extent that its taxable income is distributed to shareholders.
The distributions received by the Fund from its investments may, for federal
income tax purposes, consist of ordinary income, long-term capital gains, or a
return of capital. The characterization of these distributions to the Fund may,
in turn, affect the tax treatment of the Fund's distributions to its
shareholders. Dividends and distributions are taxable to shareholders in the
same manner whether received in cash or reinvested in additional shares of the
Fund.
Dividends paid by the Fund from net investment income, including dividends,
interest and net short-term capital gains, will be taxable to shareholders as
ordinary income. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) which are designated by the
Fund as capital gains distributions are taxable as long-term capital gains,
regardless of the length of time shareholders have owned shares in the Fund. To
the extent that the Fund makes a distribution in excess of its current and
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing the tax basis in a shareholder's shares,
and then, to the extent the distribution exceeds such basis, as a taxable gain
to be realized upon sale of such shares.
Distributions that the Fund receives from a REIT, and dividends of the Fund
attributable to such distributions, will not constitute "dividends" for purposes
of the dividends-received deduction applicable to corporate shareholders.
A distribution will be treated as paid by the Fund and received by its
shareholders on December 31 of the current calendar year if it is declared by
the Fund in October, November, or December of that year with a record date in
such a month and paid by the Fund in January of the subsequent year.
Any dividends or distributions paid shortly after a purchase of shares will
have the effect of reducing the per share net asset value of the shares by the
amount of the dividends or distributions. Although in effect a return of
capital, these distributions are subject to taxes, even if their effect is to
reduce the per share net asset value below a shareholder's cost. The Fund will
notify you annually as to the tax status of dividend and capital gains
distributions paid by the Fund.
The sale or other disposition of shares of the Fund, including a redemption
of shares or an exchange of shares into another fund, is a taxable event and may
result in a capital gain or loss which will be long-term or short-term,
depending upon the shareholder's holding period for the shares.
Dividend distributions, capital gains distributions, and capital gains or
losses from redemptions and exchanges may be subject to state and local taxes.
In certain states, a portion of the Fund's income derived from certain direct
U.S. Government obligations may be exempt from state and local taxes. The Fund
will indicate each year the portion of the Fund's income, if any, that is
derived from such obligations.
The Fund is required to withhold a portion of taxable dividends, capital
gains distributions, and redemptions paid to individuals and certain other
classes of shareholders if they fail to furnish the Fund with their correct
taxpayer identification number and certain certifications regarding their tax
status, or if they are otherwise subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against a shareholder's normal federal income tax liability. For additional
information about withholding, please see the Statement.
BFDS, the shareholder servicing agent, will send you and the Internal
Revenue Service an annual statement detailing federal tax information, including
information about dividends and distributions paid to you during the preceding
year. If you redeem or exchange shares in any year, following the end of the
year, you will receive a statement providing the cost basis and gain or loss of
each share lot that you sold during such year. Your CGM account cost basis will
be calculated using the "single category average cost method," which is one of
the four calculation methods allowed by the IRS. Be sure to keep these
statements as permanent records. A fee may be charged for any duplicate
information that you request.
The tax discussion set forth above is included for general information only.
Shareholders and prospective investors should consult their own tax advisers
concerning the tax consequences of an investment in the Fund.
PRICING OF SHARES
The share price or "net asset value" per share of the Fund is computed daily
by dividing the total value of the investments and other assets of the Fund,
less any liabilities, by the total outstanding shares of the Fund. The net asset
value per share of the Fund is determined as of the close of the regular trading
session of the Exchange on each day the Exchange is open for trading. Portfolio
securities are generally valued at their market value. In certain cases, market
value may be determined on the basis of information provided by a pricing
service approved by the Board of Trustees. Instruments with maturities of sixty
days or less are valued at amortized cost, which approximates market value.
Other assets and securities which are not readily marketable will be valued in
good faith at fair value using methods determined by the Board of Trustees. The
valuation of portfolio securities is more fully described in the Statement.
PERFORMANCE INFORMATION
The Fund may include yield and total return information in advertisements or
other written sales material. The Fund will show its average annual total return
for the most recent one-year period and the life of the Fund through the end of
the most recent calendar quarter. Total return is measured by comparing the
value of an investment in the Fund at the beginning of the relevant period to
the value of the investment at the end of the period (assuming automatic
reinvestment of all dividends and capital gains distributions). The Fund may
also show total return over other periods on an aggregate basis for the period
presented.
Yield is computed in accordance with the SEC's standardized formula by
dividing the adjusted net investment income per share earned during a recent
thirty-day period by the maximum offering price of a Fund share on the last day
of the period. The Fund may also present one or more distribution rates in its
sales literature. These rates will be determined by annualizing the Fund's
distributions from net investment income and net short-term capital gains over a
recent twelve-month, three-month, or thirty-day period and dividing that amount
by the net asset value on the last day of such period.
The Fund may compare its performance to that of recognized financial indices
or groups of mutual funds. It may also include its ranking among other mutual
funds or its rating as published by mutual fund ranking services or major
financial publications. All performance information is based on past results and
is not an indication of likely future performance.
ADDITIONAL FACTS ABOUT THE FUND
[] The Trust was organized in 1986 as a Massachusetts business trust and is
authorized to issue an unlimited number of full and fractional shares in
multiple series. The Trust currently has four series: CGM Mutual Fund (a
successor to Loomis-Sayles Mutual Fund), CGM Fixed Income Fund, CGM American
Tax Free Fund, and CGM Realty Fund.
[] When a shareholder invests in the Fund, the shareholder acquires freely
transferable shares of beneficial interest that entitle the shareholder to
receive dividends and to cast one vote at shareholder meetings for each
share owned. On matters affecting the Fund, shares of the Fund vote
separately from shares of other series of the Trust, except as otherwise
required by law.
[] The investment objective, investment practices and other non-fundamental
policies of the Fund can be changed without shareholder approval. If there
is a change in the Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their current
financial position and needs.
<PAGE>
APPENDIX
RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. DEBT RATINGS -- TAXABLE DEBT &
DEPOSITS GLOBALLY:
Aaa -- Bonds which are rated "Aaa" are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated "Caa" are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from "Aa" through "B." The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. PREFERRED STOCK RATINGS:
aaa -- An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa -- An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a -- An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa -- An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba -- An issue which is rated "ba" is considered to have speculative
elements, and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b -- An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -- An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
DESCRIPTION OF STANDARD & POOR'S CORPORATION LONG-TERM ISSUE CREDIT RATINGS:
AAA -- An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA -- An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB -- An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
BB, B and CCC -- Obligations rated "BB", "B", "CCC", "CC", and "C" are
regarded as having significant speculative characteristics. "BB" indicates the
least degree of speculation and "C" the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obliglations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
r -- This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk -- such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
DESCRIPTION OF STANDARD & POOR'S CORPORATION PREFERRED STOCK RATING DEFINITIONS:
AAA -- This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA -- A preferred stock issue rated "AA" also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA".
A -- An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB -- An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
BB, B, CCC -- Preferred stock rated "BB," "B," and "CCC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. "BB" indicates the lowest degree of speculation
and "CCC" the highest. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Plus (+) or Minus (-): The ratings from A to CCC may be modified by the
addition of a plus or minus sign to show relative standing within major rating
categories.
PORTFOLIO COMPOSITION
For the fiscal year ending on December 31, 1996, the Fund's investments
did not include any securities below investment grade.
INVESTMENT ADVISER
Capital Growth Management
Limited Partnership
One International Place
Boston, MA 02110
TRANSFER AND DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, MA 02102
SHAREHOLDER SERVICING AGENT FOR
STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, MA 02266
RFP96
CGM
REALTY FUND
Prospectus & Application
May 1, 1997
A No-Load Fund
[FENCER LOGO]
<PAGE>
CGM AMERICAN TAX FREE FUND
CGM FIXED INCOME FUND
CGM American Tax Free Fund and CGM Fixed Income Fund (each the "Fund" and
together, the "Funds") are diversified mutual funds and series of CGM Trust (the
"Trust"), a registered, open-end, no-load management investment company. Each
Fund's investment manager is Capital Growth Management Limited Partnership
("CGM" or the "Investment Manager").
The primary investment objective of CGM AMERICAN TAX FREE FUND is to
provide high current income exempt from federal income tax. The Fund's secondary
investment objective is capital appreciation. CGM American Tax Free Fund may not
be an appropriate investment for retirement plans and similar accounts.
The investment objective of CGM FIXED INCOME FUND is to maximize total
return by investing in debt securities and preferred stock that provide current
income, capital appreciation or a combination of both income and appreciation.
PROSPECTUS
May 1, 1997
This prospectus sets forth the information you should know before investing
in either Fund. It should be retained for future reference. A Statement of
Additional Information about the Funds dated May 1, 1997, (the "Statement") has
been filed with the Securities and Exchange Commission (the "SEC") and is
available free of charge. Write to the Trust, c/o CGM Investor Services, 222
Berkeley Street, Boston, MA 02116 or call the telephone number listed below to
obtain a Statement. The SEC maintains a web site (http:// www.sec.gov) that
contains the Statement, material incorporated by reference, and other
information regarding the Funds. The Statement contains more detailed
information about the Fund and, as amended or supplemented from time to time, is
incorporated into this prospectus by reference.
- -------------------------------------------------------------------------------
For additional information about:
[] Account procedures and status [] New account procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800-345-4048
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
Schedule of Fees .................................................... 3
Financial Highlights: CGM American Tax Free Fund .................... 4
Financial Highlights: CGM Fixed Income Fund ........................ 5
Investment Objectives and Policies of CGM American Tax Free Fund .... 6
Investment Objective and Policies of CGM Fixed Income Fund .......... 8
Risk Factors ........................................................ 10
Investment Restrictions ............................................. 14
The Funds' Investment Manager ....................................... 14
The Portfolio Managers .............................................. 14
How to Purchase Shares .............................................. 15
Shareholder Services ................................................ 16
How to Redeem Shares ................................................ 17
Telephone Transactions .............................................. 19
Dividends, Capital Gains and Taxes .................................. 19
Pricing of Shares ................................................... 21
Performance Information ............................................. 22
Additional Facts About the Funds .................................... 22
<PAGE>
SCHEDULE OF FEES
CGM AMERICAN CGM FIXED
TAX FREE FUND INCOME FUND
------------- -----------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) .............. None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) .............. None None
Redemption Fees* ................................... None None
Exchange Fees ...................................... None None
ANNUAL FUND OPERATING EXPENSES, AFTER WAIVER AND REIMBURSEMENTS
(as a percentage of average net assets)
Management Fees, After Waiver .................. 0% 0.14%
12b-1 Fees ..................................... None None
Other Expenses, After Reimbursements ........... 0% 0.71%
--- -----
Total Fund Operating Expenses, After Waiver and
Reimbursements ............................... 0% 0.85%
- ----------
*A wire fee (currently $5.00) will be deducted from proceeds if a shareholder
elects to transfer redemption proceeds by wire.
The purpose of this fee schedule is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly if you
invest in the Funds. This fee schedule has been adjusted in the case of CGM
Fixed Income Fund to give effect to the revised management fee that became
effective on December 13, 1996. For additional information about the Funds' fees
and expenses, please see "The Funds" Investment Manager" and the Statement.
CGM has voluntarily agreed, until December 31, 1997, and thereafter until
further notice to CGM AMERICAN TAX FREE FUND, to waive its management fees and
bear all of the expenses of the Fund. The percentages shown for Management Fees
and Other Expenses reflect current fees after such voluntary waiver and
reimbursements. For the fiscal year ended December 31, 1996, without the
voluntary waiver and reimbursements, the Management Fees, Other Expenses and
Total Fund Operating Fund as a percentage of average net assets would have been
0.60%, 1.54% and 2.14%, respectively.
CGM has voluntarily agreed, until December 31, 1997, to waive management
fees and, if necessary, bear expenses associated with operating CGM FIXED INCOME
FUND, to the extent necessary to limit CGM Fixed Income Fund's operating
expenses to an annual rate of 0.85% of its average net assets. The percentages
shown for Management Fees and Other Expenses reflect current fees after such
waiver and reimbursements. For the fiscal year ended December 31, 1996, without
the waiver and reimbursements, the Management Fees, Other Expenses and Total
Fund Operating Expenses as a percentage of average net assets would have been
0.65%, 0.71% and 1.36%, respectively.
The following examples illustrate the approximate expenses that you would
incur on a $1,000 investment over the following periods, assuming a 5% annual
rate of return and redemption at the end of each period.
<TABLE>
<CAPTION>
CGM AMERICAN TAX FREE FUND CGM FIXED INCOME FUND
CUMULATIVE CUMULATIVE
- ----------------------------------------------------------------- ----------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------ ------ ------ ------ ------ ------
<C> <C> <C> <C> <C> <C> <C> <C>
$0 $0 $0 $0 $9 $27 $47 $105
</TABLE>
Please keep in mind that the examples shown above are hypothetical and
assume that current waivers and expense reimbursements will remain in effect.
The information above should not be considered a representation of past or
future return or expenses; the actual return and expenses may be more or less.
<PAGE>
CGM AMERICAN TAX FREE FUND
FINANCIAL HIGHLIGHTS
(For a share of the Fund outstanding throughout the indicated periods)
These financial highlights have been examined by Price Waterhouse LLP,
independent accountants. The table below should be read in conjunction with the
financial statements and the notes thereto, which, together with the Report of
Independent Accountants thereon, are included in the Fund's Annual Report and
incorporated by reference into the Statement. In addition to the highlights set
forth below, further information about the performance of the Fund is contained
in the Annual Report and the Statement, which may be obtained from the Trust
free of charge.
FOR THE NOVEMBER 10,
YEAR ENDED 1993(C)
DECEMBER 31, THROUGH
----------------------------- DECEMBER 31,
1996 1995 1994 1993
---- ---- ---- ------------
For a share of the Fund
outstanding throughout each
period:
Net asset value at the beginning
of period ....................... $ 9.77 $ 8.83 $10.25 $10.00
------ ------ ------ ------
Net investment income (after
waiver and reimbursements)
(a) ............................. 0.58 0.61 0.58 0.04
Dividends from net investment
income ........................ (0.58) (0.61) (0.58) (0.04)
Net realized and unrealized gain
(loss) on investments ........... (0.31) 0.94 (1.42) 0.25
------ ------ ------ ------
Net increase (decrease) in net
asset value ..................... (0.31) 0.94 (1.42) 0.25
------ ------ ------ ------
Net asset value at end of period .. $ 9.46 $ 9.77 $ 8.83 $10.25
====== ====== ====== ======
Total Return (%) (b) .............. 2.9 18.0 -8.2 21.8(d)
Ratios:
Operating expenses to average net
assets (%) ...................... 0 0 0 0
Operating expenses to average net
assets before waiver (%) ........ 2.14 2.59 2.42 3.59(d)
Net income to average net
assets (%) ...................... 6.10 6.50 6.39 4.95(d)
Portfolio turnover (%) ............ 107 125 169 0
Net assets at end of period
(in thousands) ..................$12,430 $11,855 $10,150 $4,786
(a) Fees waived and expenses
reimbursed amounted to ........ $ 0.20 $ 0.24 $ 0.22 $ 0.03
(b) The total return would have been lower had the total fees and expenses
not been waived or reimbursed during the period.
(c) Commencement of operations.
(d) Computed on an annualized basis.
<PAGE>
CGM FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a share of the Fund outstanding throughout the indicated periods)
These financial highlights have been examined by Price Waterhouse LLP,
indep endent accountants. The table below should be read in conjunction with the
financial statements and the notes thereto, which, together with the Report of
Independent Accountants thereon, are included in the Fund's Annual Report and
incorporated by reference into the Statement. In addition to the highlights set
forth below, further information about the performance of the Fund is contained
in the Annual Report and the Statement, which may be obtained from the Trust
free of charge.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD
DECEMBER 31, MARCH 17, 1992(C)
------------------------------------------------------ THROUGH
1996 1995 1994 1993 DECEMBER 31, 1992
---- ---- ---- ---- ---------------------
For a share of the Fund outstanding
throughout each period:
<S> <C> <C> <C> <C> <C>
Net asset value at the beginning of period ......... $11.41 $ 9.57 $11.17 $10.26 $10.00
------ ------ ------ ------ ------
Net investment income (after waiver and
reimbursements) (a) ...... 0.77 0.70 0.73 0.67 0.50
Dividends from net investment income ............... (0.77) (0.70) (0.73) (0.67) (0.49)
Net realized and unrealized gain (loss)
on investments ................................... 0.95 1.84 (1.60) 1.23 0.40
Distributions from net realized gain ............... (0.76) -- -- (0.32) (0.13)
Distributions from paid-in capital ................. -- -- -- -- (0.02)
------ ------ ----- ------ -----
Net increase (decrease) in net asset value ......... 0.19 1.84 (1.60) 0.91 0.26
------ ------ ----- ------ -----
Net asset value at the end of period ............... $11.60 $11.41 $ 9.57 $11.17 $10.26
====== ====== ====== ====== ======
Total Return (%) (b) ............................... 15.4 27.3 -8.0 18.9 11.7(d)
Ratios:
Operating expenses to average net assets (%) ....... 0.85 0.85 0.85 0.85 0.85(d)
Operating expenses to average net assets before
expense limitation (%) ........................... 1.26 1.53 1.46 2.02 3.21(d)
Net income to average net assets (%) ............... 6.53 6.46 7.00 6.30 7.29(d)
Portfolio turnover (%) ............................. 149 148 129 149 212(d)
Average commission rate (e) ........................ $ 0.700 -- -- -- --
Net assets at end of period (in thousands) ......... $40,646 $31,793 $28,672 $32,883 $9,467
(a) Fees waived and expenses reimbursed amounted to $ 0.05 $ 0.07 $ 0.06 $ 0.12 $ 0.16
(b) The total return would have been lower had management fees and certain expenses not been waived or reimbursed during the period.
(c) Commencement of operations.
(d) Computed on an annualized basis.
(e) SEC regulations require portfolios to disclose the average commission rate paid on trades for which commissions were charged
for fiscal years beginning on or after September 1, 1995.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF
CGM AMERICAN TAX FREE FUND
CGM American Tax Free Fund's primary objective is to provide high current
income exempt from federal income tax. The Fund's secondary objective is capital
appreciation. There are no assurances that the Fund will achieve its objectives
and the Fund may change its objectives without shareholder approval or prior
notice.
CGM American Tax Free Fund will seek to achieve its objectives by investing
primarily in investment grade securities that are exempt from federal income
tax. At least 75% of the Fund's assets will be invested in securities rated at
the time of purchase Baa, MIG-2, Prime-2 or higher by Moody's Investors Service,
Inc. ("Moody's"), or BBB, SP-2, A-2 or better by Standard & Poor's Corporation
("S&P"), or, if not rated by Moody's or S&P at the time of purchase, determined
to be of comparable quality by the Investment Manager. Securities rated BBB by
S&P or Baa by Moody's are regarded as having an adequate capacity to pay
interest and repay principal, but such securities also have speculative
characteristics and changes in economic conditions and other circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal.
Up to 25% of the Fund's assets may be invested in lower quality securities,
which have speculative characteristics and are subject to special risks. See
"Risk Factors -- Non-Investment Grade Risk." See Appendix A to this Prospectus
for a full description of credit ratings.
In an effort to enhance return, CGM American Tax Free Fund intends to take
advantage of pricing inefficiencies between individual issues and groups of
securities that may occur. As a fundamental policy, under normal market
conditions, the Fund will invest at least 80% of its net assets in securities,
the interest from which is, in the opinion of counsel to the issuer, exempt from
federal income tax and excluded from the calculation of the federal alternative
minimum tax for individuals.
CGM American Tax Free Fund will not invest more than 25% of its total assets
in any one industry. Governmental issuers of tax-exempt securities are not
considered part of any industry. However, tax-exempt securities backed only by
the assets and revenues of nongovernmental users may, for this purpose, be
deemed to be issued by such nongovernmental users, and the 25% limitation would
apply to such obligations. The Fund may invest more than 25% of its total assets
in a broader segment of the tax-exempt market, such as revenue obligations of
hospitals and other healthcare facilities, housing agency revenue obligations or
airport revenue obligations. The Fund may also invest more than 25% of its total
assets in securities relating to any one or more states (including the District
of Columbia), territories or United States possessions or any of their political
subdivisions.
TAX-EXEMPT SECURITIES
Tax-exempt securities are debt obligations issued by states (including the
District of Columbia), territories and possessions of the United States and
their political subdivisions, agencies and instrumentalities, or by multistate
agencies or authorities to obtain funds for various public purposes, including
projects to construct or rebuild schools, hospitals, roads, utilities and
transportation systems throughout the United States. These securities are
commonly classified as general obligation bonds, revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source, but not from the general taxing power. Some revenue
bonds are structured as municipal lease obligations or equipment purchase
contracts. Industrial development bonds are revenue bonds that generally do not
carry a pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Tax-exempt securities may bear fixed, floating or
variable rates of interest, which are determined in some instances by formulas
under which the security's interest rate will change directly or inversely
relative to changes in interest rates or an index, or multiples thereof, in many
cases subject to a maximum and a minimum. Certain tax-exempt securities are
subject to redemption at a date earlier than their stated maturity pursuant to
call options, which may be separated from the related security and purchased and
sold independently.
PUT BONDS
CGM American Tax Free Fund may invest in tax-exempt securities (including
securities with variable interest rates) which may be redeemed or sold back
(put) to the issuer of the security or a third party at face value prior to
stated maturity. Such securities will normally trade as if maturity is the
earlier put date, even though stated maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES
CGM American Tax Free Fund may purchase floating and variable rate notes and
bonds, which are tax-exempt obligations ordinarily having stated maturities in
excess of one year, but which permit the holder to demand payment of principal
at any time or at specified intervals. Variable rate demand notes include master
demand notes, which are obligations that permit the Fund to invest fluctuating
amounts that may change daily without penalty pursuant to direct arrangements
between the Fund, as lender, and the borrower. The interest rates on these
obligations fluctuate from time to time. Frequently, such obligations are
secured by letters of credit or other credit support arrangements provided by
banks. Use of letters of credit or other support arrangements will not adversely
affect the tax-exempt status of these obligations. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. The Investment Manager, on behalf of the Fund, will consider on an
ongoing basis the creditworthiness of the issuers of the floating and variable
rate demand obligations in the Fund's portfolio.
MUNICIPAL LEASE OBLIGATIONS
CGM American Tax Free Fund may invest in lease obligations or installment
purchase contract obligations, which are instruments supported by lease payments
made by a municipality ("municipal lease obligations"). Although municipal lease
obligations do not normally constitute general obligations of the municipality,
a lease obligation is ordinarily backed by the municipality's agreement to make
the payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in later years unless
money is appropriated in the future. Municipal lease obligations are a
relatively new form of financing and the market for such obligations is still
developing and is less liquid than other markets for tax-exempt securities.
Municipal lease obligations may be determined to be liquid (for purposes of
complying with the Fund's investment restrictions) in accordance with procedures
adopted by the Board of Trustees.
PORTFOLIO TURNOVER
There is no limitation on the dollar-weighted average maturity of CGM
American Tax Free Fund's portfolio and the maturity may be shortened or
lengthened depending upon the Investment Manager's outlook for interest rates.
Although CGM American Tax Free Fund does not purchase securities with the
intention of engaging in short-term trading, the Fund will sell any particular
security and reinvest proceeds when it is deemed prudent by management,
regardless of the length of the holding period. This policy may result in higher
securities transactions costs. To the extent that this policy results in gains
on investments, the Fund will make distributions to its shareholders, which may
accelerate the shareholders' tax liabilities. See "Dividends, Capital Gains and
Taxes."
TEMPORARY DEFENSIVE POLICY
For temporary defensive purposes, CGM American Tax Free Fund may invest,
without limitation, in securities issued or guaranteed by the U.S. Government,
or any agency or instrumentality thereof ("U.S. Government Securities");
certificates of deposit, demand and time deposits and bankers' acceptances of
banks whose deposits are insured by the Federal Deposit Insurance Corporation
and have assets of at least $1 billion, including U.S. branches of foreign banks
and foreign branches of U.S. banks; prime commercial paper, including master
demand notes; and repurchase agreements secured by U.S. Government Securities.
INVESTMENT OBJECTIVE AND POLICIES OF
CGM FIXED INCOME FUND
CGM Fixed Income Fund's objective is to maximize total return by investing
in debt securities and preferred stocks that provide current income, capital
appreciation or a combination of both income and appreciation. There are no
assurances that the Fund will achieve its objective and the Fund may change its
objective without shareholder approval.
CGM Fixed Income Fund generally seeks to attain its objective by investing
in securities that are believed by the Investment Manager to be undervalued. The
Fund's flexible investment policy allows it to invest in fixed-income securities
and variable-rate securities, including preferred stocks, with varying
maturities and varying qualities ranging from the highest quality to
non-investment grade.
CGM Fixed Income Fund will invest primarily in investment grade debt
securities rated at the time of purchase a minimum of Baa by Moody's or BBB by
S&P, in preferred stocks rated at the time of purchase a minimum of baa by
Moody's or BBB by S&P, and in debt securities not rated by Moody's or S&P at the
time of purchase, but which the Investment Manager believes to be of comparable
quality.
CGM Fixed Income Fund may also invest less than 35% of its assets in
securities that are not rated at least Baa (baa, in the case of preferred
stocks) by Moody's or BBB by S&P or, if not rated by Moody's or S&P, are
believed by the Investment Manager to be of comparable quality. Lower quality
securities purchased by the Fund will generally be limited to securities rated B
(b, in the case of preferred stocks) or better by Moody's or S&P, at the time of
purchase. In addition, the Fund may invest not more than 10% of its total assets
in securities rated at the time of purchase Caa (caa, in the case of preferred
stocks) by Moody's or CCC by S&P if, in the opinion of the Investment Manager,
the financial condition of the issuer or the protection afforded to a particular
security is stronger than would otherwise be indicated by the rating. See "Risk
Factors -- Non-Investment Grade Risk." See Appendix A to this Prospectus for a
full description of credit ratings.
FIXED INCOME AND VARIABLE RATE SECURITIES
CGM Fixed Income Fund may invest in a variety of fixed-income and
variable-rate securities issued by corporations, municipalities, the U.S.
Government and its instrumentalities, and foreign and multinational
institutions, corporations and governments. These securities include bonds,
debentures, notes, equipment trust certificates, asset-backed securities,
mortgage-related securities, preferred stocks and money market instruments such
as commercial paper, Treasury bills, time deposits, bankers' acceptances and
repurchase agreements. Interest payments on such securities may be paid out as
additional securities (commonly referred to as "payment-in-kind securities") or
as cash, or deferred to a future date not to exceed maturity (commonly referred
to as "zero coupon"). Such securities may also have conversion features. Under
normal circumstances, the Fund will invest at least 65% of its total assets in
fixed-income securities.
CONVERTIBLE SECURITIES
CGM Fixed Income Fund may also invest in convertible securities, bonds and
common stocks (or attached warrants) sold as a unit, and preferred stocks.
Convertible securities are securities, such as bonds, notes, debentures or
preferred stocks, which may be converted at a stated price within a specified
period of time into a specified number of shares of common stock of the same or
a different issuer. Convertible securities are senior to common stock in a
corporation's capital structure, but usually are subordinated to non-convertible
debt securities. While providing an income stream (generally higher in yield
than the income from a common stock but lower than that of a non-convertible
debt security), a convertible security may also afford an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation of the common stock. However, investors ordinarily pay a premium to
obtain such conversion feature.
In general, the market value of a convertible security is the higher of its
"investment value" (i.e., its value as a fixed-income or variable-rate security)
or its "conversion value" (i.e., the value of the underlying security if the
security is converted). To the extent that a convertible security is a
fixed-income security, its market value generally increases when interest rates
decline and generally decreases when interest rates rise. However, the price of
a convertible security also is influenced by the market value of the security's
underlying security, often common stock. Thus, the price of a convertible
security generally increases as the market value of the underlying security
increases, and generally decreases as the market value of the underlying
security declines.
CGM Fixed Income Fund may, from time to time, own stock as a result of the
conversion of a convertible security or the exercise of a warrant.
UNDERVALUED SECURITIES
CGM Fixed Income Fund may invest in undervalued securities, which are
securities that have market prices that are lower than the prices that the
Investment Manager judges to be their true value. Undervaluation may result from
temporary dislocations in the market, market misperceptions of risk, yield curve
movements and cyclical and secular changes in the economy.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities. In
general, securities that may be resold without registration pursuant to Rule
144A will be treated as liquid for these purposes, in accordance with guidelines
established by the Board of Trustees to determine whether there is a readily
available market for such securities.
BORROWING
Although CGM Fixed Income Fund is permitted to borrow amounts (including
obligations under reverse repurchase agreements) aggregating up to 33.3% of the
value of its total assets, the Fund does not intend to borrow for purposes of
leveraging its portfolio. Under ordinary circumstances, the Fund will borrow
only for temporary purposes in amounts not to exceed 5% of the value of its
total assets. At any time that the Fund's borrowings (including obligations
under reverse repurchase agreements) exceed 5% of the value of its total assets,
the Fund will not purchase or acquire any additional investment securities.
PORTFOLIO TURNOVER
Although CGM Fixed Income Fund's objective is total return and the Fund does
not purchase securities with the intention of engaging in short-term trading,
the Fund will sell any particular security and reinvest the proceeds when it is
deemed prudent by management, regardless of the length of the holding period.
This policy may result in higher securities transactions costs. To the extent
that this policy results in gains on investments, the Fund will make
distributions to its shareholders, which may accelerate the shareholders' tax
liabilities. See "Dividends, Capital Gains and Taxes."
TEMPORARY DEFENSIVE POLICY
For temporary defensive purposes, CGM Fixed Income Fund may invest, without
limitation, in U.S. Government Securities; certificates of deposit, demand and
time deposits and bankers' acceptances of banks whose deposits are insured by
the Federal Deposit Insurance Corporation and have assets of at least $1
billion, including U.S. branches of foreign banks and foreign branches of U.S.
banks; prime commercial paper, including master demand notes; and repurchase
agreements secured by U.S. Government Securities.
RISK FACTORS
INTEREST RATE RISK
Securities purchased by CGM American Tax Free Fund and CGM Fixed Income Fund
will be subject to interest rate risk. Interest rate risk is the potential for a
decline in prices of fixed-income securities due to rising interest rates. In
general, prices of fixed-income securities move inversely with interest rates.
If interest rates rise, prices of fixed-income securities generally fall; if
interest rates fall, prices of fixed-income securities generally rise. In
addition, for a given change in interest rates, longer- maturity securities
normally fluctuate more in price (gaining or losing more in value) than
shorter-maturity securities. To compensate investors for this risk,
longer-maturity securities generally offer higher yields than shorter- maturity
securities, all other factors (including credit quality) being equal. The Funds'
flexible investment policies allow them to invest in securities with varying
maturities.
EVENT RISK
Event risk is the possibility that corporate securities will suffer a
decline in credit quality and market value when the issuer undergoes a corporate
restructuring. Corporate restructurings, such as mergers, acquisitions,
leveraged buyouts or similar events, often can be financed by a significant
expansion of a company's outstanding debt. As a result of the added debt burden,
the credit quality and market value of a firm's existing bonds may decline
sharply.
CREDIT RISK
Credit risk is the possibility that an issuer will fail to make timely
payments of interest or principal. In general, the lower the credit quality of a
security, the higher the yield and the higher the risk, all other factors (such
as maturity) being equal. In determining the credit quality of a tax-exempt
security, it is necessary to consider the possibility that legislative changes
affecting the taxing and spending authority of a municipality will affect the
ability of the municipality to make payments of principal and interest on its
obligations. Investment policies of the Funds allow them to invest in securities
with credit quality ranging from the highest (Aaa or aaa by Moody's or AAA by
S&P) to as low as Caa or caa by Moody's or CCC by S&P if, in the opinion of the
Investment Manager, the financial condition of the issuer or the protection
afforded to a particular security is stronger than would otherwise be indicated
by the rating. The Funds will generally not purchase securities rated below B or
b by Moody's or B by S&P. In addition, the Funds may not invest more than 10% of
their total assets at the time of purchase in securities rated Caa or caa by
Moody's or CCC by S&P. See Appendix A to this Prospectus for a full description
of credit ratings for the investments held by CGM American Tax Free Fund and CGM
Fixed Income Fund during the previous fiscal year.
NON-INVESTMENT GRADE RISK
Securities rated non-investment grade (lower than Baa or baa by Moody's or
lower than BBB by S&P) are sometimes referred to as "high yield" or "junk"
bonds. See Appendix A for further information about securities ratings.
Investors should consider the following risks associated with high yield
securities before investing in either of the Funds.
High yield securities may be regarded as predominantly speculative with
respect to the issuer's continuing ability to make principal and interest
payments. Analysis of the creditworthiness of issuers of high yield securities
may be more complex than for issuers of higher quality debt securities, and the
ability of the Funds to achieve their investment objectives may, to the extent
of their investments in high yield securities, be more dependent upon such
creditworthiness analysis than would be the case if the Funds were investing in
higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to
interest-rate changes than more highly rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. Yields on a
high yield security will fluctuate. If the issuer of high yield securities
defaults, the Funds may incur additional expenses to seek recovery.
The secondary markets on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect the price at which the Funds
could sell a particular high yield security when necessary to meet liquidity
needs or in response to a specific economic event, such as a deterioration in
the credit worthiness of the issuer, and could adversely affect and cause large
fluctuations in the daily net asset value of the Funds' shares. Adverse
publicity and investor perceptions may decrease the value and liquidity of high
yield securities.
It is reasonable to expect any recession to severely disrupt the market for
high yield securities, have an adverse impact on the value of such securities,
and adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon. New laws and proposed new laws may adversely
impact the market for high yield securities.
WHEN-ISSUED SECURITIES RISK
CGM American Tax Free Fund and CGM Fixed Income Fund each may purchase some
debt securities on a "when-issued" basis, which means that it may be as long as
60 days after purchase before the securities are delivered to the Fund. Payment
and interest terms, however, are fixed at the time the purchaser enters into the
commitment. The Funds do not pay for when-issued securities or start earning
interest on them until the contractual settlement date. At the time of
settlement, the market value of the security may be more or less than the
purchase price. A segregated account of each Fund consisting of cash, cash
equivalents, U.S. Government Securities or other high quality liquid debt
securities at least equal at all times to the amount of when-issued securities
held by the particular Fund will be established and maintained at the Funds'
custodian bank.
FOREIGN SECURITIES RISK
CGM Fixed Income Fund may invest up to 20% of its net assets at the time of
purchase in debt securities and preferred stocks issued by institutions,
corporations and governments established by or in one or more foreign countries,
which may be developed or undeveloped countries. Such foreign securities will
otherwise satisfy the limitations and restrictions applicable to the Fund,
including the Fund's policies regarding credit quality. In making foreign
investments, the Fund will also give appropriate consideration to the following
factors, among others.
Because some foreign securities CGM Fixed Income Fund may acquire are
purchased with and payable in currencies of foreign countries, the value of
these assets as measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations.
Certain currency exchange expenses may be incurred when the Fund changes
investments from one country to another.
Foreign securities markets generally are not as developed or efficient as
those in the United States. Securities of some foreign issuers are less liquid
and more volatile than securities of comparable U.S. issuers. Similarly, volume
and liquidity in most foreign securities markets are less than in U.S. markets
and, at times, volatility of prices can be greater than in the United States.
There may be less government supervision and regulation of securities exchanges,
brokers and listed companies. The issuers of some of these securities, such as
foreign bank obligations, may be subject to less stringent or different
regulations than those governing U.S. issuers. In addition, there may be less
publicly available information about a foreign issuer, and foreign issuers are
not subject to uniform accounting and financial reporting standards, practices
and requirements comparable to those applicable to U.S. issuers. Further, it may
be more difficult to obtain current information about corporate actions by
foreign issuers of portfolio securities that affect the prices of such
securities.
Foreign securities are also subject to additional risks of possible adverse
political and economic developments, possible seizure or nationalization of
foreign deposits and possible adoption of governmental restrictions, which might
adversely affect the payment of principal and interest on the foreign securities
or might restrict the payment of principal and interest to investors located
outside the country of the issuer, whether from currency blockage or otherwise.
CGM Fixed Income Fund's ability and decisions to purchase and sell portfolio
securities may be affected by laws or regulations relating to the convertibility
and repatriation of assets.
Some foreign securities may be subject to transfer taxes levied by foreign
governments, and the income received by CGM Fixed Income Fund from sources
within foreign countries may be reduced by withholding and other taxes imposed
by such countries. The Fund will also incur higher custody costs in connection
with foreign securities.
MORTGAGE-RELATED SECURITIES AND
ASSET-BACKED SECURITIES RISK
CGM Fixed Income Fund may invest in mortgage-related securities and asset-
backed securities. Mortgage-related securities are represented by pools of
mortgage loans or loans assembled for sale to investors by various governmental
agencies, such as the Government National Mortgage Association, and
government-related organizations, such as the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation, as well as by
private issuers, such as commercial banks, savings and loan institutions,
financial corporations, mortgage bankers and private mortgage insurance
companies. Asset-backed securities are pass-through securities backed by
non-mortgage assets, including automobile loans, credit card receivables and
consumer receivables. Although certain mortgage-related and asset-backed
securities are guaranteed by a third party or otherwise similarly secured, the
market value of the security, which may fluctuate, and the yield are not so
secured. If CGM Fixed Income Fund purchases a mortgage-related or an
asset-backed security at a premium, all or part of the premium may be lost if
there is a decline in the market value of the security, whether resulting from
changes in interest rates or prepayments in the underlying mortgage collateral.
As with other interest-bearing securities, the prices of such securities are
inversely affected by changes in interest rates. However, although the value of
a mortgage-related or asset-backed security may decline when interest rates
rise, the converse is not necessarily true, because in periods of declining
interest rates the mortgages or assets underlying the security may be more
likely to be prepaid. For this and other reasons, a mortgage-related or
asset-backed security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages or assets and, therefore, it is not
possible to predict accurately the security's return. Such prepayments may
expose CGM Fixed Income Fund to a lower rate of return on reinvestment. To the
extent that such mortgage-related securities are held by the Fund, the
prepayment right of the mortgagors may limit the increase in net asset value of
the Fund because the value of the mortgage-related securities held by the Fund
may not appreciate as rapidly as the price of other debt securities.
CGM Fixed Income Fund may also invest in stripped mortgage-related
securities often referred to as IO (interest-only) and PO (principal-only)
securities. IO and PO securities are formed by separating the principal and
interest payments of a mortgage-related security to create two or more classes
of securities with different characteristics than the underlying security. IOs
receive all of the coupon interest from mortgage-related securities and can be
high yielding securities, while POs receive all of the principal payments from
mortgage-related securities and are seldom high yielding securities. IOs and POs
are extremely sensitive to changes in both interest rates and prepayment rates.
Because an IO receives only the interest payments of an underlying
mortgage-related security, an increase in prepayments (due to lower interest
rates) will result in less interest being paid to the IO investor. The decrease
in interest payments will cause the value of the IO to decline as most other
bonds increase in value. A decline in prepayments (due to higher interest
rates), however, will result in increased interest being paid to the IO
investor. The increase in interest payments will generally result in a higher
value for the IO security. PO securities, on the other hand, are zero coupon
securities, as they receive no interest, but do receive all principal payments
of an underlying mortgage-related security. The value of these securities will
increase as prepayments increase, particularly if interest rates are declining.
Like zero coupon securities, PO securities are extremely volatile securities,
which increase in value as interest rates decline and/or prepayments increase
and decline when rates increase and/or prepayments decline.
IO and PO securities that are issued by the U.S. Government or its agencies
and instrumentalities and are backed by fixed-rate mortgages may be treated as
liquid for purposes of investment restrictions applicable to investments in
illiquid securities, in accordance with guidelines established by the Board of
Trustees, to determine whether there is a readily available market for such
securities. All other IO and PO securities will be treated as illiquid for
purposes of applicable investment restrictions.
ZERO COUPON, DEFERRED INTEREST AND
PAYMENT-IN-KIND SECURITIES RISK
There may be special tax considerations associated with investing in
securities structured as deferred interest, zero coupon or payment-in-kind
securities. CGM Fixed Income Fund records the interest on these securities as
income even though it receives no cash interest until each security's maturity
date. The Fund will be required to distribute all or substantially all such
amounts annually and may have to obtain the cash to do so by selling securities.
Thus, to meet cash distribution obligations, the Fund may be required to
liquidate a portion of its assets, which it would otherwise continue to hold, at
a disadvantageous time. These distributions will be taxable to shareholders as
ordinary income.
In the case of securities structured as deferred interest, zero coupon or
payment-in-kind securities, the market prices of such securities are affected to
a greater extent by interest rate changes, and therefore tend to be more
volatile than securities which pay interest periodically and in cash.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental restrictions, which may not
be changed without the approval of shareholders. Certain other fundamental and
non-fundamental restrictions are set forth in the Statement. Each Fund may not:
[] purchase any securities which would cause more than 25% of the market value
of its total assets at the time of such purchase to be invested in the
securities of one or more issuers having their principal business activities
in the same industry, provided that there is no limit with respect to
investments in U.S. Government Securities;
[] borrow money, except that it may borrow from banks in an amount not to
exceed one-third of the value of its total assets and may borrow for
temporary purposes from entities other than banks in an amount not to exceed
5% of the value of its total assets; or
[] with respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of any one issuer or invest more than 5% of
the value of its total assets in the securities of any one issuer, except
the U.S. Government, its agencies and instrumentalities.
THE FUNDS' INVESTMENT MANAGER
Each Fund's investment manager is Capital Growth Management Limited
Partnership, One International Place, Boston, Massachusetts 02110. CGM, an
investment advisory firm founded in 1989, manages eight mutual fund portfolios
and advisory accounts for other clients. The general partner of CGM is a
corporation controlled equally by Robert L. Kemp and G. Kenneth Heebner, who are
trustees and officers of the Funds.
In addition to selecting and reviewing each Fund's investments, CGM provides
executive and other personnel for the management of the Funds. The Trust's Board
of Trustees supervises CGM's management of the affairs of the Funds.
Until December 31, 1997, and thereafter until further notice to CGM American
Tax Free Fund, CGM has voluntarily agreed to waive its management fees and bear
all of the expenses of CGM American Tax Free Fund. Without this waiver and these
reimbursements, the investment management fee would be 0.60% on the first
$500,000,000, 0.55% on the next $500,000,000, and 0.45% on amounts in excess of
$1 billion.
Until December 31, 1997, CGM has voluntarily agreed to waive fees and to
reimburse CGM Fixed Income Fund for expenses to the extent the Fund's expenses
exceed 0.85% of the Fund's average annual net assets. CGM has also agreed not to
modify its commitment thereafter without approval of the Board of Trustees.
Without this waiver and these reimbursements, the investment management fee
would be 0.65% on the first $200,000,000, 0.55% on the next $300,000,000, and
0.40% on amounts in excess of $500,000,000. In 1996, the Fund paid 0.14% of its
average net assets in management fees to CGM.
THE PORTFOLIO MANAGERS
The portfolio manager for CGM American Tax Free Fund is Janice H. Saul, who
is an officer of the Fund. Prior to joining CGM, Ms. Saul was employed as a
portfolio manager by Loomis, Sayles & Company, Incorporated ("Loomis Sayles")
and by Scudder, Stevens and Clark.
CGM Fixed Income Fund's investment portfolio is co-managed by G. Kenneth
Heebner and Janice H. Saul, officers of the Fund's Investment Manager. Mr.
Heebner is responsible for the Fund's investments that are convertible into
equity securities and Ms. Saul has primary responsibility for managing the
Fund's debt securities.
Mr. Heebner, who is a vice president and trustee of CGM Trust, also manages
the investment portfolios of CGM Mutual Fund, CGM Capital Development Fund and
CGM Realty Fund. Prior to March 1, 1990, Mr. Heebner managed the CGM Capital
Development Fund and CGM Mutual Fund in his capacity as vice president and
director of Loomis Sayles.
HOW TO PURCHASE SHARES
The Trust sells shares of the Funds directly to investors without any sales
load. You may make an initial purchase of shares of each Fund by submitting a
completed application form and payment to:
The CGM Funds
P. O. Box 449
Boston, Massachusetts 02117-0449
The minimum initial investment in each Fund is $2,500 for regular accounts
and $1,000 for retirement accounts (see "Shareholder Services -- Retirement
Plans") and accounts set up under the Uniform Gifts to Minors Act ("UGMA") or
the Uniform Transfers to Minors Act ("UTMA"). Subsequent investments in each
Fund must be at least $50. See "Shareholder Services" below for further
information about minimum investments in certain other circumstances.
All investments made by check should be in U.S. dollars and made payable to
CGM American Tax Free Fund or CGM Fixed Income Fund (as applicable). Third party
checks (i.e. checks payable to anyone other than CGM American Tax Free Fund or
CGM Fixed Income Fund) are generally not accepted and checks drawn on credit
card accounts will not be accepted. The Trust reserves the right to reject any
third party checks and checks drawn on credit card accounts.
After accepting an order, the Trust forwards the application and payment to
the CGM Shareholder Services Department ("CGM Shareholder Services") of Boston
Financial Data Services, Inc. ("BFDS"), which is the shareholder servicing agent
for State Street Bank and Trust Company ("State Street Bank"). CGM Shareholder
Services then opens an account, applies the payment to the purchase of full and
fractional shares, and mails a statement of the account confirming the
transaction.
After your account has been established for each Fund, you may send
subsequent investments in such Fund at any time directly to the shareholder
servicing agent at the following address:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P. O. Box 8511
Boston, Massachusetts 02266-8511
The remittance for any subsequent investment must be accompanied by either
the Additional Investment Stub detached from a statement of account, or a note
containing sufficient information to identify the account, i.e., the Fund name,
your account number, your name and social security number.
Subsequent investments may also be made by federal funds wire. Instruct your
bank to wire federal funds to State Street Bank and Trust Company, ABA
#011000028. The text of the wire should read as follows: "DDA 99046336 $ Amount,
STATE ST BOS ATTN Mutual Funds. Credit CGM American Tax Free Fund or CGM Fixed
Income Fund (as applicable), Shareholder Name, Shareholder Account Number." Your
bank may charge you a fee for transmitting funds by wire.
The Trust reserves the right to reject any purchase order, including orders
in connection with exchanges, for any reason the Trust, in its sole discretion,
deems appropriate. Although the Trust does not anticipate that it will do so,
the Trust reserves the right to suspend, change or withdraw the offering of
shares of any Fund.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust or by CGM Shareholder
Services.
If you wish transactions in your account to be effected by another person
under a power of attorney from you, special rules apply. Please contact the
Trust or CGM Shareholder Services for details.
An investor will not receive any certificates for shares unless the investor
requests them in writing from CGM Shareholder Services. The Trust's system for
recording investments eliminates the problems of handling and safekeeping
certificates.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services as more fully described
in the Statement. Explanations and forms are available from the Trust.
EXCHANGE PRIVILEGE
Shares of either Fund may be exchanged for shares of money market funds
currently distributed by New England Funds, L.P. ("Money Market Funds"). You may
also exchange shares for shares of CGM American Tax Free Fund or CGM Fixed
Income Fund (as applicable), CGM Mutual Fund or CGM Realty Fund. Additionally,
you may exchange shares for shares of CGM Capital Development Fund, but only if
you were a shareholder on September 24, 1993 and have remained a shareholder in
the CGM Capital Development Fund continuously since that date. CGM Capital
Development Fund shares are not generally available to other persons except in
special circumstances that have been approved by, or under the authority of, the
Board of Trustees of that Fund as described in the Statement.
All exchanges may be made without charge. You may make an exchange by
written instruction or, if a written authorization for telephone exchanges is on
file with CGM Shareholder Services, you may call 800-343-5678. See "Telephone
Transactions." Exchanges must be for amounts of at least $1,000. Under certain
circumstances, before an exchange can be made, additional documents may be
required to verify the authority or legal capacity of the person seeking the
exchange. If you wish to make an exchange into a new account, the exchange must
satisfy the applicable minimum initial investment requirements. Exchange
requests cannot be revoked once they have been received in good order.
Investors should not view the exchange privilege as a means for taking
advantage of short-term swings in the market, and each Fund limits the number of
exchanges each shareholder may make to four exchanges per account (or two round
trips) per calendar year. Monthly automatic exchanges from the Money Market
Funds to the Funds are exempt from this restriction. The Trust also reserves the
right to prohibit exchanges during the first 15 days following an investment in
a particular Fund. The Trust may terminate or change the terms of the exchange
privilege. In general, shareholders will receive notice of any material change
to the exchange privilege at least 60 days prior to the change. For federal
income tax purposes, an exchange constitutes a sale of shares, which may result
in a capital gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
If the value of your account is at least $10,000, you may have periodic cash
withdrawals automatically paid to you or any person you designate. If checks are
returned to any Fund as "undeliverable" or remain uncashed for more than six
months, the plan will be cancelled. Undeliverable or uncashed checks shall be
cancelled and such amounts shall be reinvested in the applicable Fund at the per
share net asset value determined as of the date of cancellation of such checks.
AUTOMATIC INVESTMENT PLAN ("AIP")
Once your account has been established for a particular Fund, voluntary
monthly investments of at least $50 may be made automatically by pre-authorized
withdrawals from your checking account. Debits from savings banks and credit
unions generally are not acceptable. Additional information about this Plan is
set forth in the Statement and also in Sections 7 and 9 of the Account
Application.
RETIREMENT PLANS
CGM American Tax Free Fund may not be an appropriate investment for: IRA
accounts, SEP-IRA accounts, 403(b)(7) custodial accounts, qualified profit
sharing plans, or qualified money purchase pension plans.
CGM Fixed Income Fund's shares may be purchased by certain types of
tax-deferred retirement plans. CGM makes available retirement plan forms and
plan documents for IRAs, SEP-IRAs, 403(b)(7) custodial accounts, and money
purchase pension and profit sharing plans ("CGM Retirement Plans").
SHAREHOLDER REPORTS
Shareholders of each Fund will receive that Fund's financial statements and
a summary of the Fund's investments at least semiannually. The Funds intend to
consolidate mailings of annual, semiannual and quarterly reports to households
having multiple accounts with the same address of record and to furnish a single
copy of each report to that address. Mailing of prospectuses and proxy
statements will not be consolidated, and, if a report is included in such
mailings, each shareholder will receive a separate copy. You may request
additional reports by notifying either Fund in writing, or by calling the Trust.
Shareholders will receive statements confirming all purchases, redemptions and
changes of address. You may call CGM Shareholder Services and request a
duplicate statement for the current year without charge. A fee may be charged
for any duplicate information requested for prior years.
HOW TO REDEEM SHARES
You can redeem all or part of your shares in either Fund in three different
ways: by sending a written request for a check or wire representing the
redemption proceeds, by making a telephone request for redemption by check
(provided that the amount to be redeemed is not more than $25,000 and the check
is being sent to you at your record address, which has not changed in the prior
three months) or by making a telephone request for redemption proceeds to be
wired to a bank that you have predesignated. The redemption price will always be
the net asset value per share next determined after the redemption request is
received by CGM Shareholder Services in good order (including any necessary
documentation). Necessary documentation may include, in certain circumstances,
documents verifying the authority or legal capacity of the person seeking to
redeem shares. Redemption requests cannot be revoked once they have been
received in good order.
If you elect to redeem shares in writing, send your written request to:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The written request must include the name of the particular Fund, your account
number, the exact name(s) in which your shares are registered, the number of
shares or the dollar amount to be redeemed and mailing or wire instructions. All
owners of shares must sign the request in the exact name(s) in which the shares
are registered (which appear(s) on your confirmation statement) and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity). If you
are signing in a special capacity, you may wish to contact CGM Shareholder
Services in advance to determine whether additional documentation will be
required before you send a redemption request.
Redemptions from CGM Retirement Plans for which State Street Bank is the
trustee must contain additional information. Please contact CGM Shareholder
Services for instructions and forms. Complete information, including tax
withholding instructions, must be included in your redemption request.
If you are redeeming shares worth more than $25,000 or requesting that the
proceeds check be made payable to someone other than the registered owner(s) or
be sent to an address other than your record address (or sent to your record
address if such address has been changed within the previous three months), you
must have your signature guaranteed by an "eligible guarantor institution" as
defined in the rules under the Securities Exchange Act of 1934 (including a
bank, broker, dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association, but not a notary
public).
If you hold certificates representing your investment, you must enclose the
certificates and a properly completed redemption form or stock power. You bear
the risk of loss of such certificates; consequently you may wish to send your
certificates by registered mail.
If you elect to redeem shares by telephone, call CGM Shareholder Services
directly at 800-343-5678. See "Telephone Transactions." Telephone redemptions
are not available for CGM Retirement Plans. When you make a redemption request
by telephone, you may choose to receive redemption proceeds either by having a
check mailed to the address of record on the account, provided the address has
not changed for three months and you are redeeming $25,000 or less, or by having
a wire sent to a bank account you have previously designated.
Telephone redemptions by check are available to all shareholders of the
Funds automatically and no special application is necessary. You may select the
telephone redemption wire service when you fill out your initial application or
you may select it later by completing the Service Options Form (with a signature
guarantee), available from the Trust or CGM Shareholder Services.
A telephone redemption request must be received by CGM Shareholder Services
prior to the close of the New York Stock Exchange (the "Exchange"). If you
telephone your request to CGM Shareholder Services after the Exchange closes or
on a day when the Exchange is not open for business, the Trust cannot accept
your request and a new one will be necessary.
Wire redemptions by telephone may be made only if your bank is a member of
the Federal Reserve System or has a correspondent bank that is a member of such
System. If your account is with a savings bank, it must have only one
correspondent bank that is a member of the Federal Reserve System. A wire fee
(currently $5) will be deducted from the proceeds. If you decide to change the
bank account to which proceeds are to be wired, you must send in this change on
the Service Options Form with a signature guarantee.
Proceeds resulting from a written or regular telephone redemption request
will normally be mailed to you within seven days after receipt of your request
in good order. Telephone wire redemption proceeds will normally be wired to your
bank within seven days following receipt of a proper redemption request. If you
purchased your shares of a Fund by check (or through your AIP) and elect to
redeem shares within 15 days of such purchase, you may experience delays in
receiving redemption proceeds. The Trust will generally postpone sending your
redemption proceeds from such investment until the Trust can verify that your
check (or AIP investment) has been or will be collected. There will be no such
delay for redemptions following investments paid for by federal funds wire or by
bank cashier's check, certified check or treasurer's check. If checks
representing redemption proceeds are returned "undeliverable" or remain uncashed
for six months, such checks shall be cancelled and such proceeds shall be
reinvested in the applicable Fund at the per share net asset value determined as
of the date of cancellation of such checks.
No Fund may suspend the right of redemption, or postpone payment for more
than seven days, except when the Exchange is closed for other than weekends or
holidays, when trading on the Exchange is restricted, during an emergency (as
determined by the SEC) that makes it impracticable for that Fund to dispose of
its securities or to determine fairly the value of its net assets, or during any
other period permitted by the SEC for the protection of investors.
Because the expense of maintaining small accounts is disproportionately
high, each Fund may close accounts with 20 shares or less and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of a Fund's intention to close the account and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to CGM Retirement Plans and UGMA/UTMA
accounts.
TELEPHONE TRANSACTIONS
You may initiate three types of transactions by telephone:
[] Telephone Exchanges
[] Telephone Redemptions By Wire
[] Telephone Redemptions By Check
The terms and provisions for each of these services are explained fully in the
preceding sections. Once a telephone transaction request has been placed, it
cannot be cancelled.
The Telephone Exchange privilege and/or Telephone Redemptions By Wire
privilege must be elected by you when you fill out your initial application for
each Fund or you may select them later by completing the Service Options Form
(with a signature guarantee) available from the Trust or CGM Shareholder
Services. The Telephone Redemptions By Check privilege is available to
shareholders of each Fund automatically and no special application is necessary.
The telephone redemption privileges are not available for IRAs, SEP-IRAs,
403(b)(7) custodial accounts or for money purchase pension and profit sharing
accounts under a CGM Retirement Plan (in which State Street Bank is the
trustee).
Each Fund will employ reasonable procedures to confirm that instructions
received by telephone (including instructions with respect to changes in
addresses) are genuine, such as requesting personal identification information
that appears on your account application and recording the telephone
conversation. You will bear the risk of loss due to unauthorized or fraudulent
instructions regarding your account, although each Fund may be liable if
reasonable procedures are not employed.
DIVIDENDS, CAPITAL GAINS AND TAXES
CGM American Tax Free Fund and CGM Fixed Income Fund each intends to
qualify annually as a "regulated investment company" under the Internal Revenue
Code. To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund so qualifies, it
generally will not be subject to federal income or excise tax to the extent that
its taxable income is distributed to shareholders.
Each Fund intends to declare and pay monthly dividends consisting of
substantially all of its net investment income. A Fund's dividend and capital
gains distributions may be reinvested in additional shares or received in cash,
although certain restrictions may apply to participants in CGM Retirement Plans.
If you elect to receive distributions in cash and checks are returned
"undeliverable" or remain uncashed for six months, your cash election will be
changed automatically and your future dividend and capital gains distributions
will be reinvested in the same Fund at the per share net asset value determined
as of the date of payment of the distribution. In addition, following such
six-month period, any undeliverable or uncashed checks will be cancelled and
such amounts shall be reinvested in the same Fund at the per share net asset
value determined as of the date of cancellation of such checks.
Dividends paid by a Fund from net taxable investment income, including
dividends, interest and net short-term gains, will be taxable to shareholders as
ordinary income. For corporate investors, no portion of dividends paid by either
Fund is expected to qualify for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) are taxable as long-term capital gains,
regardless of the length of time shareholders have owned shares in the Fund. To
the extent that a Fund makes a distribution in excess of its current and
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing the tax basis in a shareholder's shares,
and then, to the extent the distribution exceeds such basis, as a taxable gain
to be realized upon sale of such shares. Taxable dividends and distributions are
taxable to shareholders of a Fund in the same manner whether received in cash or
reinvested in additional Fund shares.
CGM American Tax Free Fund anticipates that a substantial portion of its
investment income will be tax-exempt interest income. Dividends paid by the Fund
from net tax-exempt interest income will be excluded from a shareholder's gross
income for federal income tax purposes. Shareholders who are recipients of
Social Security benefits should be aware that exempt interest dividends received
from the Fund are includable in their "modified adjusted gross income" for
purposes of determining the amount of such Social Security benefit, if any, that
is required to be included in their gross income. The exemption of certain
dividends from federal income tax does not necessarily result in exemption under
the income tax laws of any state or local taxing authority. Shareholders should
consult their own tax advisers about the status of dividends and distributions
of CGM American Tax Free Fund in their own states and localities.
If a shareholder of CGM American Tax Free Fund receives an exempt-interest
dividend with respect to any share and redeems or exchanges such share before
holding it for more than six months, any loss on the redemption or exchange will
be disallowed to the extent of such exempt-interest dividend. Similarly, if a
shareholder of the Fund receives a distribution taxable as a long-term capital
gain with respect to any share and redeems or exchanges such share before
holding it for more than six months, any loss on the redemption or exchange (not
otherwise disallowed as attributable to an exempt-interest dividend) will be
treated as a long-term capital loss to the extent of the long-term capital gain
recognized on such distribution.
CGM American Tax Free Fund may invest in private activity bonds. Interest on
private activity bonds issued after August 7, 1986, although generally
excludable from gross income for federal income tax purposes, may be subject to
the federal alternative minimum tax ("AMT"). AMT is imposed on taxpayers who
utilize to a significant degree certain tax deductions and exclusions (known as
"items of tax preference"). Interest from private activity bonds is an item of
tax preference that is included with items of income from certain other sources
in calculating if a taxpayer is subject to AMT in the amount thereof.
Shareholders should consult their own tax advisers regarding the potential
applicability of AMT to them.
If CGM Fixed Income Fund invests in foreign securities, it may be subject to
foreign withholding taxes on income earned on such securities and may be unable
to pass through to shareholders foreign tax credits and deductions with respect
to such taxes.
A distribution will be treated as paid by a Fund and received by its
respective shareholders on December 31 of the current calendar year if it is
declared in October, November, or December of that year with a record date in
such a month and paid in January of the subsequent year.
Any dividends or distributions paid shortly after a purchase of shares will
have the effect of reducing the per share net asset value of the shares by the
amount of the dividends or distributions. Although in effect a return of
capital, these distributions (if derived from taxable investment income or net
capital gains) are subject to tax, even if their effect is to reduce the per
share net asset value below a shareholder's cost. Each Fund will notify you
annually as to the tax status of dividend and capital gains distributions paid
by the Fund.
The sale or other disposition of shares of a Fund, including a redemption of
shares or an exchange of shares into another fund, is a taxable event and may
result in a capital gain or loss which will be long-term or short-term,
generally depending upon the shareholder's holding period for the shares.
Each Fund is required to withhold a portion of taxable dividends, capital
gains distributions, and redemptions paid to individuals and certain other
classes of shareholders if they fail to furnish the Fund with their correct
taxpayer identification numbers and certain certifications regarding their tax
status, or if they are otherwise subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against a shareholder's normal federal income tax liability. For additional
information about withholding, please see the Statement.
BFDS, the shareholder servicing agent, will send you and the Internal
Revenue Service an annual statement detailing federal tax information, including
information about dividends and distributions paid to you during the preceding
year. If you redeem or exchange shares in any year, following the end of a year,
you will receive a statement providing the cost basis and gain or loss of each
share lot that you sold in each year. Your CGM account cost basis will be
calculated using the "single category average cost method," which is one of the
four calculation methods allowed by the IRS. Be sure to keep these statements as
permanent records. A fee may be charged for any duplicate information that you
request.
Dividend distributions, capital gains distributions, and capital gains or
losses from redemptions and exchanges may also be subject to state and local
taxes. In certain states, a portion of each Fund's income derived from certain
direct U.S. Government obligations may be exempt from state and local taxes.
Each year, each Fund will indicate the portion of its income, if any, that is
derived from such obligations.
The tax discussion set forth above is included for general information only.
Shareholders and prospective investors should consult their own tax advisers
concerning the tax consequences of an investment in each Fund.
PRICING OF SHARES
The share price or "net asset value" per share of each Fund is computed
daily by dividing the total value of the investments and other assets of the
Fund, less any liabilities, by the total outstanding shares of the Fund. The net
asset value per share of each Fund is determined as of the close of the regular
trading session of the Exchange on each day the Exchange is open for trading.
Portfolio securities are generally valued at their market value. In certain
cases, market value may be determined on the basis of information provided by a
pricing service approved by the Board of Trustees. Instruments with maturities
of 60 days or less are valued at amortized cost, which approximates market
value. Other assets and securities which are not readily marketable will be
valued in good faith at fair value using methods determined by the Board of
Trustees. The valuation of portfolio securities is more fully described in the
Statement.
PERFORMANCE INFORMATION
The Funds may include yield and total return information in advertisements
or other written sales material. Each Fund will show its average annual total
return for the most recent one-year period and the life of the Fund through the
end of the most recent calendar quarter. Total return is measured by comparing
the value of an investment in the Fund at the beginning of the relevant period
to the value of the investment at the end of the period (assuming automatic
reinvestment of all dividends and capital gains distributions). Each Fund may
also show total return over other periods on an aggregate basis for the period
presented.
Yield is computed in accordance with the SEC's standardized formula by
dividing the adjusted net investment income per share earned during a recent
thirty-day period by the maximum offering price of a Fund share on the last day
of the period. Each Fund may also present one or more distribution rates in its
sales literature. These rates will be determined by analyzing the Fund's
distributions from net investment income and net short-term capital gains over a
recent twelve-month, three-month or thirty-day period and dividing that amount
by the net asset value on the last day of such period.
CGM American Tax Free Fund may also utilize tax equivalent yields with
adjustments for assumed income tax rates. Tax equivalent yield is calculated by
determining the pre-tax yield which, after being taxed at a stated rate, would
be equivalent to a stated yield calculated as described above. See Appendix B
for illustrations of this yield.
Each Fund may compare its performance to that of recognized financial
indices or groups of mutual funds. It may also include its ranking among other
mutual funds or its rating as published by mutual fund ranking services or major
financial publications. Each Fund may also compare its performance to that of
money market funds and other investments, such as certificates of deposit, and
may refer to standard measures of performance for such investments, including
the Bank Rate Monitor and data published by the Federal Reserve System.
Investors should note that, although each Fund may experience better returns and
higher yields than money market funds and other investments, the Funds do not
seek to maintain stable net asset values. Thus, particularly during periods of
rising interest rates, the per share net asset value of each Fund may decrease
while the principal value of such other investments will not change. In
addition, unlike certificates of deposit, shares of the Fund are not insured by
the FDIC or any other entity. All performance information is based on past
results and is not an indication of likely future performance.
ADDITIONAL FACTS ABOUT THE FUNDS
[] The Trust was organized in 1986 as a Massachusetts business trust and is
authorized to issue an unlimited number of full and fractional shares in
multiple series. The Trust currently has four series: CGM Mutual Fund (a
successor to Loomis-Sayles Mutual Fund), CGM Fixed Income Fund, CGM American
Tax Free Fund and CGM Realty Fund.
[] When a shareholder invests in either Fund, the shareholder acquires freely
transferable shares of beneficial interest that entitle the shareholder to
receive dividends and to cast one vote at shareholder meetings for each
share owned. On matters affecting any particular Fund, shares of the Fund
vote separately from shares of other series of the Trust, except as
otherwise required by law.
[] The investment objective, investment practices and other non-fundamental
policies of either Fund can be changed without shareholder approval. If
there is a change in either Fund's investment objective, shareholders should
consider whether the particular Fund remains an appropriate investment in
light of their current financial position and needs.
<PAGE>
APPENDIX A
RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. DEBT RATINGS -- TAXABLE DEBT &
DEPOSITS GLOBALLY:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. SHORT-TERM MIG/VMIG RATINGS --
U.S. TAX-EXEMPT MUNICIPALS:
MIG 1/VMIG 1 -- This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 -- This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well-established.
MIG 4/VMIG 4 -- This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
S.G. -- This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. PREFERRED STOCK RATINGS:
aaa -- An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa -- An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
a -- An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa -- An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba -- An issue which is rated "ba" is considered to have speculative
elements, and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b -- An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -- An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
MOODY'S SHORT-TERM PRIME RATING SYSTEM -- TAXABLE DEBT & DEPOSITS GLOBALLY:
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
[] Leading market positions in well-established industries.
[] High rates of return on funds employed.
[] Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
[] Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
[] Well-established access to a range of financial markets and assured sources
of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME Issuers rated Not Prime do not fall within any of the Prime rating
categories.
DESCRIPTION OF STANDARD & POOR'S CORPORATION LONG-TERM ISSUE CREDIT RATINGS:
AAA -- An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA -- An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB -- An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
BB, B, CCC, CC and C -- Obligations rated "BB", "B", "CCC", "CC", and "C"
are regarded as having significant speculative characteristics. "BB" indicates
the least degree of speculation and "C" the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obliglations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
Plus (+) or Minus (-): The ratings from A to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r -- This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk -- such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
DESCRIPTION OF STANDARD & POOR'S CORPORATION PREFERRED STOCK RATING DEFINITIONS:
AAA -- This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA -- A preferred stock issue rated "AA" also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA".
A -- An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB -- An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
BB, B, CCC -- Preferred stock rated "BB," "B," and "CCC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. "BB" indicates the lowest degree of speculation
and "CCC" the highest. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
DESCRIPTION OF STANDARD & POOR'S CORPORATION MUNICIPAL NOTES RATINGS:
An S&P note rating reflects the liquidity factors and market access risks
unique to notes. Notes maturing in three years or less will likely receive a
note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
-- Source of payment (the more the issue depends on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols and definitions are as follows:
SP-1 -- Strong capacity to pay principal and interest. Issues determined
to possess very strong characteristics will be given a plus
(+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 -- Speculative capacity to pay principal and interest.
SHORT-TERM ISSUE CREDIT RATINGS:
A-1 -- A short-term obligation rated "A-1" is rated in the highest category
by Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2 -- A short-term obligation rated "A-2" is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3 -- A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
B -- A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C -- A short-term obligation rated "C" is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation.
PORTFOLIO COMPOSITION
The table below provides a summary of ratings assigned to securities in the
portfolios of CGM American Tax Free Fund and CGM Fixed Income Fund. Consistent
with each Fund's policy, if a security is rated by both Moody's and S&P, the
higher rating is used for purposes of classifying the security. These figures
are dollar-weighted averages of month-end portfolio holdings during the fiscal
year ended December 31, 1996, presented as a percentage of total investments
(excluding short-term investments and, in the case of CGM Fixed Income Fund,
warrants). These percentages are historical and are not necessarily indicative
of the quality of current or future portfolio holdings, which may vary.
DOLLAR-WEIGHTED AVERAGE
---------------------------------
CGM CGM
AMERICAN FIXED
MOODY'S S&P TAX FREE INCOME
RATING OR RATING FUND FUND
- ------------------------------------------------------------------------------
Aaa/Aa/A or AAA/AA/A 54.6% 24.9%
- ------------------------------------------------------------------------------
Baa or BBB 30.7% 39.6%
- ------------------------------------------------------------------------------
Ba or BB 13.5% 13.0%
- ------------------------------------------------------------------------------
B or B 1.2% 18.9%
- ------------------------------------------------------------------------------
Caa or CCC 0.0% 3.6%
- ------------------------------------------------------------------------------
The table above includes securities not rated by Moody's or S&P that CGM has
determined to be of comparable quality to the indicated rating by Moody's or
S&P. The dollar-weighted average of such securities not rated by either Moody's
or S&P amounted to 11.3% for CGM American Tax Free Fund and 1.9% for CGM Fixed
Income Fund. Such securities may include securities rated by other nationally
recognized rating organizations, as well as unrated securities.
<PAGE>
APPENDIX B
CGM AMERICAN TAX FREE FUND
TAXABLE EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
A FULLY TAXABLE INVESTMENT
TO WOULD HAVE TO PAY YOU:
MATCH A ---------------------------------------------------------------------------------
TAX-FREE ASSUMING A ASSUMING A ASSUMING A ASSUMING A
YIELD MARGINAL TAX MARGINAL TAX MARGINAL TAX MARGINAL TAX
OF: RATE OF 28% RATE OF 31% RATE OF 36% RATE OF 39.6%
------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
2.00% 2.78% 2.90% 3.13% 3.31%
3.00% 4.17% 4.35% 4.69% 4.97%
4.00% 5.56% 5.80% 6.25% 6.62%
5.00% 6.94% 7.25% 7.81% 8.28%
6.00% 8.33% 8.70% 9.38% 9.93%
</TABLE>
----------------------------------------
This table is a hypothetical illustration and should not be considered an
indication of CGM American Tax Free Fund's performance.
The assumed marginal tax rates are not necessarily the highest possible
marginal tax rates, nor are they the lowest rates. These rates were picked
as exemplary rates that may apply to many taxpayers.
<PAGE>
INVESTMENT ADVISER
Capital Growth Management
Limited Partnership
One International Place
Boston, MA 02110
TRANSFER AND DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, MA 02102
SHAREHOLDER SERVICING AGENT FOR
STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, MA 02266
AFP96A
CGM
AMERICAN
TAX FREE FUND
CGM
FIXED INCOME
FUND
Prospectus & Application
May 1, 1997
No-Load Funds
[FENCER LOGO]
<PAGE>
PART B.
Statements of Additional Information for CGM Mutual Fund, CGM Realty Fund,
CGM Fixed Income Fund, and CGM American Tax Free Fund
follow
<PAGE>
CGM MUTUAL FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
This Statement of Additional Information (the "Statement") is not a
prospectus. This Statement relates to the CGM Mutual Fund Prospectus dated May
1, 1997 (the "Prospectus"), and should be read in conjunction therewith. A copy
of the Prospectus may be obtained from CGM Trust, c/o The CGM Funds Investor
Services Division, P.O. Box 449, Boston, Massachusetts 02117 (Telephone:
800-345-4048).
MSAI97
<PAGE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
----
INTRODUCTION................................................................ 1
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS............................. 1
PORTFOLIO TURNOVER.......................................................... 4
MANAGEMENT OF THE FUND...................................................... 5
INVESTMENT ADVISORY AND OTHER SERVICES...................................... 7
Advisory Agreement................................................. 7
Custodial Arrangements............................................. 8
Independent Accountants............................................ 9
Other Arrangements................................................. 9
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 9
DESCRIPTION OF THE TRUST.................................................... 10
Shareholder Rights................................................. 11
Shareholder and Trustee Liability.................................. 12
HOW TO BUY SHARES........................................................... 12
ADVERTISING AND PERFORMANCE INFORMATION..................................... 12
Calculation of Total Return........................................ 13
Calculation of Yield............................................... 13
Performance Comparisons............................................ 14
NET ASSET VALUE AND PUBLIC OFFERING PRICE................................... 15
SHAREHOLDER SERVICES........................................................ 16
Open Accounts...................................................... 16
Systematic Withdrawal Plans ("SWP")................................ 17
Exchange Privilege................................................. 17
Automatic Investment Plans ("AIP")................................. 18
Retirement Plans................................................... 19
Address Changes.................................................... 19
REDEMPTIONS................................................................. 19
Redeeming by Telephone............................................. 20
Check Sent to the Record Address................................... 20
Proceeds Wired to a Predesignated Bank............................. 20
All Redemptions.................................................... 21
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS ............... 22
FINANCIAL STATEMENTS........................................................ 23
<PAGE>
- -------------------------------------------------------------------------------
INTRODUCTION
- -------------------------------------------------------------------------------
CGM Mutual Fund (the "Fund"), registered with the Securities and
Exchange Commission ("SEC") as a diversified open-end management investment
company, is organized as a separate series of shares of CGM Trust (the "Trust").
The Trust is a Massachusetts business trust established under the laws of
Massachusetts in 1986. The Trust is governed by an Amended and Restated
Agreement and Declaration of Trust (the "Declaration of Trust") dated January
23, 1997. The Trust is a successor in interest to Loomis-Sayles Mutual Fund. On
March 1, 1990, the Trust's name was changed from "Loomis-Sayles Mutual Fund" to
"CGM Mutual Fund" to reflect the assumption by Capital Growth Management Limited
Partnership ("CGM" or the "Investment Manager") of investment advisory
responsibilities with respect to the Trust. On December 20, 1991, the Trust's
name was changed to CGM Trust and the Fund's name was changed to CGM Mutual Fund
in connection with the organization of CGM Fixed Income Fund as a second series
of the Trust.
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
- -------------------------------------------------------------------------------
The Fund's investment objective is reasonable long-term capital
appreciation with a prudent approach to protection of capital from undue risks.
Current income is a consideration in the selection of the Fund's portfolio
securities, but it is not a controlling factor. There are no assurances that the
Fund will achieve its objective.
The Fund seeks to attain its objective by investing substantially all
of its assets in equity securities and fixed-income securities. The Fund is
"flexibly managed"; it sometimes will be more heavily invested in equity or
fixed-income securities, depending on management's view of the economic and
investment outlook. The Fund will ordinarily invest its assets so that
approximately 25% (or more) of the Fund's total assets will be invested in debt
or fixed-income securities.
The Fund may invest up to 35% of its total assets in debt or
fixed-income securities of a quality below investment grade at the time of
investment (i.e. securities rated lower than Baa or baa by Moody's Investors
Service, Inc. ("Moody's") or lower than BBB by Standard and Poor's Corporation
("S&P"), or their equivalent as determined by the Investment Manager), including
up to 10% of its total assets in fixed income securities rated at the time of
investment Caa or lower by Moody's or CCC or lower by S&P, or their equivalent
as determined by the Investment Manager. Risks associated with such investments
are described in the Prospectus.
The Fund may not:
(1) Invest in companies for the purpose of exercising control or
management;
(2) Issue any senior securities, except as it may be permitted by the
terms of any exemptive order or similar rule issued by the
Securities and Exchange Commission (the "SEC") relating to multiple
classes of shares of beneficial interest of the Trust, and provided
further that collateral arrangements with respect to forward
contracts, future contracts, short sales or options, including
deposits of initial and variation margin, shall not be considered
to be the issuance of a senior security for the purposes of this
restriction;
(3) Act as underwriter of securities issued by others;
(4) Invest in oil, gas or other mineral leases, rights or royalty
contracts or in real estate, commodities or commodity contracts;
(5) Make loans. (For purposes of this investment restriction, neither
(i) entering into repurchase agreements nor (ii) the purchase of
bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the
public, is considered the making of a loan);
(6) With respect to 75% of its total assets, purchase more than 10% of
the outstanding voting securities of any one issuer or invest more
than 5% of the value of its total assets in the securities of one
issuer, except the U.S. Government, its agencies or
instrumentalities;
(7) Invest more than 5% of its assets (taken at current value) in
securities of companies which (with predecessor companies) have a
record of less than three years of continuous operation, except
that the Fund may purchase securities issued by a real estate
investment trust in operation for less than 3 years if the sponsor
of such real estate investment trust has been in operation for at
least 3 years;
(8) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions or in connection with a merger, consolidation or
similar transaction. (Under the Investment Company Act of 1940, as
amended (the "1940 Act")), the Fund generally may not: (a) invest
more than 10% of its total assets (taken at current value) in such
securities; (b) own securities of any one investment company having
a value in excess of 5% of the Fund's total assets (taken at
current value); or (c) own more than 3% of the outstanding voting
stock of any one investment company);
(9) Pledge, mortgage, hypothecate or otherwise encumber any of its
assets;
(10) Purchase or retain securities of an issuer if officers and trustees
of the Fund and officers and directors of its investment adviser
who individually own more than 1/2of 1% of the shares or securities
of such issuer together own more than 5% of such shares or
securities;
(11) Purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to be
invested in the securities of one or more issuers having their
principal business activities in the same industry, provided that
there is no limit with respect to investments in the U.S.
Government, its agencies or instrumentalities;
(12) Borrow money in excess of 10% of its total assets (taken at cost)
or 5% of its total assets (taken at current value), whichever is
lower, nor borrow any money except as a temporary measure for
extraordinary or emergency purposes;
(13) Purchase securities on margin (except such short-term credits as
are necessary for clearance of transactions); or make short sales
(except where, by virtue of ownership of other securities, it has
the right to obtain, without payment of additional consideration,
securities equivalent in kind and amount to those sold);
(14) Purchase "illiquid" securities, including repurchase agreements
maturing in more than seven days and options traded "over the
counter," if, as a result, more than 10% of the Fund's total net
assets would then be invested in such securities; and
(15) Write or purchase puts, calls or combinations of both except that
it may acquire warrants or rights to subscribe to securities of
companies issuing such warrants or rights, or of parents or
subsidiaries of such companies. The Fund has no present intention
to acquire any such warrants or rights, but may do so at any time
without shareholder approval.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease resulting from a change in the values of assets
will not constitute a violation of such restriction.
The investment restrictions numbered 2, 3, 4, 5, 6, 11 and 12 above
have been adopted by the Trust as fundamental policies of the Fund. Under the
1940 Act, a fundamental policy may not be changed without the vote of a majority
of the outstanding voting securities of the Fund, as defined under the 1940 Act.
"Majority" means the lesser of (1) 67% or more of the shares present at a
meeting of shareholders of the Fund, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (2) more
than 50% of the outstanding shares of the Fund. Investment restrictions numbered
1, 7, 8, 9, 10, 13, 14 and 15 above are non-fundamental and may be changed at
any time by vote of a majority of the Fund's Board of Trustees.
It is also a non-fundamental policy of the Fund not to invest in real
estate limited partnerships, except that the Fund may purchase publicly traded
securities issued by real estate investment trusts. Real estate investment
trusts may be affected by changes in underlying property values and mortgage
real estate investment trusts may also be affected by the quality of credit
extended. Other risks associated with real estate investment trusts include the
possibility of a decline in real estate values, overbuilding, increased
competition, and other risks related to local or general economic conditions;
rising operating costs and property taxes; and fluctuations in rental income.
Additionally, rising interest rates generally decrease the value of
high-yielding securities and increase the costs of obtaining financing, which
could cause the value of the Fund's investments in such securities to decline.
Although authorized to invest in restricted securities, the Fund as a
matter of policy currently does not intend to invest in such securities. Also,
the Fund has given undertakings to a state regulatory authority in connection
with the qualification of Fund shares for sale in such state that its
investments in warrants will not exceed 5% of the value of its net assets and
that not more than 2% of its net assets will be invested in warrants which are
not listed on the New York or American Stock Exchanges. Such policy and
undertakings can be changed without shareholder approval, but shareholders will
be advised if any such changes are made.
The Fund may invest in repurchase agreements which are agreements by
which the Fund purchases a security and obtains a simultaneous commitment from
the seller (a bank or, to the extent permitted by the 1940 Act, a recognized
securities dealer) to repurchase the security at an agreed-upon price and date
(usually seven days or less from the date of original purchase). The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
the Fund the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality of
the U.S. Government, the obligation of the seller is not guaranteed by the U.S.
Government and there is a risk that the seller may fail to repurchase the
underlying security. In such event, the Fund would attempt to exercise rights
with respect to the underlying security, including possible disposition in the
market. However, the Fund may be subject to various delays and risks of loss,
including (1) possible declines in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (2) possible
reduced levels of income and lack of access to income during this period and (3)
inability to enforce rights and the expenses involved in attempted enforcement.
- -------------------------------------------------------------------------------
PORTFOLIO TURNOVER
- -------------------------------------------------------------------------------
Although the Fund's objective is long-term capital appreciation, it
frequently sells portfolio securities in response to changes in market, industry
or individual company conditions or outlook, even though those securities may
only have been held for short periods of time. This policy may result in higher
securities transaction costs. To the extent that this policy results in gains on
investments, the Fund will make distributions to shareholders, which may
accelerate the shareholders' tax liabilities for realized gains and may result
in the distribution of short-term capital gains taxable as ordinary income. See
"Income Dividends, Capital Gains Distributions and Tax Status."
The Fund's portfolio turnover rate for each of the last ten years is
set forth in the Prospectus in the table entitled "Financial Highlights." The
Fund's portfolio turnover rate has varied significantly from year to year in the
recent past due to the volatility of economic and market conditions, and the
Fund anticipates similar variations in the future.
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------
PETER O. BROWN -- Trustee;
30 Douglas Road, Rochester, NY; Partner, Harter, Secrest & Emery;
formerly Executive Vice President and Chief Operating Officer,
The Glenmede Trust Company; formerly Senior Vice President, Chase
Lincoln First Bank, N.A.
NICHOLAS J. GRANT -- Trustee;
77 Massachusetts Avenue, Cambridge, MA; Professor of Metallurgy
and Materials Science, Massachusetts Institute of Technology.
G. KENNETH HEEBNER* -- Trustee and Vice President;
Employee, CGM; formerly Vice President and Director, Loomis,
Sayles and Company, Incorporated ("Loomis Sayles").
ROBERT L. KEMP* -- Trustee and President;
Employee, CGM; formerly President and Director, Loomis Sayles.
ROBERT B. KITTREDGE -- Trustee;
21 Sturdivant Street, Cumberland Foreside, ME; Retired; formerly
Vice President, General Counsel and Director, Loomis Sayles.
LAURENS MACLURE -- Trustee;
183 Sohier Street, Cohasset, MA; Retired; formerly President and
Chief Executive Officer, New England Deaconess Hospital.
JAMES VAN DYKE QUEREAU, JR. -- Trustee;
59 Annewood Lane, Wayne, PA; Managing Partner, Stratton
Management Company; formerly Institutional Managing Partner,
Loomis Sayles.
J. BAUR WHITTLESEY -- Trustee;
1521 Locust Street, Philadelphia, PA; Attorney.
- --------
* Trustee deemed to be an "interested person" of the Fund, as defined by
the 1940 Act.
KATHLEEN S. HAUGHTON -- Vice President;
222 Berkeley Street, Boston, MA 02116; Employee -- Investor
Services Division, CGM; formerly Vice President, Boston Financial
Data Services, Inc.
LESLIE A. LAKE -- Vice President and Secretary;
Employee -- Office Administrator, CGM; formerly Office
Administrator, Capital Growth Management Division of Loomis
Sayles.
MARTHA I. MAGUIRE -- Vice President
Employee -- Funds Marketing, CGM; formerly marketing
communications consultant (self-employed); formerly Sales
Promotion Consultant, The New England.
MARY L. STONE -- Assistant Vice President;
Employee -- Coordinator, Mutual Fund Recordkeeping, CGM; formerly
Coordinator, Mutual Fund Recordkeeping, Loomis Sayles.
FRANK N. STRAUSS -- Treasurer;
222 Berkeley Street, Boston, MA 02116; Employee -- Chief
Financial Officer, CGM; formerly Vice President of Fund
Accounting, Freedom Capital Management Corporation and Assistant
Vice President, The Boston Company, Inc.
W. DUGAL THOMAS -- Vice President;
Employee -- Director of Marketing, CGM; formerly Director of
Marketing, Loomis Sayles.
Each of the Fund's trustees is also a trustee of one or more other
investment companies for which CGM acts as investment adviser. Except as
indicated above, the address of each trustee and officer of the Fund affiliated
with CGM is One International Place, Boston, Massachusetts 02110.
As of January 31, 1997, the officers and trustees of the Fund owned
beneficially less than 1% of the outstanding shares of the Fund.
The Fund pays no compensation to its officers or to the trustees listed
above who are interested persons of the Fund. Officers and trustees receive no
pension or retirement benefits paid from Fund expenses. The following table sets
forth the compensation paid by the Trust to its trustees for the year ended
December 31, 1996:
<TABLE>
<CAPTION>
Pension Total
or Retirement Estimated Compensation From
Aggregate Benefits Accrued Annual Registrant and
Name of Compensation as Part of Fund Benefit Upon Fund Complex
Trustee From Trust Expenses Retirement Paid to Trustees(a)
- ------- ---------- -------- ---------- -------------------
<S> <C> <C> <C> <C>
Peter O. Brown $26,430.25 None None $35,750.00
Nicholas J. Grant 30,930.25 None None 41,750.00
G. Kenneth Heebner None None None None
Robert L. Kemp None None None None
Robert B. Kittredge 26,430.25 None None 35,750.00
Laurens Maclure 26,430.25 None None 35,750.00
James Van Dyke Quereau, Jr. 26,430.25 None None 35,750.00
J. Baur Whittlesey 26,430.25 None None 35,750.00
</TABLE>
- ---------------
(a) The Fund Complex is comprised of two Trusts with a total of five funds.
- -------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- -------------------------------------------------------------------------------
Advisory Agreement. CGM serves as investment manager of the Fund under
an advisory agreement approved by the shareholders of the Fund at a special
meeting held on December 12, 1996 and effective as of December 13, 1996. CGM has
served as investment manager of the Fund since March 1, 1990. Prior to March 1,
1990, the Fund was managed by Loomis Sayles, whose Capital Growth Management
Division was reorganized into CGM on that date.
Under the advisory agreement, CGM manages the investment and
reinvestment of assets of the Fund and generally administers its affairs,
subject to supervision by the Board of Trustees of the Trust. CGM furnishes, at
its own expense, all necessary office supplies, facilities and equipment,
services of executive and other personnel of the Fund and certain administrative
services. For these services, CGM is compensated at the annual percentage rate
of 0.90% of the first $500 million of the Fund's average daily net asset value,
0.80% of the next $500 million of such value and 0.75% of such value in excess
of $1 billion. While this rate is higher than that paid by most other investment
companies, it is comparable to the fees paid by many investment companies having
investment objectives and policies similar to those of the Fund. For the fiscal
years ended December 31, 1994, 1995 and 1996, the advisory fee paid to CGM in
respect of services rendered to the Fund amounted to $7,523,197, $7,637,552 and
$8,033,863, respectively.
The Fund pays the compensation of its trustees who are not partners,
directors, officers or employees of CGM or its affiliates (other than registered
investment companies); registration, filing, and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Fund; the expenses of
meetings of the shareholders and trustees of the Fund; the charges and expenses
of the Fund's legal counsel; interest, including on any borrowings by the Fund;
the cost of services, including services of counsel, required in connection with
the preparation of, and the costs of printing, registration statements and
prospectuses relating to the Fund, including amendments and revisions thereto,
annual, semiannual, and other periodic reports of the Fund, and notices and
proxy solicitation material furnished to shareholders of the Fund or regulatory
authorities, to the extent that any such materials relate to the Fund or its
shareholders; and the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
CGM also acts as investment adviser to CGM Capital Development Fund,
CGM Fixed Income Fund, CGM American Tax Free Fund and CGM Realty Fund and three
other mutual fund portfolios. CGM also provides investment advice to other
institutional clients.
Certain officers and trustees of the Fund also serve as officers,
directors or trustees of other investment companies advised by CGM. The other
investment companies and clients served by CGM sometimes invest in securities in
which the Fund also invests. If the Fund and such other investment companies or
clients advised by CGM desire to buy or sell the same portfolio securities at
the same time, purchases and sales will be allocated to the extent practicable
on a pro rata basis in proportion to the amounts desired to be purchased or sold
for each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities which the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
trustees that the desirability of retaining CGM as adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
Street Bank"), Boston, Massachusetts 02102, is the Fund's custodian. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to the Fund. Upon instruction,
State Street Bank receives and delivers cash and securities of the Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Fund and calculates the total
net asset value, total net income, and net asset value per share of the Fund on
each business day.
Independent Accountants. The Fund's independent accountants are Price
Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse LLP conducts an annual audit of the Fund's financial statements,
assists in the preparation of the Fund's federal and state income tax returns
and consults with the Fund as to matters of accounting and federal and state
income taxation. The information concerning financial highlights in the
Prospectus, and the financial statements incorporated by reference into this
Statement, have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Other Arrangements. Certain office space, facilities, equipment and
administrative services for the Fund and other mutual funds under the investment
management of the CGM organization are furnished by CGM. In addition, CGM
provides bookkeeping, accounting, auditing, financial and related clerical
services for which it is reimbursed by the Fund based on the cost of providing
these services. For the services rendered to the Fund for the fiscal year 1996,
fiscal year 1995 and fiscal year 1994, CGM was reimbursed in the amounts of
$83,000, $80,000 and $80,000, respectively.
- -------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -------------------------------------------------------------------------------
In placing orders for the purchase and sale of portfolio securities for
the Fund, CGM always seeks the best price and execution. Transactions in
unlisted securities will be carried out through broker-dealers who make the
primary market for such securities unless, in the judgment of CGM, a more
favorable price can be obtained by carrying out such transactions through other
brokers.
CGM selects only brokers it believes are financially responsible, will
provide efficient and effective services in executing, clearing and settling an
order and will charge commission rates which, when combined with the quality of
the foregoing services, will produce the best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be competitive
with generally prevailing rates. CGM will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Fund will not
pay a broker a commission at a higher rate than is otherwise available for the
same transaction in recognition of the value of research services provided by
the broker or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which CGM believes will provide the best price and execution
for a transaction. These research services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce CGM's expenses. Such services may be used by CGM in servicing
other client accounts and in some cases may not be used with respect to the
Fund. Receipt of services or products other than research from brokers is not a
factor in the selection of brokers.
In 1996, brokerage transactions of the Fund aggregating $3,448,420,906
were allocated to brokers providing research services and $3,942,432 in
commissions were paid on these transactions. During 1994, 1995 and 1996 the Fund
paid total brokerage fees of approximately $5,775,145, $5,702,810 and
$4,313,317, respectively. The variation in the Fund's brokerage commissions is
substantially attributable to fluctuating portfolio activity.
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DESCRIPTION OF THE TRUST
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The Declaration of Trust of the Trust currently permits the trustees to
issue an unlimited number of shares of beneficial interest of separate series of
the Trust. Interests in the portfolio described in the Prospectus and in this
Statement are represented by shares of the Fund. Each share of the Fund
represents an interest in such series which is equal to and proportionate with
the interest represented by each other share. The shares of the Fund do not have
any preemptive rights. Upon liquidation of the portfolio, shareholders of the
Fund are entitled to share pro rata in the net assets of such portfolio
available for distribution to shareholders. The Declaration of Trust also
permits the trustees to charge shareholders directly for custodial, transfer
agency and servicing expenses. The trustees have no present intention of making
such direct charges.
The Declaration of Trust also permits the trustees, without shareholder
approval, to create one or more additional series or classes of shares or to
reclassify any or all outstanding shares as shares of particular series or
classes, with such preferences and rights and eligibility requirements as the
trustees may designate. While the trustees have no current intention to exercise
the power to establish separate classes of the existing series of the Fund, it
is intended to allow them to provide for an equitable allocation of the impact
of any future regulatory requirements, which might affect various classes of
shareholders differently. The trustees may also, without shareholder approval,
merge two or more existing series.
Shareholder Rights
On January 31, 1997, there were 38,623,100 shares of the Fund
outstanding. On that date State Street Bank, acting as trustee for various
retirement plans and individual retirement accounts, owned 9,453,938 shares --
about 24% of the total. In almost all cases, State Street Bank does not have the
power to vote or to dispose of the shares except at the direction of the
beneficial owner.
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and may vote (to the extent
provided herein) in the election of trustees and the termination of the Fund and
on other matters submitted to the vote of shareholders. There will normally be
no meetings of shareholders for the purpose of electing trustees, except that in
accordance with the 1940 Act (i) the Trust will hold a shareholders' meeting for
the election of trustees at such time as less than a majority of the trustees
holding office have been elected by shareholders, and (ii) if the appointment of
a trustee to fill a vacancy in the Board of Trustees would result in less than
two-thirds of the trustees having been elected by shareholders, that vacancy may
only be filled by a vote of the shareholders. In addition, trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares and filed with the Trust's custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for the
purpose, which meeting shall be held upon the written request of the holders of
not less than 10% of the outstanding shares. Upon written request by ten or more
shareholders of record who have been such for at least six months and who hold
in the aggregate shares equal to at least the lesser of (i) $25,000 in net asset
value or (ii) 1% of the outstanding shares, stating that such shareholders wish
to communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust will either provide access to a list of shareholders or disseminate
appropriate materials (at the expense of the requesting shareholders). Except as
set forth above, the trustees shall continue to hold office and may appoint
successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the holders of the outstanding shares of the
Trust except (i) to change the Trust's name or to cure technical problems in the
Declaration of Trust and (ii) to establish, designate or modify new and existing
series or subseries of Trust shares or other provisions relating to Trust shares
in response to applicable laws of regulations. The shareholders of the Fund
shall not be entitled to vote on matters exclusively affecting any other series,
such matters including, without limitation, the adoption of or change in the
investment objectives, policies or restrictions of the series and the approval
of the investment advisory contracts of the series. Similarly, no shareholders
of any other series shall be entitled to vote on any such matters exclusively
affecting the Fund. In particular, the phrase "majority of the outstanding
voting securities of the Fund" as used in this Statement shall refer only to the
shares of the Fund.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust;
however, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or trustees. The Declaration of Trust provides for indemnification out of Fund
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
All persons dealing with the Fund must look only to the assets of the
Fund for the enforcement of any claims against the Fund and no other series of
the Trust assumes any liability for obligations entered into on behalf of the
Fund.
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HOW TO BUY SHARES
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The procedures for purchasing shares of the Fund are summarized in the
Prospectus under "How to Purchase Shares."
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ADVERTISING AND PERFORMANCE INFORMATION
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Calculation of Total Return
The Fund may include total return information in advertisements or
written sales material. Total return is a measure of the change in value of an
investment in the Fund over the period covered, which assumes that any dividends
or capital gains distributions are automatically reinvested in the Fund rather
than paid to the investor in cash. The formula for total return used by the Fund
includes three steps:
(1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares that would have been
purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested;
(2) calculating the value of the hypothetical initial investment as of
the end of the period by multiplying the total number of shares owned at the end
of the period by the net asset value per share on the last trading day of the
period; and
(3) dividing this account value for the hypothetical investor by the
amount of the initial investment, and annualizing the result for periods of less
than one year.
For the one, five and ten year periods ended December 31, 1996, the
Fund's average annual total return was 23.7%, 12.4% and 13.8%, respectively. For
the one, five, ten, fifteen and twenty-five year periods ended December 31,
1996, the total return on a hypothetical $1,000 investment in the Fund on an
aggregate basis was 23.7%, 79.3%, 264.5%, 911.9% and 1,390.8%, respectively. In
computing performance information for the Fund, no adjustment has been made for
a shareholder's tax liability on taxable dividends and capital gains
distributions.
Calculation of Yield
The Fund may use yield information in advertisements or written sales
material. The Fund's yield is based on a recent 30 day period, and is determined
in accordance with the SEC's standardized formula by:
(1) calculating the aggregate dividends and adjusted interest earned
during that period, net of recurring expenses accrued for the period; and
(2) dividing that amount by the product of (A) the average daily number
of shares outstanding during the period and (B) the maximum offering price per
share on the last day of the period (less any earned income expected to be
declared as a dividend shortly thereafter).
The result is annualized, assuming a quarterly compounding, to
determine the Fund's yield. Interest earned during the period will be adjusted
to reflect amortization of any premium or discount from par on the Fund's fixed
income securities (other than obligations backed by mortgages or other assets),
using the market value for these securities on the last day of the period, or,
for securities purchased during the period, using actual cost. The Fund's yield
will vary from time to time depending upon market conditions, the composition of
the Fund's portfolio and operating expenses of the Fund.
Performance Comparisons
Total return may be used to compare the performance of the Fund against
certain widely acknowledged standards or indices for stock and bond market
performance or against the U.S. Bureau of Labor Statistics' Consumer Price
Index.
The Standard & Poor's 500 Composite Index (the "S&P 500") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the New York Stock
Exchange.
No brokerage commissions or other fees are factored into the values of
the S&P 500 and the Dow Jones Industrial Average.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of change, over time, in the prices of
goods and services in major expenditure groups.
Lipper Analytical Services, Inc., an independent service that monitors
the performance of over 9,505 mutual funds, calculates total return for those
funds grouped by investment objective. From time to time, the Fund may include
its ranking among mutual funds tracked by Lipper in advertisements or sales
literature.
Morningstar, Inc. ("Morningstar") is an independent mutual fund ranking
service. Morningstar proprietary ratings reflect historical risk-adjusted
performance and are subject to change every month. Funds with at least three
years of performance history are assigned ratings from one star (lowest) to five
stars (highest). Morningstar ratings are calculated from the funds' three-,
five-, and ten-year average annual returns (when available) and a risk factor
that reflects the fund performance relative to three-month Treasury bill monthly
returns. Funds' returns are adjusted for fees and sales loads. Ten percent of
the funds in an investment category receive five stars, 22.5% receive four
stars, 35% receive three stars, 22.5% receive two stars, and the bottom 10%
receive one star. From time to time, the Fund may include its ranking among
mutual funds tracked by Morningstar in advertisements or sales literature.
Value Line, Inc. ("Value Line"), an independent mutual fund ranking
service reviews the performance of 6,101 mutual funds. In ranking mutual funds,
Value Line uses two indicators: a Risk Rank to show the total level of risk a
fund has assumed and an Overall Rank measuring various performance criteria
taking risk into account. Funds are ranked from 1 to 5, with 1 the highest
Overall Rank (the best risk-adjusted performance) and the best Risk Rank (the
least risky). From time to time, the Fund may include ranking information
provided by Value Line in advertisements and sales literature.
From time to time, articles about the Fund regarding performance,
rankings and other characteristics of the Fund and information about persons
responsible for its portfolio management may appear in national publications and
major metropolitan newspapers including, but not limited to, The Wall Street
Journal, The Boston Globe, The New York Times and Barron's, Forbes, Fortune,
Money, Worth, Kiplinger's Personal Finance, Mutual Funds, Individual Investor,
Bloomberg Personal and Business Week magazines. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints of, or quotations
from, such articles may be used in the Fund's promotional literature.
The Fund has been continuously managed since 1981 by G. Kenneth
Heebner.
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NET ASSET VALUE AND PUBLIC OFFERING PRICE
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The method for determining the public offering price and net asset
value per share is summarized in the Prospectus under "Pricing of Shares."
The net asset value of a share of the Fund is determined by dividing
the Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares outstanding and rounding to the nearest cent. Such
determination is made as of the close of normal trading on the New York Stock
Exchange on each day on which the Exchange is open for unrestricted trading, and
no less frequently than once daily on each day during which there is sufficient
trading in the Fund's portfolio securities that the value of the Fund's shares
might be materially affected. During the 12 months following the date of this
Statement, the New York Stock Exchange is expected to be closed on the following
holidays: Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas
Day, New Year's Day, Presidents' Day and Good Friday.
Securities which are traded over-the-counter or on a stock exchange
will be valued according to the broadest and most representative market based on
the last reported sale price for securities listed on a national securities
exchange (or on the NASDAQ National Market System) or, if no sale was reported
and in the case of over-the-counter securities not so listed, the last reported
bid price. U.S. government securities are valued at the most recent quoted price
on the date of valuation.
For equity securities, it is expected that the broadest and most
representative market will ordinarily be either (i) a national securities
exchange, such as the New York Stock Exchange or American Stock Exchange, or
(ii) the NASDAQ National Market System. For corporate bonds, notes, debentures
and other fixed-income securities, it is expected that the broadest and most
representative market will ordinarily be the over-the-counter market.
Fixed-income securities may, however, be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees when such prices are
believed to reflect the fair market value of such securities. The prices
provided by the pricing service may be determined based on valuations for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Instruments with maturities of sixty days or less are valued at amortized cost,
which approximates market value. Other assets and securities which are not
readily marketable will be valued in good faith at fair value using methods
determined by the Board of Trustees.
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SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
Open Accounts
A shareholder's investment in the Fund is credited to an open account
maintained for the shareholder by the CGM Shareholder Services Department ("CGM
Shareholder Services") of Boston Financial Data Services, Inc. ("BFDS"), the
shareholder servicing agent for State Street Bank. The address is: CGM
Shareholder Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
Certificates representing shares are issued only upon written request
to CGM Shareholder Services but are not issued for fractional shares. Following
each transaction in the account, a shareholder will receive an account statement
disclosing the current balance of shares owned and the details of recent
transactions that have taken place during the year. After the close of each
fiscal year, CGM Shareholder Services will send each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. The year-end statement should be retained as a
permanent record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates problems of handling and safekeeping, and the
cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are borne by the Fund,
and no direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
Systematic Withdrawal Plans ("SWP")
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of a shareholder provided that the account has a value of at least
$10,000 at the time the plan is established.
Payments will be made either to the shareholder or to any other person
or entity designated by the shareholder. If payments are issued to an individual
other than the registered owner(s) and/or mailed to an address other than the
address of record, a signature guarantee will be required on the SWP
application. Shares to be included in a Systematic Withdrawal Plan must be held
in an Open Account rather than certificated form. Income dividends and capital
gain distributions will be reinvested at the net asset value determined as of
the close of the New York Stock Exchange on the record date for the dividend or
distribution. If withdrawal checks are returned to the Fund as "undeliverable"
or remain uncashed for more than six months, the shareholder's Systematic
Withdrawal Plan will be canceled, such undeliverable or uncashed checks will be
canceled and such amounts reinvested in the Fund at the per share net asset
value determined as of the date of cancellation of the checks.
Since withdrawal payments represent in whole or in part proceeds from
the liquidation of shares, the shareholder should recognize that withdrawals may
reduce and possibly exhaust the value of the account, particularly in the event
of a decline in net asset value. Accordingly, the shareholder should consider
whether a Systematic Withdrawal Plan and the specified amounts to be withdrawn
are appropriate in the circumstances. The Trust makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
Exchange Privilege
A shareholder may exchange shares of the Fund for shares of CGM Fixed
Income Fund, CGM American Tax Free Fund, CGM Realty Fund, New England Cash
Management Trust, New England Tax Exempt Money Market Trust or CGM Capital
Development Fund; however, shares of CGM Capital Development Fund may only be
exchanged for if you were a shareholder on September 24, 1993, and have remained
a shareholder in the CGM Capital Development Fund. CGM Capital Development Fund
shares are not generally available to other persons except in special
circumstances that have been approved by, or under the authority of, the Board
of Trustees of CGM Capital Development Fund. The special circumstances currently
approved by the Board of Trustees of CGM Capital Development Fund are limited to
the offer and sale of shares of such fund to the following additional persons:
trustees of CGM Capital Development Fund, employees of the Investment Manager
and counsel to such fund and the Investment Manager. The value of shares
exchanged must be at least $1,000 and all exchanges are subject to the minimum
investment requirements of the fund into which the exchange is being made. This
option is summarized in the Prospectus under "Shareholder Services--Exchange
Privilege." The Trust reserves the right to terminate or limit the privilege of
a shareholder who makes more than four exchanges (or two round trips) per year
and to prohibit exchanges during the first 15 days following an investment in
the Fund. A shareholder may exercise the exchange privilege only when the fund
into which shares will be exchanged is registered or qualified in the state in
which such shareholder resides.
Exchanges may be effected by (i) a telephone request to CGM Shareholder
Services at 800-343-5678, provided that a special authorization form is on file
with the Trust, or (ii) a written exchange request to CGM Shareholder Services
accompanied by an account application for the appropriate fund. Exchange
requests cannot be revoked once they have been received in good order. The Trust
reserves the right to modify this exchange privilege without prior notice,
except as otherwise required by law or regulation.
For federal income tax purposes, an exchange constitutes a sale of
shares, which may result in a capital gain or loss.
Automatic Investment Plans ("AIP")
Once initial investment minimums have been satisfied (see "How to
Purchase Shares" in the Prospectus), a shareholder may participate in an
Automatic Investment Plan, pursuant to which the Fund debits $50.00 or more on
or about the same date each month from a shareholder's checking account and
transfers the proceeds into the shareholder's Fund account. To participate, a
shareholder must authorize the Fund and its agents to initiate Automated
Clearing House ("ACH") debits against the shareholder's designated account at a
bank or other financial institution. Debits from savings banks and credit unions
generally are not acceptable . Debits from savings accounts will not be accepted
under any circumstances. Shareholders receive a confirmation of each purchase of
Fund shares, and each debit from a shareholder's bank account will appear on the
shareholder's monthly bank statement. If a shareholder elects to redeem shares
of either Fund purchased under the AIP within 15 days of such purchase, the
shareholder may experience delays in receiving redemption proceeds. See "All
Redemptions."
Once a shareholder enrolls in the AIP, the Fund and its agents are
authorized to initiate ACH debits against the shareholder's account payable to
the order of The CGM Funds. Such authority remains in effect until revoked by
the shareholder, and, until the Fund actually receives such notice of
revocation, the Fund is fully protected in initiating such debits. Participation
in the AIP may be terminated by sending written notice to CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by calling
800-343-5678 more than 14 days prior to the next scheduled debit date. The Fund
may immediately terminate a shareholder's participation in the AIP in the event
that any item is unpaid by the shareholder's financial institution. The Fund may
terminate or modify the AIP at any time.
Retirement Plans
Under "Shareholder Services--Retirement Plans" the Prospectus refers to
several retirement plans. These include tax deferred money purchase pension or
profit sharing plans, as well as SEP-IRAs, IRAs and 403(b)(7) custodial accounts
established under retirement plans sponsored by CGM. These plans may be funded
with shares of the Fund.
For participants under age 59 1/2, all income dividends and capital
gain distributions of plan participants must be reinvested. Plan documents and
further information can be obtained from the Trust by writing or calling the
Trust as indicated on the cover of this Statement.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
Address Changes
Shareholders can request to change their record address either by
telephone or in writing (by mail or delivery service, but not by facsimile) in
accordance with policies and procedures of the Trust. After an address change is
made, no telephone or written redemption requests will be honored for three
months unless the registered owner's signature is guaranteed on the request.
Written requests for a change in address may be mailed to: CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
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REDEMPTIONS
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The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be
guaranteed by an eligible guarantor institution in accordance with procedures
established by the Trust. Signature guarantees by notaries public are not
acceptable.
The procedures established by the Trust provide that an "eligible
guarantor institution" means any of the following: banks (as defined in ss. 3(a)
of the Federal Deposit Insurance Act (the "FDIA") [12 U.S.C. ss. 1813(a)]);
brokers, dealers, municipal securities brokers, government securities dealers
and government securities brokers, as those terms are defined under the
Securities Exchange Act of 1934 (the "Act"); credit unions (as defined in ss.
19(b)(1)(A) of the Federal Reserve Act [12 U.S.C. ss. 461(b)]); national
securities exchanges, registered securities associations and clearing agencies,
as those terms are defined under the Act; and savings associations (as defined
in ss. 3(b) of the FDIA [12 U.S.C. ss. 1813(b)]). However, as noted in the
Prospectus, a signature guarantee will not be required if the proceeds of the
redemption do not exceed $25,000, and the proceeds check is made payable to the
registered owner(s) and mailed to the record address, which has not changed in
the prior three months. If the record address has changed within the prior three
months, a signature guarantee will be required. This policy applies to both
written and telephone redemption requests.
Redeeming by Telephone
There are two ways to redeem by telephone. In either case, a
shareholder should call 800-343-5678 prior to 4:00 p.m. (Eastern time). Requests
made after that time or on a day when the New York Stock Exchange is not open
for business cannot be accepted. Telephone redemptions are not available for
IRAs, SEP-IRAs, 403(b)(7) custodial accounts or money purchase pension and
profit sharing plans under a CGM retirement plan where State Street Bank is the
trustee.
Check Sent to the Record Address
A shareholder may request that a check be sent to the record address on
the account, provided that the address has not changed for the last three months
and the shareholder is redeeming $25,000 or less. The check will be made payable
to the registered owner(s) of the account.
If checks representing redemption proceeds are returned "undeliverable"
or remain uncashed for six months, such checks shall be canceled and such
proceeds shall be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation of such checks.
Proceeds Wired to a Predesignated Bank
A shareholder may request that the redemption proceeds be wired to the
bank selected on the Fund application or subsequently on the Service Options
Form available from the Trust. A nominal wire fee, currently $5.00, is deducted
from the proceeds. When selecting the service, a shareholder must designate a
bank account to which the redemption proceeds should be wired. Any change in the
bank account so designated may be made by furnishing CGM Shareholder Services a
completed Service Options Form with a signature guarantee. Whenever the Service
Options Form is used, the shareholder's signature must be guaranteed as
described above. Telephone redemptions may be made only if an investor's bank is
a member of the Federal Reserve System or has a correspondent bank that is a
member of the System. If the account is with a savings bank, it must have only
one correspondent bank that is a member of the System.
All Redemptions
The redemption price will be the net asset value per share next
determined after the redemption request is received by CGM Shareholder Services
in good order (including any necessary documentation). Redemption requests
cannot be revoked once they have been received in good order. Proceeds resulting
from a written redemption request will normally be mailed to you within seven
days after receipt of your request in good order. Telephone redemption proceeds
will normally be mailed or wired within seven days following receipt of a proper
redemption request. If you purchased your Fund shares by check (or through your
AIP) and elect to redeem shares within 15 days of such purchase, you may
experience delays in receiving redemption proceeds. The Trust will process your
redemption request upon receipt of a request in good order. However, the Trust
will generally postpone sending your redemption proceeds from such investment
until it can verify that your check (or AIP investment) has been or will be
collected. Under ordinary circumstances, the Trust can not verify collection of
individual checks (or AIP investments) and may therefore automatically holds
proceeds from redemptions requested during the 15 day period following such
investment for a total of up to seven days. There will be no such automatic
delay following investments paid for by federal funds wire or by bank cashier's
check, certified check or treasurer's check although the Trust may in any case
postpone payment of redemption proceeds for up to seven days.
The Trust will normally redeem shares for cash; however, the Trust
reserves the right to pay the redemption price wholly in kind or partly in kind
and partly in cash if the Board of Trustees of the Trust determines it to be
advisable in the interest of the remaining shareholders. If portfolio securities
are distributed in lieu of cash, the shareholder will normally incur brokerage
commissions upon subsequent disposition of any such securities. However, the
Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Trust is obligated to redeem shares solely in cash for any shareholder
during any 90-day period up to the lesser of $250,000 or 1% of the total net
asset value of the Fund at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gains Distributions and Tax Status."
Because the expense of maintaining small accounts is disproportionately
high, the Trust may close accounts with 20 shares or less and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of the Trust's intention to close the account, and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to retirement and Uniform Gifts to Minors Act
or Uniform Transfers to Minors Act accounts.
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INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
- -------------------------------------------------------------------------------
As described in the Prospectus under "Dividends, Capital Gains
Distributions and Taxes" it is the policy of the Fund to pay quarterly, as
dividends, substantially all net investment income and to distribute annually
all net realized capital gains, if any, after offsetting any capital loss
carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of the New York Stock Exchange on the record date for such dividend or
distribution. Shareholders, however, may elect to receive their income dividends
or capital gain distributions, or both, in cash. (However, if you elect to
receive capital gains in cash, your income dividends must also be received in
cash.) The election, made at the time the account is opened, may be changed by
the shareholder at any time by submitting a written request directly to CGM
Shareholder Services. In order for a change to be in effect for any dividend or
distribution, it must be received by CGM Shareholder Services on or before the
record date for such dividend or distribution. If you elect to receive
distributions in cash, and checks are returned "undeliverable" to the Fund or
remain uncashed for six months, your cash election will be automatically changed
and your future distributions will be reinvested in the Fund at the per share
net asset value determined as of the date of payment of the distribution. In
addition, following such six month period, any undeliverable or uncashed checks
will be canceled and such amounts reinvested in the Fund at the per share net
asset value determined as of the date of cancellation of such checks.
The Fund has met, and intends to continue to meet, the requirements of
the Internal Revenue Code with respect to regulated investment companies.
The distributions received by the Fund from its investments may, for
federal income tax purposes, consist of ordinary income, long-term capital gains
or a return of capital. The characterization of these distributions to the Fund
may, in turn, affect the tax treatment of the Fund's distributions to its
shareholders. Dividends and distributions are taxable to shareholders in the
same manner whether received in cash or reinvested in additional shares of the
Fund.
Dividends paid by the Fund from net investment income, including
dividends, interest and net short-term capital gains, will be taxable to
shareholders as ordinary income. Distributions of net capital gains (the excess
of net long-term capital gains over net short-term capital losses) which are
designated by the Fund as capital gains distributions are taxable as long-term
capital gains, regardless of the length of time shareholders have owned shares
in the Fund. To the extent that the Fund makes a distribution in excess of its
current and accumulated earnings and profits, the distribution will be treated
first as a tax-free return of capital, reducing the tax basis in a shareholder's
shares, and then, to the extent the distribution exceeds such basis, as a
taxable gain to be realized upon sale of such shares.
Distributions that the Fund receives from a REIT, and dividends of the
Fund attributable to such distributions, will not constitute "dividends" for
purposes of the dividends-received deduction applicable to corporate
shareholders. Dividends and distributions on Fund shares received shortly after
their purchase, although in effect a return of capital, are subject to federal
income taxes.
The Fund is required to withhold and remit to the U.S. Treasury 31% of
all dividends from net investment income and capital gains distributions,
whether distributed in cash or reinvested in shares of the Fund, paid or
credited to any shareholder account for which an incorrect or no taxpayer
identification number has been provided or where the Fund is notified that the
shareholder has underreported income in the past (or the shareholder fails to
certify that he is not subject to withholding). In addition, the Fund will be
required to withhold and remit to the U.S. Treasury 31% of the amount of the
proceeds of any redemption of Fund shares from a shareholder account for which
an incorrect or no taxpayer identification number has been provided or where the
Fund is notified that the shareholder has underreported income in the past (or
the shareholder fails to certify that he is not subject to such withholding).
As required by federal law, detailed federal tax information is
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The financial statements and Report of Independent Accountants for the
year ended December 31, 1996, included in the Fund's Annual Report to
Shareholders for the year ended December 31, 1996, are incorporated herein by
reference.
<PAGE>
CGM REALTY FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
This Statement of Additional Information (the "Statement") is not a
prospectus. This Statement relates to the CGM Realty Fund Prospectus dated May
1, 1997 (the "Prospectus"), and should be read in conjunction therewith. A copy
of the Prospectus may be obtained from CGM Trust, c/o The CGM Funds Investor
Services Division, P.O. Box 449, Boston, Massachusetts 02117 (Telephone:
800-345-4048).
RSAI97
<PAGE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
----
INTRODUCTION............................................................... 1
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS............................ 1
PORTFOLIO TURNOVER......................................................... 6
MANAGEMENT OF THE FUND..................................................... 7
INVESTMENT ADVISORY AND OTHER SERVICES..................................... 9
Advisory Agreement................................................ 9
Custodial Arrangements............................................ 10
Independent Accountants........................................... 10
Other Arrangements................................................ 11
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 11
DESCRIPTION OF THE TRUST................................................... 12
Shareholder Rights................................................ 12
Shareholder and Trustee Liability................................. 13
HOW TO BUY SHARES.......................................................... 14
ADVERTISING AND PERFORMANCE INFORMATION.................................... 14
Calculation of Total Return....................................... 14
Calculation of Yield.............................................. 15
Performance Comparisons........................................... 16
NET ASSET VALUE AND PUBLIC OFFERING PRICE.................................. 17
SHAREHOLDER SERVICES....................................................... 18
Open Accounts..................................................... 18
Systematic Withdrawal Plans ("SWP")............................... 19
Exchange Privilege................................................ 19
Automatic Investment Plans ("AIP")................................ 21
Retirement Plans.................................................. 21
Address Changes................................................... 21
REDEMPTIONS................................................................ 22
Redeeming by Telephone............................................ 22
Check Sent to the Record Address.................................. 23
Proceeds Wired to a Predesignated Bank............................ 23
All Redemptions................................................... 23
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS............... 24
FINANCIAL STATEMENTS....................................................... 26
<PAGE>
- -------------------------------------------------------------------------------
INTRODUCTION
- -------------------------------------------------------------------------------
CGM Realty Fund (the "Fund") is organized as a separate series of
shares of CGM Trust (the "Trust"). The Trust is a Massachusetts business trust
established under the laws of Massachusetts in 1986. The Trust is governed by an
Amended and Restated Agreement and Declaration of Trust (the "Declaration of
Trust") dated January 23, 1997. The Trust is a successor in interest to
Loomis-Sayles Mutual Fund. On March 1, 1990, the Trust's name was changed from
"Loomis-Sayles Mutual Fund" to "CGM Mutual Fund" to reflect the assumption by
Capital Growth Management Limited Partnership ("CGM" or the "Investment
Manager") of investment advisory responsibilities with respect to the Trust. On
December 20, 1991, the Trust's name was changed to CGM Trust.
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
- -------------------------------------------------------------------------------
The Fund's investment objective is above-average income and long-term
growth of capital. The Fund intends to pursue its objective by investing
primarily in equity securities of companies in the real estate industry.
At least 65% of the Fund's total assets will be invested under normal
conditions in equity securities of companies in the real estate industry. A
company is considered in the real estate industry if construction, ownership,
management, financing and sales of residential, commercial or industrial real
estate accounts for not less than 50% of its gross revenues or net profits.
Investments that the Fund makes in companies with significant real estate
holdings (but not otherwise in the real estate industry) will be considered to
be investments in the real estate industry for purposes of evaluating compliance
with the Fund's investment restrictions. The Fund's total investment in
companies possessing such significant real estate holdings within any particular
industry will not exceed 25% of the market value of the Fund's total assets.
Up to 35% of the Fund's total assets may be invested in securities of
companies outside the real estate industry. The Fund may invest this portion of
its assets in equity securities or fixed income securities, including investment
grade securities and, with respect to up to 25% of the Fund's total assets,
lower quality securities (securities rated lower than Baa by Moody's Investors
Service, Inc. or lower than BBB by Standard and Poor's Corporation). Certain
risks associated with investments in lower quality securities are described in
the Prospectus.
The Fund may not:
(1) Borrow money, except that it may borrow from banks in an amount not
to exceed 1/3 of the value of its total assets and may borrow for temporary
purposes from entities other than banks in an amount not to exceed 5% of the
value of its total assets;
(2) Issue any senior securities, except as permitted by the terms of
any exemptive order or similar rule issued by the Securities and Exchange
Commission (the "SEC") relating to multiple classes of shares of beneficial
interest of the Trust, and provided further that collateral arrangements with
respect to forward contracts, futures contracts, short sales or options,
including deposits of initial and variation margin, shall not be considered to
be the issuance of a senior security for purposes of this restriction;
(3) Act as an underwriter of securities issued by other persons, except
insofar as the Fund may be deemed an underwriter in connection with the
disposition of securities;
(4) Purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to be invested in
the securities of one or more issuers having their principal business activities
in the same industry, provided that there is no limit with respect to
investments in the real estate industry and in securities issued by the U.S.
Government, its agencies and instrumentalities;
(5) Purchase or sell real estate, except that the Fund may invest in
securities of companies that deal in real estate or are engaged in the real
estate business, including real estate investment trusts, and securities secured
by real estate or interests therein and the Fund may hold and sell real estate
acquired as a result of the Fund's ownership of such securities;
(6) Purchase or sell commodities or commodity futures contracts, except
that the Fund may invest in financial futures contracts, options thereon and
similar instruments;
(7) Make loans to other persons except (a) through the lending of
securities held by it, (b) through the use of repurchase agreements, and (c) by
the purchase of debt securities in accordance with its investment policies;
(8) With respect to 75% of its total assets, purchase more than 10% of
the outstanding voting securities of any one issuer or invest more than 5% of
the value of its total assets in securities of any one issuer, except the U.S.
Government, its agencies or instrumentalities;
(9) Purchase "illiquid" securities, including repurchase agreements
maturing in more than seven days and options traded "over the counter," if, as a
result, more than 10% of the Fund's net assets would then be invested in such
securities;
(10) Purchase securities issued by companies which, including their
predecessors, have been in operation for less than 3 years, if, as a result,
more than 5% of the Fund's total assets would then be invested in such
securities, except that the Fund may purchase securities issued by a real estate
investment trust in operation for less than 3 years if the sponsor of such real
estate investment trust has been in operation for at least 3 years;
(11) Purchase or retain securities of any issuer if the officers,
directors or trustees of the Fund and the adviser thereof who individually own
more than 1/2 of 1% of the securities of such issuer together own beneficially
more than 5% of such securities;
(12) Acquire or retain securities of any investment company, except that
the Fund may (a) acquire securities of closed-end investment companies up to the
limits permitted by applicable law, provided such acquisitions are in the open
market and there is no commission or profit to a dealer or sponsor other than
the customary broker's commission, and (b) acquire securities of any investment
company as part of a merger, consolidation or similar transaction;
(13) Sell securities short or maintain a short position unless, at all
times that a short position is open, the Fund owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short (which sales are commonly referred to as
"short sales against the box");
(14) Invest in puts, calls, straddles, spreads or any combination
thereof, except that the Fund may (a) purchase put and call options on
securities and securities indexes, and (b) write covered put and call options on
securities and securities indexes, provided that the aggregate value of the
securities underlying the calls or obligations underlying the puts determined as
of the date the options are sold shall not exceed 25% of the Fund's net assets
and, provided further that (i) the securities underlying such options are within
the investment policies of the Fund and (ii) at the time of such investment, the
value of the Fund's aggregate investment in such securities does not exceed 5%
of the Fund's total assets;
(15) Invest in oil, gas or other mineral exploration programs,
development programs or leases, except that the Fund may purchase publicly
traded securities of companies engaging in whole or in part in such activities;
(16) Invest in real estate limited partnerships, except that the Fund
may purchase publicly traded securities issued by real estate investment trusts;
(17) Pledge, mortgage or hypothecate its assets in excess, together with
permitted borrowings, of 1/3 of its total assets;
(18) Purchase securities on margin, except short-term credits as are
necessary for the purchase and sale of securities, provided that the deposit or
payment of initial or variation margin in connection with futures contracts or
related options will not be deemed to be a purchase on margin;
(19) Invest in warrants, if at the time of such investment (a) more than
5% of the value of the Fund's net assets would be invested in warrants or (b)
more than 2% of the value of the Fund's net assets would be invested in warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange (and for this purpose, warrants attached to securities will be deemed
to have no value); and
(20) Invest more than 15% of the value of its net assets in restricted
securities of all types (including securities which are eligible for resale
pursuant to Rule 144A, Regulation S or other exemptive provisions under the
Securities Act of 1933).
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment restrictions numbered 1 through 8 have been adopted by
the Trust as fundamental policies of the Fund. Under the Investment Company Act
of 1940, as amended (the "1940 Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund,
as defined under the 1940 Act. "Majority" means the lesser of (1) 67% or more of
the shares present at a meeting of shareholders of the Fund, if the holders of
more than 50% of the outstanding shares of the Fund are present or represented
by proxy, or (2) more than 50% of the outstanding shares of the Fund. Investment
restrictions numbered 9 through 20 above are non-fundamental and may be changed
at any time by vote of a majority of the Trust's Board of Trustees.
Although the Fund has the ability to invest in REITs without regard to
the expected duration of the REIT, the Fund does not presently intend to invest
in REITs with finite lives without first notifying its shareholders and
supplying further information in the Prospectus. Finite-life REITs may entail
special risks, such as the risk that shareholders will elect to continue the
REIT indefinitely or the risk that the REIT will liquidate and make
distributions of capital returns at any time.
Although the Fund has the ability to invest in financial futures
contracts and options thereon, to invest in puts, calls and warrants, to acquire
securities of closed-end investment companies, to sell securities short against
the box and to loan portfolio securities, the Fund has no current intention of
doing so without first notifying its shareholders and supplying further
information in the Prospectus.
Restricted securities eligible for resale to "qualified institutional
buyers" pursuant to Rule 144A under the Securities Act of 1933, as amended, may
be determined to be liquid by the Investment Manager under guidelines approved
by the Board of Trustees. In its determination of liquidity with respect to such
securities, the Investment Manager will consider the following factors, among
others: (1) the frequency of trades and quotes for the security, (2) the number
of dealers willing to purchase or sell the security and the number of other
potential purchasers, (3) dealer undertakings to make a market in the security,
and (4) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer). The foregoing investment practice could
have the effect of increasing the level of illiquidity in the Fund to the extent
that qualified institutional buyers become uninterested in purchasing the
securities. Restricted securities that are so determined to be liquid shall
remain subject to investment restriction number 20 above, although they will no
longer be subject to investment restriction number 9.
The Fund may invest up to 25% of its total assets in repurchase
agreements. A repurchase agreement is an instrument under which the purchaser
acquires ownership of a security and obtains a simultaneous commitment from the
seller (a bank or, to the extent permitted by the 1940 Act, a recognized
securities dealer) to repurchase the security at an agreed-upon price and date
(usually seven days or less from the date of original purchase). The resale
price is in excess of the purchase price and reflects an agreed-upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
the Fund the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality of
the U.S. Government, the obligation of the seller is not guaranteed by the U.S.
Government and there is a risk that the seller may fail to repurchase the
underlying security. In such event, the Fund would attempt to exercise rights
with respect to the underlying security, including possible disposition in the
market. However, the Fund may be subject to various delays and risks of loss,
including (1) possible declines in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (2) possible
reduced levels of income and lack of access to income during this period, and
(3) inability to enforce rights and the expenses involved in attempted
enforcement.
The Fund may enter into reverse repurchase agreements with banks or
broker-dealers. Reverse repurchase agreements involve the sale of a security
held by the Fund and its agreement to repurchase the instrument at a stated
price, date and interest payment. Reverse repurchase agreements may be
considered to be borrowings by the Fund and entail additional risks such as the
occurrence of interest expenses and fluctuations in the Fund's net asset value.
In connection with entering into reverse repurchase agreements, a segregated
account of the Fund consisting of cash, cash equivalents, U.S. Government
securities or other high quality liquid debt securities with an aggregate value
at all times sufficient to repurchase the securities, or equal to the proceeds
received upon the sale plus accrued interest, will be established with the
Fund's custodian bank.
The Fund may invest in mortgage-related securities and asset-backed
securities. Mortgage-related securities are represented by pools of mortgage
loans or loans assembled for sale to investors by various governmental agencies,
such as the Government National Mortgage Association, and government-related
organizations, such as the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation, as well as by private issuers, such as
commercial banks, savings and loan institutions, financial corporations,
mortgage bankers and private mortgage insurance companies. Asset-backed
securities are pass-through securities backed by non-mortgage assets, including
automobile loans, credit card receivables and consumer receivables. Although
certain mortgage-related and asset-backed securities are guaranteed by a third
party or otherwise similarly secured, the market value of the security, which
may fluctuate, and the yield are not so secured. If the Fund purchases a
mortgage-related or an asset-backed security at a premium, all or part of the
premium may be lost if there is a decline in the market value of the security,
whether resulting from changes in interest rates or prepayments in the
underlying mortgage collateral.
As with other interest-bearing securities, the prices of such securities
are inversely affected by changes in interest rates. However, although the value
of a mortgage-related or asset-backed security may decline when interest rates
rise, the converse is not necessarily true, because in periods of declining
interest rates the mortgages or assets underlying the security may be more
likely to be prepaid. For this and other reasons, a mortgage-related or
asset-backed security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages or assets and, therefore, it is not
possible to predict accurately the security's return. Such prepayments may
expose the Fund to a lower rate of return on reinvestment. To the extent that
such mortgage-related securities are held by the Fund, the prepayment right of
the mortgagors may limit the increase in net asset value of the Fund because the
value of the mortgage-related securities held by the Fund may not appreciate as
rapidly as the price of other debt securities.
- -------------------------------------------------------------------------------
PORTFOLIO TURNOVER
- -------------------------------------------------------------------------------
Although the Fund's objective is long-term growth and above-average
income and the Fund does not purchase securities with the intention of engaging
in short term trading, the Fund will sell any particular security and reinvest
proceeds when it is deemed prudent by the Investment Manager, regardless of the
length of the holding period. This policy may result in higher securities
transaction costs. To the extent that this policy results in gains on
investments, the Fund will make distributions to its shareholders, which may
accelerate the shareholders' tax liabilities for realized gains and may result
in the distribution of short-term capital gains taxable as ordinary income. See
"Income Dividends, Capital Gains Distributions and Tax Status." The Fund's
portfolio turnover rate for each full or partial year of its operation is set
forth in the Prospectus in the table entitled "Financial Highlights."
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------
PETER O. BROWN -- Trustee;
30 Douglas Road, Rochester, NY; Partner, Harter, Secrest & Emery;
formerly Executive Vice President and Chief Operating Officer, The
Glenmede Trust Company; formerly Senior Vice President, Chase Lincoln
First Bank, N.A.
NICHOLAS J. GRANT -- Trustee;
77 Massachusetts Avenue, Cambridge, MA; Professor of Metallurgy and
Materials Science, Massachusetts Institute of Technology.
G. KENNETH HEEBNER* -- Trustee and Vice President;
Employee, CGM; formerly Vice President and Director, Loomis, Sayles and
Company, Incorporated ("Loomis Sayles").
ROBERT L. KEMP* -- Trustee and President;
Employee, CGM; formerly President and Director, Loomis Sayles.
ROBERT B. KITTREDGE -- Trustee;
21 Sturdivant Street, Cumberland Foreside, ME; Retired; formerly Vice
President, General Counsel and Director, Loomis Sayles.
LAURENS MACLURE -- Trustee;
183 Sohier Street, Cohasset, MA; Retired; formerly President and Chief
Executive Officer, New England Deaconess Hospital.
JAMES VAN DYKE QUEREAU, JR. -- Trustee;
59 Annewood Lane, Wayne, PA; Managing Partner, Stratton Management
Company; formerly Institutional Managing Partner, Loomis Sayles.
J. BAUR WHITTLESEY -- Trustee;
1521 Locust Street, Philadelphia, PA; Attorney.
KATHLEEN S. HAUGHTON -- Vice President;
222 Berkeley Street, Boston, MA 02116; Employee -- Investor Services
Division, CGM; formerly Vice President, Boston Financial Data Services,
Inc.
LESLIE A. LAKE -- Vice President and Secretary;
Employee -- Office Administrator, CGM; formerly Office Administrator,
Capital Growth Management Division of Loomis Sayles.
MARTHA I. MAGUIRE -- Vice President;
Employee -- Funds Marketing, CGM; formerly marketing communications
consultant (self-employed); formerly Sales Promotion Consultant, The
New England.
MARY L. STONE -- Assistant Vice President;
Employee -- Coordinator, Mutual Fund Recordkeeping, CGM; formerly
Coordinator, Mutual Fund Recordkeeping, Loomis Sayles.
FRANK N. STRAUSS -- Treasurer;
222 Berkeley Street, Boston, MA 02116; Employee -- Chief Financial
Officer, CGM; formerly Vice President of Fund Accounting, Freedom
Capital Management Corporation and Assistant Vice President, The Boston
Company, Inc.
W. DUGAL THOMAS -- Vice President;
Employee -- Director of Marketing, CGM; formerly Director of Marketing,
Loomis Sayles.
- --------
* Trustees deemed "interested persons" of the Fund, as defined under the
1940 Act.
Each of the Fund's trustees is also a trustee of one or more other
investment companies for which CGM acts as investment manager. Except as
indicated above, the address of each trustee and officer of the Fund affiliated
with CGM is One International Place, Boston, Massachusetts 02110.
As of January 31, 1997, the officers and trustees of the Fund owned
beneficially less than 1.0% of the outstanding shares of the Fund.
The Fund pays no compensation to its officers or to the trustees listed
above who are interested persons of the Fund. Officers and trustees receive no
pension or retirement benefits paid from Fund expenses. The following table sets
forth the compensation paid by the Trust to its trustees for the year ended
December 31, 1996:
<TABLE>
<CAPTION>
Pension Total
or Retirement Estimated Compensation From
Aggregate Benefits Accrued Annual Registrant and
Name of Compensation as Part of Fund Benefit Upon Fund Complex
Trustee From Trust Expenses Retirement Paid to Trustees(a)
- ------- ---------- -------- ---------- -------------------
<S> <C> <C> <C> <C>
Peter O. Brown $26,430.25 None None $35,750.00
Nicholas J. Grant 30,930.25 None None 41,750.00
G. Kenneth Heebner None None None None
Robert L. Kemp None None None None
Robert B. Kittredge 26,430.25 None None 35,750.00
Laurens Maclure 26,430.25 None None 35,750.00
James Van Dyke Quereau, Jr. 26,430.25 None None 35,750.00
J. Baur Whittlesey 26,430.25 None None 35,750.00
</TABLE>
(a) The Fund Complex is comprised of two Trusts with a total of five funds.
- -------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- -------------------------------------------------------------------------------
Advisory Agreement. CGM serves as investment manager of the Fund under
an advisory agreement which became effective on August 30, 1996 upon the merger
of New England Mutual Life Insurance Company into Metropolitan Life Insurance
Company. Under the advisory agreement, CGM manages the investment and
reinvestment of assets of the Fund and generally administers its affairs,
subject to supervision by the Board of Trustees of the Trust. CGM furnishes, at
its own expense, all necessary office supplies, facilities and equipment,
services of executive and other personnel of the Fund and certain administrative
services. For these services, CGM is compensated at the annual percentage rate
of 0.85% of the first $500 million of the Fund's average daily net asset value,
and 0.75% of such value in excess of $500 million. CGM has voluntarily agreed,
until December 31, 1997, and thereafter until further notice to the Fund, to
limit its management fees and, if necessary, to bear certain expenses associated
with operating the Fund, in order to limit the Fund's total operating expenses
to an annual rate of 1.0% of the Fund's average net assets. For the period from
May 13, 1994 (commencement of operations) through December 31, 1994, the fiscal
year ended December 31, 1995 and the fiscal year ended December 31, 1996 the
investment advisory fees that would have been payable to CGM in respect of
services rendered to the Fund amounted to $113,421, $333,264 and $717,641,
respectively. As a result of such limitation, the Fund paid no investment
advisory fee to CGM for such 1994 period, $65,432 for the fiscal year ended
December 31, 1995 and $508,519 for the fiscal year ended December 31, 1996.
The Fund pays the compensation of its trustees who are not partners,
directors, officers or employees of CGM or its affiliates (other than registered
investment companies); registration, filing, and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Fund; the expenses of
meetings of the shareholders and trustees of the Fund; the charges and expenses
of the Fund's legal counsel; interest, including on any borrowings by the Fund;
the cost of services, including services of counsel, required in connection with
the preparation of, and the costs of printing registration statements and
prospectuses relating to the Fund, including amendments and revisions thereto,
annual, semiannual, and other periodic reports of the Fund, and notices and
proxy solicitation material furnished to shareholders of the Fund or regulatory
authorities, to the extent that any such materials relate to the Fund or its
shareholders; and the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
CGM also acts as investment adviser to CGM Capital Development Fund,
CGM Mutual Fund, CGM Fixed Income Fund and CGM American Tax Free Fund and three
other mutual fund portfolios. CGM also provides investment advice to other
institutional clients.
Certain officers and trustees of the Fund also serve as officers,
directors or trustees of other investment companies advised by CGM. The other
investment companies and clients served by CGM sometimes invest in securities in
which the Fund also invests. If the Fund and such other investment companies or
clients advised by CGM desire to buy or sell the same portfolio securities at
the same time, purchases and sales will be allocated to the extent practicable
on a pro rata basis in proportion to the amounts desired to be purchased or sold
for each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities which the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
trustees that the desirability of retaining CGM as adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
Street Bank"), Boston, Massachusetts 02102, is the Fund's custodian. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to the Fund. Upon instruction,
State Street Bank receives and delivers cash and securities of the Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Fund and calculates the total
net asset value, total net income, and net asset value per share of the Fund on
each business day.
Independent Accountants. The Fund's independent accountants are Price
Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse LLP conducts an annual audit of the Fund's financial statements,
assists in the preparation of the Fund's federal and state income tax returns
and consults with the Fund as to matters of accounting and federal and state
income taxation. The information concerning financial highlights in the
Prospectus, and the financial statements incorporated by reference into this
Statement, have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Other Arrangements. Certain office space, facilities, equipment and
administrative services for the Fund and other mutual funds under the investment
management of the CGM organization are furnished by CGM. In addition, CGM
provides bookkeeping, accounting, auditing, financial recordkeeping and related
clerical services for which it is entitled to be reimbursed by the Fund based on
the cost of providing these services. As a result of the expense provisions
described above, CGM received no reimbursement by the Fund for any of such costs
in 1994. For services rendered to the Fund for fiscal years 1995 and 1996, CGM
was reimbursed by the Fund $12,300 and $18,000, respectively for such expenses.
- -------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -------------------------------------------------------------------------------
In placing orders for the purchase and sale of portfolio securities for
the Fund, CGM always seeks the best price and execution. Transactions in
unlisted securities will be carried out through broker-dealers who make the
primary market for such securities unless, in the judgment of CGM, a more
favorable price can be obtained by carrying out such transactions through other
brokers.
CGM selects only brokers it believes are financially responsible, will
provide efficient and effective services in executing, clearing and settling an
order and will charge commission rates which, when combined with the quality of
the foregoing services, will produce the best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be competitive
with generally prevailing rates. CGM will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Fund will not
pay a broker a commission at a higher rate than is otherwise available for the
same transaction in recognition of the value of research services provided by
the broker or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which CGM believes will provide the best price and execution
for a transaction. These research services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce CGM's expenses. Such services may be used by CGM in servicing
other client accounts and in some cases may not be used with respect to the
Fund. Receipt of services or products other than research from brokers is not a
factor in the selection of brokers. In 1996, brokerage transactions of the Fund
aggregating $145,811,051 were allocated to brokers providing research services
and $393,774 in commissions were paid on these transactions. During 1994, 1995
and 1996, the Fund paid total brokerage fees of $542,648, $269,950 and $787,194,
respectively.
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DESCRIPTION OF THE TRUST
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The Declaration of Trust of the Trust currently permits the trustees to
issue an unlimited number of shares of beneficial interest of separate series of
the Trust. Interests in the portfolio described in the Prospectus and in this
Statement are represented by shares of the Fund. Each share of the Fund
represents an interest in such series which is equal to and proportionate with
the interest represented by each other share. The shares of the Fund do not have
any preemptive rights. Upon liquidation of the portfolio, shareholders of the
Fund are entitled to share pro rata in the net assets of such portfolio
available for distribution to shareholders. The Declaration of Trust also
permits the trustees to charge shareholders directly for custodial, transfer
agency and servicing expenses. The trustees have no present intention of making
such direct charges.
The Declaration of Trust also permits the trustees, without shareholder
approval, to create one or more additional series or classes of shares or to
reclassify any or all outstanding shares as shares of particular series or
classes, with such preferences and rights and eligibility requirements as the
trustees may designate. While the trustees have no current intention to exercise
the power to establish separate classes of the existing series of the Fund, it
is intended to allow them to provide for an equitable allocation of the impact
of any future regulatory requirements, which might affect various classes of
shareholders differently. The trustees may also, without shareholder approval,
merge two or more existing series.
Shareholder Rights
On January 31, 1997, there were 16,100,647 shares of the Fund
outstanding. On that date, State Street Bank, acting as trustee for various
retirement plans and individual retirement accounts, owned 2,133,916
shares--about 13% of the total. In almost all cases, State Street Bank does not
have the power to vote or to dispose of the shares except at the direction of
the beneficial owner.
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and may vote (to the extent
provided herein) in the election of trustees of the Trust and the termination of
the Fund and on other matters submitted to the vote of shareholders. There will
normally be no meetings of shareholders for the purpose of electing trustees,
except that in accordance with the 1940 Act (i) the Trust will hold a
shareholders' meeting for the election of trustees at such time as less than a
majority of the trustees holding office have been elected by shareholders, and
(ii) if the appointment of a trustee to fill a vacancy in the Board of Trustees
would result in less than two-thirds of the trustees having been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for the purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by ten or more shareholders of record who have been such
for at least six months and who hold in the aggregate shares equal to at least
the lesser of (i) $25,000 in net asset value or (ii) 1% of the outstanding
shares, stating that shareholders wish to communicate with the other
shareholders for the purpose of obtaining the signatures necessary to demand a
meeting to consider removal of a trustee, the Trust will either provide access
to a list of shareholders or disseminate appropriate materials (at the expense
of the requesting shareholders). Except as set forth above, the trustees shall
continue to hold office and may appoint successor trustees. Voting rights are
not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the holders of the outstanding shares of the
Trust except (i) to change the Trust's name or to cure technical problems in the
Declaration of Trust and (ii) to establish, designate or modify new and existing
series or subseries of Trust shares or other provisions relating to Trust shares
in response to applicable laws or regulations. The shareholders of the Fund
shall not be entitled to vote on matters exclusively affecting any other series,
such matters including, without limitation, the adoption of or change in the
investment objectives, policies or restrictions of the series and the approval
of the investment advisory contracts of the series. Similarly, no shareholders
of any other series shall be entitled to vote on any such matters exclusively
affecting the Fund. In particular, the phrase "majority of the outstanding
voting securities of the Fund" as used in this Statement shall refer only to the
shares of the Fund.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust;
however, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or trustees. The Declaration of Trust provides for indemnification out of Fund
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
All persons dealing with the Fund must look only to the assets of the
Fund for the enforcement of any claims against the Fund and no other series of
the Trust assumes any liability for obligations entered into on behalf of the
Fund.
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HOW TO BUY SHARES
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The procedures for purchasing shares of the Fund are summarized in the
Prospectus under "How to Purchase Shares."
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ADVERTISING AND PERFORMANCE INFORMATION
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Calculation of Total Return
The Fund may include total return information in advertisements or
written sales material. Total return is a measure of the change in value of an
investment in the Fund over the period covered, which assumes that any dividends
or capital gains distributions are automatically reinvested in the Fund rather
than paid to the investor in cash. The formula for total return used by the Fund
includes three steps:
(1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Fund all additional shares that
would have been purchased if all dividends and distributions paid or
distributed during the period had been automatically reinvested;
(2) calculating the value of the hypothetical initial
investment as of the end of the period by multiplying the total number
of shares owned at the end of the period by the net asset value per
share on the last trading day of the period; and
(3) dividing this account value for the hypothetical investor
by the amount of the initial investment, and annualizing the result for
periods of less than one year.
For the one-year period ended December 31, 1996, and for the period
from inception (May 13, 1994) through December 31, 1996, the average annual
total return of the Fund was 44.1% and 23.1%, respectively. If CGM had not
agreed to fee limitations and expense provisions described above, the Fund's
total return for such periods would have been lower.
In computing performance information for the Fund, no adjustment will
be made for a shareholder's tax liability on taxable dividends and capital gains
distributions.
Calculation of Yield
The Fund may use yield information in advertisements or written sales
material. The Fund's yield is based on a recent 30 day period, and is determined
in accordance with the SEC's standardized formula by:
(1) calculating the aggregate dividends and adjusted interest
earned during that period, net of recurring expenses accrued for the
period; and
(2) dividing that amount by the product of (A) the average
daily number of shares outstanding during the period and (B) the
maximum offering price per share on the last day of the period (less
any earned income expected to be declared as a dividend shortly
thereafter).
The result is annualized, assuming a quarterly compounding, to
determine the Fund's yield. Interest earned during the period will be adjusted
to reflect amortization of any premium or discount from par on the Fund's fixed
income securities (other than obligations backed by mortgages or other assets),
using the market value for these securities on the last day of the period, or,
for securities purchased during the period, using actual cost. The Fund's yield
will vary from time to time depending upon market conditions, the composition of
the Fund's portfolio and operating expenses of the Fund. The 30-day yield of the
Fund for the period ended December 31, 1996, was 5.32%.
Performance Comparisons
Total return may be used to compare the performance of the Fund against
certain widely acknowledged standards or indices for stock and bond market
performance or against the U.S. Bureau of Labor Statistics' Consumer Price
Index.
The Standard & Poor's 500 Composite Index (the "S&P 500") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the New York Stock
Exchange.
No brokerage commissions or other fees are factored into the values of
the S&P 500 and the Dow Jones Industrial Average.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of change, over time, in the prices of
goods and services in major expenditure groups.
Lipper Analytical Services, Inc., an independent service that monitors
the performance of over 9,505 mutual funds, calculates total return for those
funds grouped by investment objective. From time to time, the Fund may include
its ranking among mutual funds tracked by Lipper in advertisements or sales
literature.
Morningstar, Inc. ("Morningstar") is an independent mutual fund ranking
service. Morningstar proprietary ratings reflect historical risk-adjusted
performance and are subject to change every month. Funds with at least three
years of performance history are assigned ratings from one star (lowest) to five
stars (highest). Morningstar ratings are calculated from the funds' three-,
five-, and ten-year average annual returns (when available) and a risk factor
that reflects the fund performance relative to three-month Treasury bill monthly
returns. Funds' returns are adjusted for fees and sales loads. Ten percent of
the funds in an investment category receive five stars, 22.5% receive four
stars, 35% receive three stars, 22.5% receive two stars, and the bottom 10%
receive one star. From time to time, the Fund may include its ranking among
mutual funds tracked by Morningstar in advertisements or sales literature.
Value Line, Inc. ("Value Line"), an independent mutual fund ranking
service reviews the performance of 6,101 mutual funds. In ranking mutual funds,
Value Line uses two indicators: a Risk Rank to show the total level of risk a
fund has assumed and an Overall Rank measuring various performance criteria
taking risk into account. Funds are ranked from 1 to 5, with 1 the highest
Overall Rank (the best risk-adjusted performance) and the best Risk Rank (the
least risky). From time to time, the Fund may include ranking information
provided by Value Line in advertisements and sales literature.
The Fund may compare its total return or yield or both to that of the
National Association of Real Estate Investment Trusts' (NAREIT) Equity REIT
Index.
From time to time, articles about the Fund regarding performance,
rankings and other characteristics of the Fund, information about persons
responsible for its portfolio management, and information about the
characteristics and performance of the real estate industry, REITs and mutual
funds that invest in real estate securities may appear in national publications
and major metropolitan newspapers including, but not limited to, The Wall Street
Journal, The Boston Globe, The New York Times and Barron's, Forbes, Fortune,
Money, Worth, Kiplinger's Personal Finance, Mutual Funds, Individual Investor,
Bloomberg Personal and Business Week magazines. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints of, or quotations
from, such articles may be used in the Fund's promotional literature.
Mr. Heebner has continuously managed the Fund since its inception on
May 13, 1994.
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NET ASSET VALUE AND PUBLIC OFFERING PRICE
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The method for determining the public offering price and net asset
value per share is summarized in the Prospectus under "Pricing of Shares."
The net asset value of a share of the Fund is determined by dividing
the Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares outstanding and rounding to the nearest cent. Such
determination is made as of the close of normal trading on the New York Stock
Exchange on each day on which the Exchange is open for unrestricted trading, and
no less frequently than once daily on each day during which there is sufficient
trading in the Fund's portfolio securities that the value of the Fund's shares
might be materially affected. During the 12 months following the date of this
Statement, the New York Stock Exchange is expected to be closed on the following
holidays: Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas
Day, New Year's Day, Presidents' Day, and Good Friday.
Securities which are traded over-the-counter or on a stock exchange
will be valued according to the broadest and most representative market based on
the last reported sale price for securities listed on a national securities
exchange (or on the NASDAQ National Market System) or, if no sale was reported
and in the case of over-the-counter securities not so listed, the last reported
bid price. U.S. Government securities are valued at the most recent quoted price
on the date of valuation.
For equity securities, it is expected that the broadest and most
representative market will ordinarily be either (i) a national securities
exchange, such as the New York Stock Exchange or American Stock Exchange, or
(ii) the NASDAQ National Market System. For corporate bonds, notes, debentures
and other fixed-income securities, it is expected that the broadest and most
representative market will ordinarily be the over-the-counter market.
Fixed-income securities may, however, be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees when such prices are
believed to reflect the fair market value of such securities. The prices
provided by the pricing service may be determined based on valuations for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Instruments with maturities of sixty days or less are valued at amortized cost,
which approximates market value. Other assets and securities which are not
readily marketable will be valued in good faith at fair value using methods
determined by the Board of Trustees.
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SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
Open Accounts
A shareholder's investment in the Fund is credited to an open account
maintained for the shareholder by the CGM Shareholder Services Department ("CGM
Shareholder Services") of Boston Financial Data Services, Inc. ("BFDS"), the
shareholder servicing agent for State Street Bank. The address is: CGM
Shareholder Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
Certificates representing shares are issued only upon written request
to CGM Shareholder Services but are not issued for fractional shares. Following
each transaction in the account, a shareholder will receive an account statement
disclosing the current balance of shares owned and the details of recent
transactions that have taken place during the year. After the close of each
fiscal year, CGM Shareholder Services will send each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. The year-end statement should be retained as a
permanent record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates problems of handling and safekeeping, and the
cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are borne by the Fund,
and no direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
Systematic Withdrawal Plans ("SWP")
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of a shareholder provided that the account has a value of at least
$10,000 at the time the plan is established.
Payments will be made either to the shareholder or to any other person
or entity designated by the shareholder. If payments are issued to an individual
other than the registered owner(s) and/or mailed to an address other than the
address of record, a signature guarantee will be required on the SWP
application. Shares to be included in a Systematic Withdrawal Plan must be held
in an Open Account rather than certificated form. Income dividends and capital
gain distributions will be reinvested at the net asset value determined as of
the close of the New York Stock Exchange on the record date for the dividend or
distribution. If withdrawal checks are returned to the Fund as "undeliverable"
or remain uncashed for more than six months the shareholder's Systematic
Withdrawal Plan will be cancelled, such undeliverable or uncashed checks will be
cancelled and such amounts reinvested in the Fund at the per share net asset
value determined as of the date of cancellation of the checks.
Since withdrawal payments represent in whole or in part proceeds from
the liquidation of shares, the shareholder should recognize that withdrawals may
reduce and possibly exhaust the value of the account, particularly in the event
of a decline in net asset value. Accordingly, the shareholder should consider
whether a Systematic Withdrawal Plan and the specified amounts to be withdrawn
are appropriate in the circumstances. The Trust makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
Exchange Privilege
A shareholder may exchange shares of the Fund for shares of CGM Mutual
Fund, CGM Fixed Income Fund, CGM American Tax Free Fund, New England Cash
Management Trust, New England Tax Exempt Money Market Trust or CGM Capital
Development Fund; however, shares of CGM Capital Development Fund may be
exchanged for only if you were a shareholder on September 24, 1993, and have
continuously remained a shareholder in the CGM Capital Development Fund since
that date. CGM Capital Development Fund shares are not generally available to
other persons except in special circumstances that have been approved by, or
under the authority of, the Board of Trustees of CGM Capital Development Fund.
The special circumstances currently approved by the Board of Trustees of CGM
Capital Development Fund are limited to the offer and sale of shares of such
fund to the following additional persons: trustees of CGM Capital Development
Fund, employees of the Investment Manager and counsel to such fund and the
Investment Manager. The value of shares exchanged must be at least $1,000 and
all exchanges are subject to the minimum investment requirements of the fund
into which the exchange is being made. This option is summarized in the
Prospectus under "Shareholder Services--Exchange Privilege." Exchange requests
cannot be revoked once they have been received in good order. The Trust reserves
the right to terminate or limit the privilege of a shareholder who makes more
than four exchanges (or two round trips) per year and to prohibit exchanges
during the first 15 days following an investment in the Fund. A shareholder may
exercise the exchange privilege only when the fund into which shares will be
exchanged is registered or qualified in the state in which such shareholder
resides.
Exchanges may be effected by (i) a telephone request to CGM Shareholder
Services at 800-343-5678, provided a special authorization form is on file with
the Trust, or (ii) a written exchange request to BFDS accompanied by an account
application for the appropriate fund. The Trust reserves the right to modify
this exchange privilege without prior notice, except as otherwise required by
law or regulation.
For federal income tax purposes, an exchange constitutes a sale of
shares, which may result in a capital gain or loss.
Automatic Investment Plans ("AIP")
Once initial investment minimums have been satisfied (see "How to
Purchase Shares" in the Prospectus), a shareholder may participate in an
Automatic Investment Plan, pursuant to which the Fund debits $50.00 or more on
or about the same date each month from a shareholder's checking account and
transfers the proceeds into the shareholder's Fund account. To participate, a
shareholder must authorize the Fund and its agents to initiate Automated
Clearing House ("ACH") debits against the shareholder's designated account at a
bank or other financial institution. Debits from savings banks and credit unions
generally are not acceptable. Debits from savings accounts will not be accepted
under any circumstances. Shareholders receive a confirmation of each purchase of
Fund shares, and each deduction from a shareholder's bank account will appear on
the shareholder's monthly bank statement. If a shareholder elects to redeem Fund
shares purchased under the AIP within 15 days of such purchase, the shareholder
may experience delays in receiving redemption proceeds. See "All Redemptions."
Once a shareholder enrolls in the AIP, the Fund and its agents are
authorized to initiate ACH debits against the shareholder's account payable to
the order of The CGM Funds. Such authority remains in effect until revoked by
the shareholder, and, until the Fund actually receives such notice of
revocation, the Fund is fully protected in initiating such debits. Participation
in the AIP may be terminated by sending written notice to CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by calling
800-343-5678 more than 14 days prior to the next scheduled debit date. The Fund
may immediately terminate a shareholder's participation in the AIP in the event
that any item is unpaid by the shareholder's financial institution. The Fund may
terminate or modify the AIP at any time.
Retirement Plans
Under "Shareholder Services--Retirement Plans" the Prospectus refers to
several retirement plans. These include tax deferred money purchase pension or
profit sharing plans, as well as SEP-IRAs, IRAs and 403(b)(7) custodial accounts
established under retirement plans sponsored by CGM. These plans may be funded
with shares of the Fund.
For participants under age 59 1/2, all income dividends and capital
gain distributions of plan participants must be reinvested. Plan documents and
further information can be obtained from the Trust by writing or calling the
Trust as indicated on the cover of this Statement.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
Address Changes
Shareholders can request to change their record address either by
telephone or in writing (by mail or delivery service, but not by facsimile) in
accordance with the policies and procedures of the Trust. After an address
change is made, no telephone or written redemption requests will be honored for
three months unless the registered owner's signature is guaranteed on the
request. Written requests for a change of address may be mailed to: CGM
Shareholder Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
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REDEMPTIONS
- -------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be
guaranteed by an eligible guarantor institution in accordance with procedures
established by the Trust. Signature guarantees
by notaries public are not acceptable.
The procedures provide that an "eligible guarantor institution" means
any of the following: banks (as defined in ss. 3(a) of the Federal Deposit
Insurance Act (the "FDIA") [12 U.S.C. ss. 1813(a)]); brokers, dealers, municipal
securities brokers, government securities dealers and government securities
brokers, as those terms are defined under the Securities Exchange Act of 1934
(the "Act"); credit unions (as defined in ss. 19(b)(1)(A) of the Federal Reserve
Act [12 U.S.C. ss. 461(b)]); national securities exchanges, registered
securities associations and clearing agencies, as those terms are defined under
the Act; and savings associations (as defined in ss. 3(b) of the FDIA [12 U.S.C.
ss. 1813(b)]). However, as noted in the Prospectus, a signature guarantee will
not be required if the proceeds of the redemption do not exceed $25,000, and the
proceeds check is made payable to the registered owner(s) and mailed to the
record address, which has not changed in the prior three months. If the record
address has changed within the prior three months, a signature guarantee will be
required. This policy applies to both written and telephone redemption requests.
Redeeming by Telephone
There are two ways to redeem by telephone. In either case, a
shareholder should call 800-343-5678 prior to 4:00 p.m. (Eastern time). Requests
made after that time or on a day when the New York Stock Exchange is not open
for business cannot be accepted. Telephone redemptions are not available for
IRAs, SEP-IRAs, 403(b)(7) custodial accounts or money purchase pension and
profit sharing plans under a CGM retirement plan where State Street Bank is the
trustee.
Check Sent to the Record Address
A shareholder may request that a check be sent to the record address on
the account, provided that the address has not changed for the last three months
and the shareholder is redeeming $25,000 or less. The check will be made payable
to the registered owner(s) of the account.
If checks representing redemption proceeds are returned "undeliverable"
or remain uncashed for six months, such checks shall be cancelled and such
proceeds shall be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation of such checks.
Proceeds Wired to a Predesignated Bank
A shareholder may request that the redemption proceeds be wired to the
bank selected on the Fund application or subsequently on the Service Options
Form available from the Trust or BFDS. A nominal wire fee, currently $5.00, is
deducted from the proceeds. When selecting the service, a shareholder must
designate a bank account to which the redemption proceeds should be wired. Any
change in the bank account so designated may be made by furnishing BFDS a
completed Service Options Form with a signature guarantee. Whenever the Service
Options Form is used, the shareholder's signature must be guaranteed as
described above. Telephone redemptions may be made only if an investor's bank is
a member of the Federal Reserve System or has a correspondent bank that is a
member of the System. If the account is with a savings bank, it must have only
one correspondent bank that is a member of the System.
All Redemptions
The redemption price will be the net asset value per share next
determined after the redemption request is received by CGM Shareholder Services
in good order (including any necessary documentation). Redemption requests
cannot be revoked once they have been received in good order. Proceeds resulting
from a written redemption request will normally be mailed to you within seven
days after receipt of your request in good order. Telephone redemption proceeds
will normally be mailed or wired within seven days following receipt of a proper
redemption request. If you purchased your Fund shares by check (or through your
AIP) and elect to redeem shares within 15 days of such purchase, you may
experience delays in receiving redemption proceeds. The Trust will process your
redemption request upon receipt of a request in good order. However, the Trust
will generally postpone sending your redemption proceeds from such investment
until it can verify that your check (or AIP investment) has been or will be
collected. Under ordinary circumstances, the Trust cannot verify collection of
individual checks (or AIP investments) and may therefore automatically hold
proceeds from redemptions requested during the 15 day period following such
investment for a total of up to seven days. There will be no such automatic
delay following investments paid for by federal funds wire or by bank cashier's
check, certified check or treasurer's check although the Trust may in any case
postpone payment of redemption proceeds for up to seven days.
The Trust will normally redeem shares for cash; however, the Trust
reserves the right to pay the redemption price wholly in kind or partly in kind
and partly in cash if the board of trustees of the Trust determines it to be
advisable in the interest of the remaining shareholders. If portfolio securities
are distributed in lieu of cash, the shareholder will normally incur brokerage
commissions upon subsequent disposition of any such securities. However, the
Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Trust is obligated to redeem shares solely in cash for any shareholder
during any 90-day period up to the lesser of $250,000 or 1% of the total net
asset value of the Fund at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gains Distributions and Tax Status."
Because the expense of maintaining small accounts is disproportionately
high, the Trust may close accounts with 20 shares or less and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of the Trust's intention to close the account, and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to retirement and Uniform Gifts to Minors Act
or Uniform Transfers to Minors Act accounts.
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INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
- -------------------------------------------------------------------------------
As described in the Prospectus under "Dividends, Capital Gains
Distributions and Taxes" it is the policy of the Fund to pay quarterly, as
dividends, substantially all net investment income and to distribute annually
all net realized capital gains, if any, after offsetting any capital loss
carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of the New York Stock Exchange on the record date for such dividend or
distribution. Shareholders, however, may elect to receive their income dividends
or capital gain distributions, or both, in cash. (However, if you elect to
receive capital gains in cash, your income dividends must also be received in
cash.) The election, made at the time the account is opened, may be changed by
the shareholder at any time by submitting a written request directly to CGM
Shareholder Services. In order for a change to be in effect for any dividend or
distribution, it must be received by CGM Shareholder Services on or before the
record date for such dividend or distribution. If you elect to receive
distributions in cash, and checks are returned "undeliverable" to the Fund or
remain uncashed for six months, your cash election will be automatically changed
and your future distributions will be reinvested in the Fund at the per share
net asset value determined as of the date of payment of the distribution. In
addition, following such six month period, any undeliverable or uncashed checks
will be cancelled and such amounts reinvested in the Fund at the per share net
asset value determined as of the date of cancellation of such checks.
The Fund intends to meet the requirements of the Internal Revenue Code
with respect to regulated investment companies.
The distributions received by the Fund from its investments may, for
federal income tax purposes, consist of ordinary income, long-term capital gains
or a return of capital. The characterization of these distributions to the Fund
may, in turn, affect the tax treatment of the Fund's distributions to its
shareholders. Dividends and distributions are taxable to shareholders in the
same manner whether received in cash or reinvested in additional shares of the
Fund.
Dividends paid by the Fund from net investment income, including
dividends, interest and net short-term capital gains, will be taxable to
shareholders as ordinary income. Distributions of net capital gains (the excess
of net long-term capital gains over net short-term capital losses) which are
designated by the Fund as capital gains distributions are taxable as long-term
capital gains, regardless of the length of time shareholders have owned shares
in the Fund. To the extent that the Fund makes a distribution in excess of its
current and accumulated earnings and profits, the distribution will be treated
first as a tax-free return of capital, reducing the tax basis in a shareholder's
shares, and then, to the extent the distribution exceeds such basis, as a
taxable gain to be realized upon sale of such shares.
Distributions that the Fund receives from a REIT, and dividends of the
Fund attributable to such distributions, will not constitute "dividends" for
purposes of the dividends-received deduction applicable to corporate
shareholders.
Dividends and distributions on Fund shares received shortly after their
purchase, although in effect a return of capital, are subject to federal income
taxes.
The Fund is required to withhold and remit to the U.S. Treasury 31% of
all dividends from net investment income and capital gains distributions,
whether distributed in cash or reinvested in shares of the Fund, paid or
credited to any shareholder account for which an incorrect or no taxpayer
identification number has been provided or where the Fund is notified that the
shareholder has underreported income in the past (or the shareholder fails to
certify that he is not subject to withholding). In addition, the Fund will be
required to withhold and remit to the U.S. Treasury 31% of the amount of the
proceeds of any redemption of Fund shares from a shareholder account for which
an incorrect or no taxpayer identification number has been provided or where the
Fund is notified that the shareholder has underreported income in the past (or
the shareholder fails to certify that he is not subject to such withholding).
As required by federal law, detailed federal tax information is
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
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FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The financial statements for the year ended December 31, 1996, included
in the Fund's Annual Report to shareholders for the year ended December 31,
1996, are incorporated herein by reference.
<PAGE>
CGM AMERICAN TAX FREE FUND
CGM FIXED INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
This Statement of Additional Information (the "Statement") is not a
prospectus. This Statement relates to the CGM American Tax Free Fund and CGM
Fixed Income Fund Prospectus dated May 1, 1997 (the "Prospectus"), and should be
read in conjunction therewith. A copy of the Prospectus may be obtained from CGM
Trust, c/o The CGM Funds Investor Services Division, P.O. Box 449, Boston,
Massachusetts 02117 (Telephone: 800-345-4048).
CGM AMERICAN TAX FREE FUND MAY NOT BE AN APPROPRIATE INVESTMENT FOR
RETIREMENT PLAN AND SIMILAR ACCOUNTS.
AFSAI 97
<PAGE>
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TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
----
INTRODUCTION................................................................ 1
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
OF CGM AMERICAN TAX FREE FUND ..................................... 1
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
OF CGM FIXED INCOME FUND........................................... 6
PORTFOLIO TURNOVER.......................................................... 10
MANAGEMENT OF THE FUND...................................................... 11
INVESTMENT ADVISORY AND OTHER SERVICES...................................... 13
Advisory Agreement................................................. 13
Custodial Arrangements............................................. 15
Independent Accountants............................................ 15
Other Arrangements................................................. 15
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 15
DESCRIPTION OF THE TRUST.................................................... 17
Shareholder Rights................................................. 17
Shareholder and Trustee Liability.................................. 18
HOW TO BUY SHARES........................................................... 19
ADVERTISING AND PERFORMANCE INFORMATION..................................... 19
Calculation of Total Return........................................ 19
Calculation of Yield............................................... 20
Performance Comparisons............................................ 21
NET ASSET VALUE AND PUBLIC OFFERING PRICE................................... 22
SHAREHOLDER SERVICES........................................................ 23
Open Accounts...................................................... 23
Systematic Withdrawal Plans ("SWP")................................ 24
Exchange Privilege................................................. 25
Automatic Investment Plans ("AIP")................................. 25
Retirement Plans................................................... 26
Address Changes.................................................... 26
REDEMPTIONS................................................................. 27
Redeeming by Telephone............................................. 27
Check Sent to the Record Address................................... 27
Proceeds Wired to a Predesignated Bank............................. 28
All Redemptions.................................................... 28
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS................ 29
FINANCIAL STATEMENTS ....................................................... 32
<PAGE>
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INTRODUCTION
- -------------------------------------------------------------------------------
CGM American Tax Free Fund and CGM Fixed Income Fund (each the "Fund"
and, collectively, the "Funds") are each organized as separate series of shares
of CGM Trust (the "Trust"). The Trust is a Massachusetts business trust
established under the laws of Massachusetts in 1986. The Trust is governed by an
Amended and Restated Agreement and Declaration of Trust (the "Declaration of
Trust") dated January 23, 1997. The Trust is a successor in interest to
Loomis-Sayles Mutual Fund. On March 1, 1990 the Trust's name was changed from
"Loomis-Sayles Mutual Fund" to "CGM Mutual Fund" to reflect the assumption by
Capital Growth Management Limited Partnership ("CGM" or the "Investment
Manager") of investment advisory responsibilities with respect to the Trust. On
December 20, 1991, the Trust's name was changed to CGM Trust.
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
OF CGM AMERICAN TAX FREE FUND
- -------------------------------------------------------------------------------
CGM American Tax Free Fund's primary investment objective is to provide
high current income exempt from federal income tax. The Fund's secondary
objective is capital appreciation. There are no assurances that CGM American Tax
Free Fund will achieve its objectives.
At least 75% of CGM American Tax Free Fund's assets will be invested in
securities rated at the time of purchase Baa, MIG-2, Prime-2 or higher by
Moody's Investors Service, Inc. ("Moody's"); or BBB, SP-2, A-2 or better by
Standard and Poor's Corporation ("Standard and Poor's"); or, if not rated by
Moody's or Standard and Poor's, determined to be of comparable quality by the
Investment Manager. Up to 25% of the Fund's assets may be invested in lower
quality securities, which have speculative characteristics and are subject to
special risks described in the Prospectus.
As a fundamental policy, under normal market conditions, CGM American
Tax Free Fund will invest at least 80% of its net assets in securities, the
interest from which is, in the opinion of counsel to the issuer, exempt from
federal income tax and excluded from the calculation of the federal alternative
minimum tax for individuals.
CGM American Tax Free Fund may not:
(1) Borrow money, except that it may borrow from banks in an amount not
to exceed 1/3 of the value of its total assets and may borrow for temporary
purposes from entities other than banks in an amount not to exceed 5% of the
value of its total assets;
(2) Issue any senior securities, except as permitted by the terms of
any exemptive order or similar rule issued by the Securities and Exchange
Commission (the "SEC") relating to multiple classes of shares of beneficial
interest of the Trust, and provided further that collateral arrangements with
respect to forward contracts, futures contracts, short sales or options,
including deposits of initial and variation margin, shall not be considered to
be the issuance of a senior security for purposes of this restriction;
(3) Act as an underwriter of securities issued by other persons, except
insofar as the Fund may be deemed an underwriter in connection with the
disposition of securities;
(4) Purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to be invested in
the securities of one or more issuers having their principal business activities
in the same industry, provided that there is no limit with respect to
investments in securities issued by the U.S. Government, its agencies and
instrumentalities;
(5) Purchase or sell real estate, except that the Fund may invest in
securities of companies that deal in real estate and securities secured by real
estate or interests therein and the Fund may hold and sell real estate acquired
as a result of the Fund's ownership of such securities;
(6) Purchase or sell commodities or commodity futures contracts, except
that the Fund may invest in financial futures contracts, options thereon and
similar instruments;
(7) Make loans to other persons except (a) through the lending of
securities held by it, (b) through the use of repurchase agreements, and (c) by
the purchase of debt securities in accordance with its investment policies;
(8) With respect to 75% of its total assets, purchase more than 10% of
the outstanding voting securities of one issuer or invest more than 5% of the
value of its total assets in securities of any one issuer, except the U.S.
Government, its agencies or instrumentalities;
(9) Purchase "illiquid" securities, including repurchase agreements
maturing in more than seven days and options traded "over the counter," if, as a
result, more than 10% of the Fund's total net assets would then be invested in
such securities;
(10) Purchase securities issued by companies which, including their
predecessors, have been in operation for less than 3 years, if, as a result,
more than 5% of the Fund's total assets would then be invested in such
securities;
(11) Purchase or retain securities of any issuer if the officers,
directors or trustees of the Fund and the adviser thereof who individually own
more than 1/2 of 1% of the securities of such issuer together own beneficially
more than 5% of such securities;
(12) Acquire or retain securities of any investment company, except
that the Fund may (a) acquire securities of closed-end investment companies up
to the limits permitted by applicable law, provided such acquisitions are in the
open market and there is no commission or profit to a dealer or sponsor other
than the customary broker's commission, and (b) acquire securities of any
investment company as part of a merger, consolidation or similar transaction;
(13) Sell securities short or maintain a short position unless, at all
times that a short position is open, the Fund owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short (which sales are commonly referred to as
"short sales against the box");
(14) Invest in puts, calls, straddles, spreads or any combination
thereof, except that the Fund may (a) purchase put and call options on
securities and securities indexes, and (b) write covered put and call options on
securities and securities indexes, provided that the aggregate value of the
securities underlying the calls or obligations underlying the puts determined as
of the date the options are sold shall not exceed 25% of the Fund's net assets
and, provided further that (i) the securities underlying such options are within
the investment policies of the Fund and (ii) at the time of such investment, the
value of the Fund's aggregate investment in such securities does not exceed 5%
of the Fund's total assets;
(15) Invest in oil, gas or other mineral exploration programs,
development programs or leases, except that the Fund may purchase publicly
traded securities of companies engaging in whole or in part in such activities;
(16) Invest in real estate limited partnerships, except that the Fund
may purchase publicly traded securities issued by real estate investment trusts;
(17) Pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;
(18) Purchase securities on margin, except short-term credits as are
necessary for the purchase and sale of securities, provided that the deposit or
payment of initial or variation margin in connection with futures contracts or
related options will not be deemed to be a purchase on margin;
(19) Invest in warrants, if at the time of such investment (a) more
than 5% of the value of the Fund's net assets would be invested in warrants or
(b) more than 2% of the value of the Fund's net assets would be invested in
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange (for this purpose, warrants attached to securities will be deemed
to have no value); and
(20) Invest more than 10% of its total assets in securities which the
Fund is restricted from selling to the public without registration under the
Securities Act of 1933, as amended.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment restrictions numbered 1 through 8 have been adopted by
the Trust as fundamental policies of CGM American Tax Free Fund. Under the
Investment Company Act of 1940 as amended (the "1940 Act"), a fundamental policy
may not be changed without the vote of a majority of the outstanding voting
securities of CGM American Tax Free Fund, as defined under the 1940 Act.
"Majority" means the lesser of (1) 67% or more of the shares present at a
meeting of shareholders of the Fund, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (2) more
than 50% of the outstanding shares of the Fund. Investment restrictions numbered
9 through 20 above are non-fundamental and may be changed at any time by vote of
a majority of the Trust's Board of Trustees.
Although CGM American Tax Free Fund has the ability to invest in
financial futures contracts and options thereon, to invest in puts, calls and
warrants, to acquire securities of closed-end investment companies, to sell
securities short against the box, to purchase publicly traded securities issued
by real estate investment trusts and to loan portfolio securities, the Fund has
no current intention of doing so without first notifying its shareholders and
supplying further information in the Prospectus.
Restricted securities eligible for resale to "qualified institutional
buyers" pursuant to Rule 144A under the Securities Act of 1933, as amended, may
be determined to be liquid by the Investment Manager under guidelines approved
by the Board of Trustees. In its determination of liquidity with respect to such
securities, the Investment Manager will consider the following factors, among
others: (1) the frequency of trades and quotes for the security, (2) the number
of dealers willing to purchase or sell the security and the number of other
potential purchasers, (3) dealer undertakings to make a market in the security,
and (4) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer). The foregoing investment practice could
have the effect of increasing the level of illiquidity in CGM American Tax Free
Fund to the extent that qualified institutional buyers become uninterested in
purchasing the securities.
CGM American Tax Free Fund may invest up to 5% of its total assets in
repurchase agreements. A repurchase agreement is an instrument under which the
purchaser acquires ownership of a security and obtains a simultaneous commitment
from the seller (a bank or, to the extent permitted by the 1940 Act, a
recognized securities dealer) to repurchase the security at an agreed-upon price
and date (usually seven days or less from the date of original purchase). The
resale price is in excess of the purchase price and reflects an agreed upon
market rate unrelated to the coupon rate on the purchased security. Such
transactions afford CGM American Tax Free Fund the opportunity to earn a return
on temporarily available cash at minimal market risk. While the underlying
security may be a bill, certificate of indebtedness, note or bond issued by an
agency, authority or instrumentality of the U.S. Government, the obligation of
the seller is not guaranteed by the U.S. Government and there is a risk that the
seller may fail to repurchase the underlying security. In such event, CGM
American Tax Free Fund would attempt to exercise rights with respect to the
underlying security, including possible disposition in the market. However, the
Fund may be subject to various delays and risks of loss, including (1) possible
declines in the value of the underlying security during the period while the
Fund seeks to enforce its rights thereto, (2) possible reduced levels of income
and lack of access to income during this period, and (3) inability to enforce
rights and the expenses involved in attempted enforcement.
CGM American Tax Free Fund may enter into reverse repurchase agreements
with banks or broker-dealers. Reverse repurchase agreements involve the sale of
a security held by the Fund and its agreement to repurchase the instrument at a
stated price, date and interest payment. Reverse repurchase agreements may be
considered to be borrowings by the Fund and entail additional risks such as the
occurrence of interest expenses and fluctuations in the Fund's net asset value.
In connection with entering into reverse repurchase agreements, a segregated
account of the Fund consisting of cash, cash equivalents, U.S. Government
securities or other high quality liquid debt securities with an aggregate value
at all times sufficient to repurchase the securities, or equal to the proceeds
received upon the sale plus accrued interest, will be established with the
Fund's custodian bank.
CGM American Tax Free Fund may purchase municipal lease obligations. In
determining the liquidity of municipal lease obligations, the Board of Trustees
will consider the following factors: (1) the frequency of trades and quotes; (2)
the number of dealers willing to purchase or sell the security; (3) the
willingness of dealers to undertake to make a market; (4) the nature of the
marketplace trades; and (5) the likelihood that the obligation will continue to
be marketable based on the credit quality of the municipality or relevant
obligor.
While CGM American Tax Free Fund may not invest more than 25% of its
total assets in any one industry, the Fund may invest more than 25% of its total
assets in a broader segment of the tax-exempt market, such as revenue
obligations of hospitals and other healthcare facilities, housing agency revenue
obligations or airport revenue obligations. The Fund may also invest more than
25% of its total assets in securities relating to any one or more states
(including the District of Columbia), territories or United States possessions
or any of their political subdivisions.
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
OF CGM FIXED INCOME FUND
- -------------------------------------------------------------------------------
CGM Fixed Income Fund's investment objective is to maximize total
return by investing in debt securities and preferred stocks that provide current
income, capital appreciation or a combination of both income and appreciation.
Under normal circumstances, CGM Fixed Income Fund will invest at least 65% of
its total assets in fixed-income securities. There are no assurances that the
Fund will achieve its objective and the Fund may change its objective without
shareholder approval.
CGM Fixed Income Fund may invest up to 35% of its assets in securities
with ratings lower than Baa (baa in the case of preferred stocks) by Moody's or
BBB by Standard and Poor's. The Fund may invest up to 10% of its total assets in
securities rated at the time of purchase Caa by Moody's (caa in the case of
preferred stocks) or CCC by Standard and Poor's if, in the opinion of the
Investment Manager, the financial condition of the issuer or the protection
afforded to the particular security is stronger than would otherwise be
indicated by the rating. Risks associated with such investments are described in
the Prospectus.
CGM Fixed Income Fund may invest up to 20% of its net assets at the
time of purchase in debt securities and preferred stocks of foreign issuers.
Risks associated with such investments are described in the Prospectus.
At any time that CGM Fixed Income Fund's borrowings (including
obligations under reverse repurchase agreements) exceed 5% of the value of its
total assets, the Fund will not purchase or acquire any additional investment
securities.
CGM Fixed Income Fund may not:
(1) Borrow money, except that it may borrow from banks in an amount not
to exceed 1/3 of the value of its total assets and may borrow for temporary
purposes from entities other than banks in an amount not to exceed 5% of the
value of its total assets;
(2) Issue any senior securities, except as it may be permitted by the
terms of any exemptive order or similar rule issued by the SEC relating to
multiple classes of shares of beneficial interest of the Trust, and provided
further that collateral arrangements with respect to forward contracts, futures
contracts, short sales or options, including deposits of initial and variation
margin, shall not be considered to be the issuance of a senior security for the
purposes of this restriction;
(3) Act as an underwriter of securities issued by other persons, except
insofar as the Fund may be deemed an underwriter in connection with the
disposition of securities;
(4) Purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to be invested in
the securities of one or more issuers having their principal business activities
in the same industry, provided that there is no limit with respect to
investments in the U.S. Government, its agencies and instrumentalities;
(5) Purchase or sell real estate, except that the Fund may invest in
securities of companies that deal in real estate and securities secured by real
estate or interests therein and the Fund may hold and sell real estate acquired
as a result of the Fund's ownership of such securities;
(6) Purchase or sell commodities or commodity futures contracts, except
that the Fund may invest in financial futures contracts, options thereon and
similar instruments;
(7) Make loans to other persons except (a) through the lending of
securities held by it, (b) through the use of repurchase agreements, and (c) by
the purchase of debt securities in accordance with its investment policies;
(8) With respect to 75% of its total assets, purchase more than 10% of
the outstanding voting securities of any one issuer or invest more than 5% of
the value of its total assets in the securities of any one issuer, except the
U.S. Government, its agencies or instrumentalities;
(9) Purchase "illiquid" securities, including repurchase agreements
maturing in more than seven days and options traded "over the counter," if, as a
result, more than 10% of the Fund's total net assets would then be invested in
such securities;
(10) Purchase securities issued by companies which, including their
predecessors, have been in operation for less than 3 years, if, as a result,
more than 5% of the Fund's total assets would then be invested in such
securities, except that the Fund may purchase securities issued by a real estate
investment trust in operation for less than 3 years if the sponsor of such real
estate investment trust has been in operation for at least 3 years;
(11) Purchase or retain securities of any issuer if the officers,
directors or trustees of the Fund and the adviser thereof who individually own
more than 1/2 of 1% of the securities of such issuer together own beneficially
more than 5% of such securities;
(12) Acquire or retain securities of any investment company, except that
the Fund may (a) acquire securities of closed-end investment companies up to the
limits permitted by applicable law, provided such acquisitions are in the open
market and there is no commission or profit to a dealer or sponsor other than
the customary broker's commission, and (b) acquire securities of any investment
company as part of a merger, consolidation or similar transaction;
(13) Sell securities short or maintain a short position unless, at all
times that a short position is open, the Fund owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short (which sales are commonly referred to as
"short sales against the box");
(14) Invest in puts, calls, straddles, spreads or any combination
thereof, except that the Fund may (a) purchase put and call options on
securities and securities indexes, and (b) write covered put and call options on
securities and securities indexes, provided that the aggregate value of the
securities underlying the calls or obligations underlying the puts determined as
of the date the options are sold shall not exceed 25% of the Fund's net assets
and, provided further that (I) the securities underlying such options are within
the investment policies of the Fund and (ii) at the time of such investment, the
value of the Fund's aggregate investment in such securities does not exceed 5%
of the Fund's total assets;
(15) Invest in oil, gas or other mineral exploration programs,
development programs or leases, except that the Fund may purchase publicly
traded securities of companies engaging in whole or in part in such activities;
(16) Invest in real estate limited partnerships, except that the Fund
may purchase publicly traded securities issued by real estate investment trusts;
(17) Pledge, mortgage or hypothecate its assets in excess, together with
permitted borrowings, of 1/3 of its total assets;
(18) Purchase securities on margin, except short-term credits as are
necessary for the purchase and sale of securities, provided that the deposit or
payment of initial or variation margin in connection with futures contracts or
related options will not be deemed to be a purchase on margin; and
(19) Invest in warrants, if at the time of such investment (a) more than
5% of the value of the Fund's net assets would be invested in warrants or (b)
more than 2% of the value of the Fund's net assets would be invested in warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange (and for this purpose, warrants attached to securities will be deemed
to have no value).
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment restrictions numbered 1 through 8 have been adopted by
the Trust as fundamental policies of CGM Fixed Income Fund. Under the 1940 Act,
a fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined under the 1940 Act.
"Majority" means the lesser of (1) 67% or more of the shares present at a
meeting of shareholders of the Fund, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (2) more
than 50% of the outstanding shares of the Fund. Investment restrictions numbered
9 through 19 above are non-fundamental and may be changed at any time by vote of
a majority of the Trust's Board of Trustees.
Although CGM Fixed Income Fund has the ability to invest in financial
futures contracts and options thereon, to acquire securities of closed-end
investment companies, to sell securities short against the box, to purchase
publicly traded securities issued by real estate investment trusts and to loan
portfolio securities, the Fund has no current intention of doing so without
first notifying its shareholders and supplying further information in the
Prospectus.
Restricted securities eligible for resale to "qualified institutional
buyers" pursuant to Rule 144A under the Securities Act of 1933, as amended, and
IO and PO securities issued by the U.S. Government and its agencies and
instrumentalities and backed by fixed-rate mortgages may be determined to be
liquid by the Investment Manager under guidelines approved by the Board of
Trustees. In its determination of liquidity with respect to such securities, the
Investment Manager will consider the following factors, among others: (1) the
frequency of trades and quotes for the security, (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers, (3) dealer undertakings to make a market in the security, and (4)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer). The foregoing investment practice could have the effect
of increasing the level of illiquidity in CGM Fixed Income Fund to the extent
that qualified institutional buyers become uninterested in purchasing the
securities.
CGM Fixed Income Fund may invest up to 5% of its total assets in
repurchase agreements. A repurchase agreement is an instrument under which the
purchaser acquires ownership of a security and obtains a simultaneous commitment
from the seller (a bank or, to the extent permitted by the 1940 Act, a
recognized securities dealer) to repurchase the security at an agreed-upon price
and date (usually seven days or less from the date of original purchase). The
resale price is in excess of the purchase price and reflects an agreed-upon
market rate unrelated to the coupon rate on the purchased security. Such
transactions afford CGM Fixed Income Fund the opportunity to earn a return on
temporarily available cash at minimal market risk. While the underlying security
may be a bill, certificate of indebtedness, note or bond issued by an agency,
authority or instrumentality of the U.S. Government, the obligation of the
seller is not guaranteed by the U.S. Government and there is a risk that the
seller may fail to repurchase the underlying security. In such event, CGM Fixed
Income Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market. However, the Fund may be
subject to various delays and risks of loss, including (1) possible declines in
the value of the underlying security during the period while the Fund seeks to
enforce its rights thereto, (2) possible reduced levels of income and lack of
access to income during this period, and (3) inability to enforce rights and the
expenses involved in attempted enforcement.
CGM Fixed Income Fund may enter into reverse repurchase agreements with
banks or broker-dealers. Reverse repurchase agreements involve the sale of a
security held by the Fund and its agreement to repurchase the instrument at a
stated price, date and interest payment. Reverse repurchase agreements may be
considered to be borrowings by the Fund and entail additional risks such as the
occurrence of interest expenses and fluctuations in the Fund's net asset value.
In connection with entering into reverse repurchase agreements, a segregated
account of the Fund consisting of cash, cash equivalents, U.S. Government
securities or other high quality liquid debt securities with an aggregate value
at all times sufficient to repurchase the securities, or equal to the proceeds
received upon the sale plus accrued interest, will be established with the
Fund's custodian bank.
- -------------------------------------------------------------------------------
PORTFOLIO TURNOVER
- -------------------------------------------------------------------------------
Although CGM American Tax Free Fund's objective is to provide high
current income exempt from federal income tax and the Fund does not purchase
securities with the intention of engaging in short term trading, the Fund will
sell any particular security and reinvest proceeds when it is deemed prudent by
the Investment Manager, regardless of the length of the holding period. CGM
American Tax Free Fund's portfolio turnover rate for each full or partial year
of its operation is set forth in the Prospectus in the table entitled "Financial
Highlights."
Although CGM Fixed Income Fund's objective is total return and the Fund
does not purchase securities with the intention of engaging in short term
trading, the Fund will sell any particular security and reinvest proceeds when
it is deemed prudent by the Investment Manager, regardless of the length of the
holding period. CGM Fixed Income Fund's portfolio turnover rate for each full or
partial year of its operation is set forth in the Prospectus in the table
entitled "Financial Highlights."
The policies described above may result in higher securities
transaction costs. To the extent that such policies result in gains on
investments, the Funds will make distributions to their shareholders, which may
accelerate the shareholders' tax liabilities for realized gains and may result
in the distribution of short-term capital gains taxable as ordinary income. See
"Income Dividends, Capital Gains Distributions and Tax Status."
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
PETER O. BROWN -- Trustee;
30 Douglas Road, Rochester, NY; Partner, Harter, Secrest &
Emery; formerly Executive Vice President and Chief Operating
Officer, The Glenmede Trust Company; formerly Senior Vice
President, Chase Lincoln First Bank, N.A.
NICHOLAS J. GRANT -- Trustee;
77 Massachusetts Avenue, Cambridge, MA; Professor of
Metallurgy and Materials Science, Massachusetts Institute of
Technology.
G. KENNETH HEEBNER* -- Trustee and Vice President;
Employee, CGM; formerly Vice President and Director, Loomis,
Sayles and Company, Incorporated ("Loomis Sayles").
ROBERT L. KEMP* -- Trustee and President;
Employee, CGM; formerly President and Director, Loomis Sayles.
ROBERT B. KITTREDGE -- Trustee;
21 Sturdivant Street, Cumberland Foreside, ME; Retired;
formerly Vice President, General Counsel and Director, Loomis
Sayles.
LAURENS MACLURE -- Trustee;
183 Sohier Street, Cohasset, MA; Retired; formerly President
and Chief Executive Officer, New England Deaconess Hospital.
JAMES VAN DYKE QUEREAU, JR. -- Trustee;
59 Annewood Lane, Wayne, PA; Managing Partner, Stratton
Management Company; formerly Institutional Managing Partner,
Loomis Sayles.
J. BAUR WHITTLESEY -- Trustee;
1521 Locust Street, Philadelphia, PA; Attorney.
KATHLEEN S. HAUGHTON -- Vice President;
222 Berkeley Street, Boston, MA 02116; Employee - Investor
Services Division, CGM; formerly Vice President, Boston
Financial Data Services, Inc.
LESLIE A. LAKE -- Vice President and Secretary;
Employee -- Office Administrator, CGM; formerly Office
Administrator, Capital Growth Management Division of Loomis
Sayles.
MARTHA I. MAGUIRE -- Vice President;
Employee -- Funds Marketing, CGM; formerly marketing
communications consultant (self-employed); formerly Sales
Promotion Consultant, The New England.
JANICE H. SAUL -- Vice President;
Employee -- Senior Portfolio Manager, CGM; formerly Senior
Portfolio Manager, Loomis Sayles.
MARY L. STONE -- Assistant Vice President;
Employee -- Coordinator, Mutual Fund Recordkeeping, CGM;
formerly Coordinator, Mutual Fund Recordkeeping, Loomis
Sayles.
FRANK N. STRAUSS -- Treasurer;
222 Berkeley Street, Boston, MA 02116; Employee -- Chief
Financial Officer, CGM; formerly Vice President of Fund
Accounting, Freedom Capital Management Corporation and
Assistant Vice President, The Boston Company, Inc.
W. DUGAL THOMAS -- Vice President;
Employee -- Director of Marketing, CGM; formerly Director of
Marketing, Loomis Sayles.
- --------
* Trustees deemed "interested persons" of the Funds, as defined under the
1940 Act.
Each of the Fund's trustees is also a trustee of one or more other
investment companies for which CGM acts as investment manager. Except as
indicated above, the address of each trustee and officer of the Fund affiliated
with CGM is One International Place, Boston, Massachusetts 02110.
As of January 31, 1997, the officers and trustees of CGM American Tax
Free Fund owned beneficially approximately 5.8% of the outstanding shares of the
Fund, and the officers and trustees of CGM Fixed Income Fund owned beneficially
less than 1.0% of the outstanding shares of the Fund.
The Funds pay no compensation to their officers or to the trustees
listed above who are interested persons of the Funds. Officers and trustees of
the Funds receive no pension or retirement benefits paid from expenses of the
respective Funds. The following table sets forth the compensation paid by the
Trust to its trustees for the year ended December 31, 1996:
<TABLE>
<CAPTION>
Pension Total
or Retirement Estimated Compensation From
Aggregate Benefits Accrued Annual Registrant and
Name of Compensation as Part of Fund's Benefit Upon Fund Complex
Trustee From Trust Expenses Retirement Paid to Trustees(a)
- ------- ---------- -------- ---------- -------------------
<S> <C> <C> <C> <C>
Peter O. Brown $26,430.25 None None $35,750.00
Nicholas J. Grant 30,930.25 None None 41,750.00
G. Kenneth Heebner None None None None
Robert L. Kemp None None None None
Robert B. Kittredge 26,430.25 None None 35,750.00
Laurens Maclure 26,430.25 None None 35,750.00
James Van Dyke Quereau, Jr. 26,430.25 None None 35,750.00
J. Baur Whittlesey 26,430.25 None None 35,750.00
</TABLE>
(a) The Fund Complex is comprised of two Trusts with a total of five funds.
- -------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- -------------------------------------------------------------------------------
Advisory Agreement. CGM serves as investment manager of CGM American
Tax Free Fund under an advisory agreement which became effective on August 30,
1996 upon the merger of New England Mutual Life Insurance Company into
Metropolitan Life Insurance Company. CGM serves as investment manager of CGM
Fixed Income Fund under an advisory agreement approved by the shareholders of
CGM Fixed Income Fund at a special meeting held on December 12, 1996 and
effective as of December 13, 1996. Under each advisory agreement, CGM manages
the investment and reinvestment of assets of the Funds and generally administers
their affairs, subject to supervision by the Board of Trustees of the Trust. CGM
furnishes, at its own expense, all necessary office supplies, facilities and
equipment, services of executive and other personnel of the Funds and certain
administrative services. For these services, CGM American Tax Free Fund
compensates CGM at the annual percentage rate of 0.60% of the first $500 million
of the Fund's average daily net asset value, 0.55% of the next $500 million of
such value and 0.45% of such value in excess of $1 billion, and CGM Fixed Income
Fund compensates CGM at the annual percentage rate of 0.65% of the first $200
million of the Fund's average daily net asset value, 0.55% of the next $300
million of such value and 0.40% of such value in excess of $500 million.
CGM has voluntarily agreed, until December 31, 1997, and thereafter
until further notice to CGM American Tax Free Fund, to waive its management fees
and bear all of the expenses of the Fund. For the fiscal years ended December
31, 1994, 1995 and 1996, the investment advisory fees that would have been
payable to CGM in respect of services rendered to CGM American Tax Free Fund
amounted to $63,445, $66,010 and $70,051, respectively. As a result of such
waiver, the fund paid no investment advisory fees to CGM during these periods.
With respect to CGM Fixed Income Fund, CGM has voluntarily agreed,
until December 31, 1997, to waive its management fee and, if necessary, bear
certain expenses associated with operating CGM Fixed Income Fund, in order to
limit CGM Fixed Income Fund's operating expenses to an annual rate of 0.85% of
its average net assets. CGM has also agreed to obtain approval of the Board of
Trustees of CGM Fixed Income Fund prior to any modification of this commitment
thereafter. For the fiscal years ended December 31, 1994, 1995 and 1996, the
investment advisory fees that would have been payable to CGM in respect of
services rendered to CGM Fixed Income Fund amounted to $185,360, $167,688 and
$200,912, respectively. As a result of such waiver, the Fund paid no investment
advisory fees to CGM for the fiscal years ended December 31, 1994 and 1995 and
$51,667 for the fiscal year ended December 31, 1996.
Each Fund pays the compensation of its trustees who are not partners,
directors, officers or employees of CGM or its affiliates (other than registered
investment companies); registration, filing, and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Fund; the expenses of
meetings of the shareholders and trustees of the Fund; the charges and expenses
of the Fund's legal counsel; interest, including on any borrowings by the Fund;
the cost of services, including services of counsel, required in connection with
the preparation of, and the costs of printing registration statements and
prospectuses relating to the Fund, including amendments and revisions thereto,
annual, semiannual, and other periodic reports of the Fund, and notices and
proxy solicitation material furnished to shareholders of the Fund or regulatory
authorities, to the extent that any such materials relate to the Fund or its
shareholders; and the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
CGM also acts as investment adviser to CGM Capital Development Fund,
CGM Mutual Fund, CGM Realty Fund and three other mutual fund portfolios. CGM
also provides investment advice to other institutional clients.
Certain officers and trustees of the Funds also serve as officers,
directors or trustees of other investment companies advised by CGM. The other
investment companies and clients served by CGM sometimes invest in securities in
which the Funds also invest. If a Fund and such other investment companies or
clients advised by CGM desire to buy or sell the same portfolio securities at
the same time, purchases and sales will be allocated to the extent practicable
on a pro rata basis in proportion to the amounts desired to be purchased or sold
for each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities that each Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Funds. It is the opinion of the
trustees that the desirability of retaining CGM as adviser for the Funds
outweighs the disadvantages, if any, that might result from these practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
Street Bank"), Boston, Massachusetts 02102, is the Funds' custodian. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to each Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to each Fund. Upon instruction,
State Street Bank receives and delivers cash and securities of each Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of each Fund and calculates the
total net asset value, total net income, and net asset value per share of each
Fund on each business day.
Independent Accountants. Each Fund's independent accountants are Price
Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse LLP conducts an annual audit of each Fund's financial statements,
assists in the preparation of each Fund's federal and state income tax returns
and consults with each Fund as to matters of accounting and federal and state
income taxation. The information concerning financial highlights in the
Prospectus, and the financial statements incorporated by reference into this
Statement, have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Other Arrangements. Certain office space, facilities, equipment and
administrative services for each Fund and other mutual funds under the
investment management of the CGM organization are furnished by CGM. In addition,
CGM provides bookkeeping, accounting, auditing, financial recordkeeping, and
related clerical services for which it is entitled to be reimbursed by each Fund
based on the cost of providing these services. As a result of the expense
provisions described above, CGM received no reimbursement from either Fund for
any of such costs in 1994 and 1995. For services rendered to CGM Fixed Income
Fund for fiscal year 1996, CGM was reimbursed by CGM Fixed Income Fund $10,000
for such expenses. As a result of the expense provisions described above, CGM
received no reimbursement for any such costs from CGM American Tax Free Fund for
fiscal year 1996.
- -------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -------------------------------------------------------------------------------
In placing orders for the purchase and sale of portfolio securities for
each Fund, CGM always seeks the best price and execution. Transactions in
unlisted securities will be carried out through broker-dealers who make the
primary market for such securities unless, in the judgment of CGM, a more
favorable price can be obtained by carrying out such transactions through other
brokers.
CGM selects only brokers it believes are financially responsible, will
provide efficient and effective services in executing, clearing and settling an
order and will charge commission rates which, when combined with the quality of
the foregoing services, will produce the best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be competitive
with generally prevailing rates. CGM will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Funds will not
pay a broker a commission at a higher rate than is otherwise available for the
same transaction in recognition of the value of research services provided by
the broker or in recognition of the value of any other services provided by the
broker that do not contribute to the best price and execution of the
transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker that CGM believes will provide the best price and execution
for a transaction. These research services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce CGM's expenses. Such services may be used by CGM in servicing
other client accounts and in some cases may not be used with respect to the
Funds. Receipt of services or products other than research from brokers is not a
factor in the selection of brokers.
CGM American Tax Free Fund pays no brokerage commissions, as such. The
tax-exempt security market is typically a "dealer" market in which investment
dealers buy and sell bonds for their own accounts, rather than for customers,
and although the price of a tax-exempt security may reflect a dealer's mark-up
or mark-down, such mark-up or mark-down is not considered to be a commission. In
addition, some securities may be purchased directly from issuers.
In 1996, brokerage transactions of CGM Fixed Income Fund aggregating
$20,277,436 were allocated to brokers providing research services and $32,412 in
commissions were paid on these transactions. During 1994, 1995, and 1996, CGM
Fixed Income Fund paid total brokerage fees of approximately $4,249, $21,273 and
$32,412, respectively.
- -------------------------------------------------------------------------------
DESCRIPTION OF THE TRUST
- -------------------------------------------------------------------------------
The Declaration of Trust of the Trust currently permits the trustees to
issue an unlimited number of shares of beneficial interest of separate series of
the Trust. Interests in the portfolio described in the Prospectus and in this
Statement are represented by shares of each Fund. Each share of a Fund
represents an interest in such series which is equal to and proportionate with
the interest represented by each other share. The shares of the Funds do not
have any preemptive rights. Upon liquidation of the portfolio, shareholders of
each Fund are entitled to share pro rata in the net assets of such portfolio
available for distribution to shareholders. The Declaration of Trust also
permits the trustees to charge shareholders directly for custodial, transfer
agency and servicing expenses. The trustees have no present intention of making
such direct charges.
The Declaration of Trust also permits the trustees, without shareholder
approval, to create one or more additional series or classes of shares or to
reclassify any or all outstanding shares as shares of particular series or
classes, with such preferences and rights and eligibility requirements as the
trustees may designate. While the trustees have no current intention to exercise
the power to establish separate classes of the existing series of the Fund, it
is intended to allow them to provide for an equitable allocation of the impact
of any future regulatory requirements, which might affect various classes of
shareholders differently. The trustees may also, without shareholder approval,
merge two or more existing series.
Shareholder Rights
On January 31, 1997, there were 1,336,054 shares of CGM American Tax
Free Fund outstanding.
On January 31, 1997, there were 3,630,211 shares of CGM Fixed Income
Fund outstanding. On that date, State Street Bank, acting as trustee for various
retirement plans and individual retirement accounts owned 1,050,169 shares -
about 29% of the total. In almost all cases, State Street Bank does not have the
power to vote or dispose of the shares except at the direction of the beneficial
owner.
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and may vote (to the extent
provided herein) in the election of trustees of the Trust and the termination of
the applicable Fund and on other matters submitted to the vote of shareholders.
There will normally be no meetings of shareholders for the purpose of electing
trustees, except that in accordance with the 1940 Act (i) the Trust will hold a
shareholders' meeting for the election of trustees at such time as less than a
majority of the trustees holding office have been elected by shareholders, and
(ii) if the appointment of a trustee to fill a vacancy in the Board of Trustees
would result in less than two-thirds of the trustees having been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for the purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by ten or more shareholders of record who have been such
for at least six months and who hold in the aggregate shares equal to at least
the lesser of (i) $25,000 in net asset value or (ii) 1% of the outstanding
shares, stating that shareholders wish to communicate with the other
shareholders for the purpose of obtaining the signatures necessary to demand a
meeting to consider removal of a trustee, the Trust will either provide access
to a list of shareholders or disseminate appropriate materials (at the expense
of the requesting shareholders). Except as set forth above, the trustees shall
continue to hold office and may appoint successor trustees. Voting rights are
not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the holders of the outstanding shares of the
Trust except (i) to change the Trust's name or to cure technical problems in the
Declaration of Trust and (ii) to establish, designate or modify new and existing
series or subseries of Trust shares or other provisions relating to Trust shares
in response to applicable laws or regulations. The shareholders of one Fund
shall not be entitled to vote on matters exclusively affecting any other series,
such matters including, without limitation, the adoption or change in the
investment objectives, policies or restrictions of the series and the approval
of the investment advisory contracts of the series. Similarly, no shareholders
of any other series shall be entitled to vote on any such matters exclusively
affecting a particular Fund. In particular, the phrase "majority of the
outstanding voting securities of the Fund" as used in this Statement shall refer
only to the shares of the applicable Fund.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust;
however, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or trustees. The Declaration of Trust provides for indemnification out of each
Fund property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered
remote since it is limited to circumstances in which the disclaimer is
inoperative and the particular Fund itself would be unable to meet its
obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
All persons dealing with a particular Fund must look only to the assets
of that Fund for the enforcement of any claims against that Fund and no other
series of the Trust assumes any liability for obligations entered into on behalf
of that Fund.
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
- -------------------------------------------------------------------------------
The procedures for purchasing shares of the Fund are summarized in the
Prospectus under "How to Purchase Shares."
- -------------------------------------------------------------------------------
ADVERTISING AND PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
Calculation of Total Return
Each Fund may include total return information in advertisements or
written sales material. Total return is a measure of the change in value of an
investment in the Fund over the period covered, which assumes that any dividends
or capital gains distributions are automatically reinvested in the Fund rather
than paid to the investor in cash. The formula for total return used by the Fund
includes three steps:
(1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares that would have been
purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested;
(2) calculating the value of the hypothetical initial investment as of
the end of the period by multiplying the total number of shares owned at the end
of the period by the net asset value per share on the last trading day of the
period; and
(3) dividing this account value for the hypothetical investor by the
amount of the initial investment, and annualizing the result for periods of less
than one year.
For the one-year and three-year periods ended December 31, 1996, and
for the period from inception (November 10, 1993) through December 31, 1996, CGM
American Tax Free Fund's average annual total return was 2.9%, 3.7% and 4.4%,
respectively. If CGM were not waiving its fee and was receiving reimbursement
from CGM American Tax Free Fund for its expenses, that Fund's total return for
those periods would have been lower.
For the one-year and three-year periods ended December 31, 1996, and
for the period from inception (March 17, 1992) through December 31, 1996, the
average annual total return of CGM Fixed Income Fund was 15.4%, 10.5% and 12.4%,
respectively. For the one and three year periods ended December 31, 1996, and
for the period from inception (March 17, 1992) through December 31, 1996, the
total return on a hypothetical $1,000 investment in CGM Fixed Income Fund was
15.4%, 35.1% and 75.4%, respectively. If CGM were not limiting CGM Fixed Income
Fund's expenses to 0.85% of its average net assets, the annual total return and
total return on a hypothetical $1,000 investment for those periods would have
been lower. In computing performance information for CGM Fixed Income Fund, no
adjustment has been made for a shareholder's tax liability on taxable dividends
and capital gains distributions.
In computing performance information for the Funds, no adjustment has
been made for a shareholder's tax liability on taxable dividends and capital
gains distributions.
Calculation of Yield
Each Fund may include yield information in advertisements or written
sales material. Each Fund's yield is based on a recent 30 day period, and is
determined in accordance with the SEC's standardized formula by:
(1) calculating the aggregate dividends and adjusted interest earned
during that period, net of recurring expenses accrued for the period; and
(2) dividing that amount by the product of (A) the average daily number
of shares outstanding during the period and (B) the maximum offering price per
share on the last day of the period (less any earned income expected to be
declared as a dividend shortly thereafter).
The result is annualized, assuming a quarterly compounding, to
determine the Fund's yield. Interest earned during the period will be adjusted
to reflect amortization of any premium or discount from par on the Fund's fixed
income securities (other than obligations backed by mortgages or other assets),
using the market value for these securities on the last day of the period, or,
for securities purchased during the period, using actual cost. Each Fund's yield
will vary from time to time depending upon market conditions, the composition of
the Fund's portfolio and operating expenses of the Fund. CGM American Tax Free
Fund may also utilize tax equivalent yields with adjustments for assumed income
tax rates. The 30-day yields of CGM American Tax Free Fund and CGM Fixed Income
Fund for the period ended December 31, 1996, were 6.13% and 7.22%, respectively.
Performance Comparisons
Total return may be used to compare the performance of the Fund against
certain widely acknowledged standards or indices for stock and bond market
performance or against the U.S. Bureau of Labor Statistics' Consumer Price
Index.
The Standard & Poor's 500 Composite Index (the "S&P 500") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the New York Stock
Exchange.
No brokerage commissions or other fees are factored into the values of
the S&P 500 and the Dow Jones Industrial Average.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of change, over time, in the prices of
goods and services in major expenditure groups.
Lipper Analytical Services, Inc., an independent service that monitors
the performance of over 9,505 mutual funds, calculates total return for those
funds grouped by investment objective. From time to time, the Fund may include
its ranking among mutual funds tracked by Lipper in advertisements or sales
literature.
Morningstar, Inc. ("Morningstar") is an independent mutual fund ranking
service. Morningstar proprietary ratings reflect historical risk-adjusted
performance and are subject to change every month. Funds with at least three
years of performance history are assigned ratings from one star (lowest) to five
stars (highest). Morningstar ratings are calculated from the funds' three-,
five-, and ten-year average annual returns (when available) and a risk factor
that reflects the fund performance relative to three-month Treasury bill monthly
returns. Funds' returns are adjusted for fees and sales loads. Ten percent of
the funds in an investment category receive five stars, 22.5% receive four
stars, 35% receive three stars, 22.5% receive two stars, and the bottom 10%
receive one star. From time to time, the Funds may include their respective
rankings among mutual funds tracked by Morningstar in advertisements or sales
literature.
Value Line, Inc. ("Value Line"), an independent mutual fund ranking
service reviews the performance of 6,101 mutual funds. In ranking mutual funds,
Value Line uses two indicators: a Risk Rank to show the total level of risk a
fund has assumed and an Overall Rank measuring various performance criteria
taking risk into account. Funds are ranked from 1 to 5, with 1 the highest
Overall Rank (the best risk-adjusted performance) and the best Risk Rank (the
least risky). From time to time, the Funds may include ranking information
provided by Value Line in advertisements and sales literature.
The Funds may also compare their respective total return or yield or
both to that of money market funds and other investments, such as certificates
of deposit and may refer to standard measures of performance for such
investments, including information published by the Bank Rate Monitor and the
Federal Reserve System. Investors should note that, although the Fund may
experience better returns and higher yields than money market funds and other
investments, they do not seek to maintain stable net asset values. Thus,
particularly during periods of rising interest rates, the per share net asset
value of each Fund may decrease while the principal value of such other
investments will not change. Each Fund may invest in securities of varying
qualities, although 75% of CGM American Tax Free Fund's portfolio and 65% of CGM
Fixed Income Fund's portfolio will consist of investment grade securities. In
addition, unlike certificates of deposit, shares of the Funds are not insured by
the FDIC or any other entity.
Bank Rate Monitor is an independent financial service that generates
indexes of bank products, including an index of stated rates for certificates of
deposit and bank money market accounts in the ten largest metropolitan areas in
the U.S. The Federal Reserve System publishes data about the U.S. banking
system. Average rates for certificates of deposit traded in the secondary market
are published by the Board of Governors of the Federal Reserve System in
Selected Interest Rates.
From time to time, articles about a particular Fund's performance,
rankings and other characteristics, and information about persons responsible
for the Fund's portfolio management may appear in national publications and
major metropolitan newspapers including, but not limited to, The Wall Street
Journal, The Boston Globe, The New York Times and Barron's, Forbes, Fortune,
Money, Worth, Kiplinger's Personal Finance, Mutual Funds, Individual Investor,
Bloomberg Personal and Business Week magazines. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including the Funds. References to, or reprints of, or quotations
from, such articles may be used in the Funds' promotional literature.
- -------------------------------------------------------------------------------
NET ASSET VALUE AND PUBLIC OFFERING PRICE
- -------------------------------------------------------------------------------
The method for determining the public offering price and net asset
value per share is summarized in the Prospectus under "Pricing of Shares."
The net asset value of a share of each Fund is determined by dividing
the particular Fund's total net assets (the excess of its assets over its
liabilities) by the total number of shares outstanding and rounding to the
nearest cent. Such determination is made as of the close of normal trading on
the New York Stock Exchange on each day on which the Exchange is open for
unrestricted trading, and no less frequently than once daily on each day during
which there is sufficient trading in the Fund's portfolio securities that the
value of the Fund's shares might be materially affected. During the 12 months
following the date of this Statement the New York Stock Exchange is expected to
be closed on the following holidays: Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, New Year's Day, Presidents' Day and Good
Friday.
Securities which are traded over-the-counter or on a stock exchange
will be valued according to the broadest and most representative market based on
the last reported sale price for securities listed on a national securities
exchange (or on the NASDAQ National Market System) or, if no sale was reported
and in the case of over-the-counter securities not so listed, the last reported
bid price. U.S. government securities are valued at the most recent quoted price
on the date of valuation.
For equity securities, it is expected that the broadest and most
representative market will ordinarily be either (i) a national securities
exchange, such as the New York Stock Exchange or American Stock Exchange, or
(ii) the NASDAQ National Market System. For corporate bonds, notes, debentures
and other fixed-income securities, it is expected that the broadest and most
representative market will ordinarily be the over-the-counter market.
Fixed-income securities may, owever, be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees when such prices are
believed to reflect the fair market value of such securities. The prices
provided by the pricing service may be determined based on valuations for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Instruments with maturities of sixty days or less are valued at amortized cost,
which approximates market value. Other assets and securities which are not
readily marketable will be valued in good faith at fair value using methods
determined by the Board of Trustees.
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
Open Accounts
A shareholder's investment is credited to an open account maintained
for the shareholder by the CGM Shareholder Services Department ("CGM Shareholder
Services") of Boston Financial Data Services, Inc. ("BFDS"), the shareholder
servicing agent for State Street Bank. The address is: CGM Shareholder Services,
c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
Certificates representing shares are issued only upon written request
to CGM Shareholder Services but are not issued for fractional shares. Following
each transaction in the account, a shareholder will receive an account statement
disclosing the current balance of shares owned and the details of recent
transactions that have taken place during the year. After the close of each
fiscal year, CGM Shareholder Services will send each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. The year-end statement should be retained as a
permanent record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates problems of handling and safekeeping, and the
cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are borne by the
Funds, and no direct charges are made to shareholders. Although the Funds have
no present intention of making such direct charges to shareholders, they reserve
the right to do so. Shareholders will receive prior notice before any such
charges are made.
Systematic Withdrawal Plans ("SWP")
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of a shareholder provided that the account has a value of at least
$10,000 at the time the plan is established.
Payments will be made either to the shareholder or to any other person
or entity designated by the shareholder. If payments are issued to an individual
other than the registered owner(s) and/or mailed to an address other than the
address of record, a signature guarantee will be required on the SWP
application. Shares to be included in a Systematic Withdrawal Plan must be held
in an Open Account rather than certificated form. Income dividends and capital
gain distributions will be reinvested at the net asset value determined as of
the close of the New York Stock Exchange. If withdrawal checks are returned to
the Funds as "undeliverable" or remain uncashed for more than six months the
shareholder's Systematic Withdrawal Plan will be cancelled, such undeliverable
or uncashed checks will be cancelled and such amounts reinvested in the Funds at
the per share net asset value determined as of the date of cancellation of the
checks.
Since withdrawal payments represent in whole or in part proceeds from
the liquidation of shares, the shareholder should recognize that withdrawals may
reduce and possibly exhaust the value of the account, particularly in the event
of a decline in net asset value. Accordingly, the shareholder should consider
whether a Systematic Withdrawal Plan and the specified amounts to be withdrawn
are appropriate in the circumstances. The Trust makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
Exchange Privilege
A shareholder may exchange shares of CGM American Tax Free Fund or CGM
Fixed Income Fund for shares of CGM Mutual Fund, CGM Realty Fund, CGM Fixed
Income Fund or CGM American Tax Free Fund (as applicable), New England Cash
Management Trust, New England Tax Exempt Money Market Trust or CGM Capital
Development Fund; however, shares of CGM Capital Development Fund may be
exchanged only if you were a shareholder on September 24, 1993, and have
continuously remained a shareholder in the CGM Capital Development Fund since
that date. CGM Capital Development Fund shares are not generally available to
other persons except in special circumstances that have been approved by, or
under the authority of, the Board of Trustees of CGM Capital Development Fund.
The special circumstances currently approved by the Board of Trustees of CGM
Capital Development Fund are limited to the offer and sale of shares of such
fund to the following additional persons: trustees of CGM Capital Development
Fund, employees of the Investment Manager and counsel to such fund and the
Investment Manager. The value of shares exchanged must be at least $1,000 and
all exchanges are subject to the minimum investment requirements of the fund
into which the exchange is being made. This option is summarized in the
Prospectus under "Shareholder Services--Exchange Privilege." Exchange requests
cannot be revoked once they have been received in good order. The Trust reserves
the right to terminate or limit the privilege of a shareholder who makes more
than four exchanges (or two round trips) per year and to prohibit exchanges
during the first 15 days following an investment in a particular Fund. A
shareholder may exercise the exchange privilege only when the fund into which
shares will be exchanged is registered or qualified in the state in which such
shareholder resides.
Exchanges may be effected by (i) a telephone request to CGM Shareholder
Services at 800-343-5678, provided a special authorization form is on file with
the Trust, or (ii) a written exchange request to CGM Shareholder Services
accompanied by an account application for the appropriate fund. The Trust
reserves the right to modify this exchange privilege without prior notice,
except as otherwise required by law or regulation.
Automatic Investment Plans ("AIP")
Once initial investment minimums have been satisfied (see "How to
Purchase Shares" in the Prospectus), a shareholder may participate in an
Automatic Investment Plan, pursuant to which the Fund debits $50.00 or more on
or about the same date each month from a shareholder's checking account and
transfers the proceeds into the shareholder's Fund account. To participate, a
shareholder must authorize the Fund and its agents to initiate Automated
Clearing House ("ACH") debits against the shareholder's designated account at a
bank or other financial institution. Debits from savings banks and credit unions
generally are not acceptable . Debits from savings accounts will not be accepted
under any circumstances. Shareholders receive a confirmation of each purchase of
Fund shares, and each deduction from a shareholder's bank account will appear on
the shareholder's monthly bank statement. If a shareholder elects to redeem
shares of either Fund purchased under the AIP within 15 days of such purchase,
the shareholder may experience delays in receiving redemption proceeds. See "All
Redemptions."
Once a shareholder enrolls in the AIP, the Fund and its agents are
authorized to initiate ACH debits against the shareholder's account payable to
the order of The CGM Funds. Such authority remains in effect until revoked by
the shareholder, and, until the Fund actually receives such notice of
revocation, the Fund is fully protected in initiating such debits. Participation
in the AIP may be terminated by sending written notice to CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by calling
800-343-5678 more than 14 days prior to the next scheduled debit date. The Fund
may immediately terminate a shareholder's participation in the AIP in the event
that any item is unpaid by the shareholder's financial institution. The Fund may
terminate or modify the AIP at any time.
Retirement Plans
Under "Shareholder Services--Retirement Plans" the Prospectus refers to
several retirement plans. These include tax deferred money purchase pension or
profit sharing plans, as well as SEP-IRAs, IRAs and 403(b)(7) custodial accounts
established under retirement plans sponsored by CGM. These plans may be funded
with shares of CGM Fixed Income Fund. CGM American Tax Free Fund may not be an
appropriate investment for: IRA accounts, SEP-IRA accounts, 403(b)(7) custodial
accounts, qualified profit sharing plans, or qualified money purchase plans.
For participants under age 59 1/2, all income dividends and capital
gain distributions of plan participants must be reinvested. Plan documents and
further information can be obtained from the Trust by writing or calling the
Trust as indicated on the cover of this Statement.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
Address Changes
Shareholders can request to change their record address either by
telephone or in writing (by mail or delivery service, but not by facsimile) in
accordance with policies and procedures of the Trust. After an address change is
made, no telephone or written redemption requests will be honored for three
months unless the registered owner's signature is guaranteed on the request.
Written requests for a change in address may be mailed to: CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
- -------------------------------------------------------------------------------
REDEMPTIONS
- -------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be
guaranteed by an eligible guarantor institution, in accordance with procedures
established by the Trust. Signature guarantees by notaries public are not
acceptable.
The procedures established by the Trust provide that an "eligible
guarantor institution" means any of the following: banks (as defined in ss. 3(a)
of the Federal Deposit Insurance Act (the "FDIA") [12 U.S.C. ss. 1813(a)]);
brokers, dealers, municipal securities brokers, government securities dealers
and government securities brokers, as those terms are defined under the
Securities Exchange Act of 1934 (the "Act"); credit unions (as defined in ss.
19(b)(1)(A) of the Federal Reserve Act [12 U.S.C. ss. 461(b)]); national
securities exchanges, registered securities associations and clearing agencies,
as those terms are defined under the Act; and savings associations (as defined
in ss. 3(b) of the FDIA [12 U.S.C. ss. 1813(b)]). However, as noted in the
Prospectus, a signature guarantee will not be required if the proceeds of the
redemption do not exceed $25,000, and the proceeds check is made payable to the
registered owner(s) and mailed to the record address, which has not changed in
the prior three months. If the record address has changed within the prior three
months, a signature guarantee will be required. This policy applies to both
written and telephone redemption requests.
Redeeming by Telephone
There are two ways to redeem by telephone. In either case, a
shareholder should call 800-343-5678 prior to 4:00 p.m. (Eastern time). Requests
made after that time or on a day when the New York Stock Exchange is not open
for business cannot be accepted. Telephone redemptions are not available for
IRAs, SEP-IRAs, 403(b)(7) custodial accounts or money purchase pension and
profit sharing plans under a CGM retirement plan where State Street Bank is the
trustee.
Check Sent to the Record Address
A shareholder may request that a check be sent to the record address on
the account, provided that the address has not changed for the last three months
and the shareholder is redeeming $25,000 or less. The check will be made payable
to the registered owner(s) of the account.
If checks representing redemption proceeds are returned "undeliverable"
or remain uncashed for six months, such checks shall be cancelled and such
proceeds shall be reinvested in the applicable Fund at the per share net asset
value determined as of the date of cancellation of such checks.
Proceeds Wired to a Predesignated Bank
A shareholder may request that the redemption proceeds be wired to the
bank selected on the Fund application or subsequently on the Service Options
Form available from the Trust. A nominal wire fee, currently $5.00, is deducted
from the proceeds. When selecting the service, a shareholder must designate a
bank account to which the redemption proceeds should be wired. Any change in the
bank account so designated may be made by furnishing CGM Shareholder Services a
completed Service Options Form with a signature guarantee. Whenever the Service
Options Form is used, the shareholder's signature must be guaranteed as
described above. Telephone redemptions may only be made if an investor's bank is
a member of the Federal Reserve System or has a correspondent bank that is a
member of the System. If the account is with a savings bank, it must have only
one correspondent bank that is a member of the System.
All Redemptions
The redemption price will be the net asset value per share next
determined after the redemption request is received by CGM Shareholder Services
in good order (including any necessary documentation). Redemption requests
cannot be revoked once they have been received in good order. Proceeds resulting
from a written redemption request will normally be mailed to you within seven
days after receipt of your request in good order. Telephone redemption proceeds
will normally be mailed or wired within seven days following receipt of a proper
redemption request. If you purchased your Fund shares by check (or through your
AIP) and elect to redeem shares within 15 days of such purchase, you may
experience delays in receiving redemption proceeds. The Trust will process your
redemption request upon receipt of a request in good order. However, the Trust
will generally postpone sending your redemption proceeds from such investment
until it can verify that your check (or AIP investment) has been or will be
collected. Under ordinary circumstances, the Trust cannot verify collection of
individual checks (or AIP investments) and may therefore automatically hold
proceeds from redemptions requested during the 15 day period following such
investment for a total of up to seven days. There will be no such automatic
delay following investments paid for by federal funds wire or by bank cashier's
check, certified check or treasurer's check although the Trust may in any case
postpone payment of redemption proceeds for up to seven days.
The Trust will normally redeem shares for cash; however, the Trust
reserves the right to pay the redemption price wholly in kind or partly in kind
and partly in cash if the Board of Trustees of the Trust determines it to be
advisable in the interest of the remaining shareholders. If portfolio securities
are distributed in lieu of cash, the shareholder will normally incur brokerage
commissions upon subsequent disposition of any such securities. However, the
Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Trust is obligated to redeem shares solely in cash for any shareholder
during any 90-day period up to the lesser of $250,000 or 1% of the total net
asset value of the particular Fund at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gains Distributions and Tax Status."
Because the expense of maintaining small accounts is disproportionately
high, the Trust may close accounts with 20 shares or less and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of the Trust's intention to close the account, and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to retirement and Uniform Gifts to Minors Act
or Uniform Transfers to Minors Act accounts.
- -------------------------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
- -------------------------------------------------------------------------------
As described in the Prospectus under "Dividends, Capital Gains and
Taxes" it is the policy of each Fund to qualify annually as a "regulated
investment company" under the Internal Revenue Code and to declare and pay
monthly substantially all net investment income in the form of dividends and to
distribute annually all net realized capital gains, if any, after offsetting any
capital loss carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of each Fund based upon the net asset value determined as of
the close of the New York Stock Exchange on the record date for such dividend or
distribution. Shareholders, however, may elect to receive their income dividends
or capital gain distributions, or both, in cash. (However, if you elect to
receive capital gains in cash, your income dividends must also be received in
cash.) The election, made at the time the account is opened, may be changed by
the shareholder at any time by submitting a written request directly to BFDS. In
order for a change to be in effect for any dividend or distribution, it must be
received by BFDS on or before the record date for such dividend or distribution.
If you elect to receive distributions in cash, and checks are returned
"undeliverable" or remain uncashed for six months, your cash election will be
automatically changed and your future distributions will be reinvested in the
same Fund at the per share net asset value determined as of the date of payment
of the distribution. In addition, following such six-month period, any
undeliverable or uncashed checks will be cancelled and such amounts reinvested
in the same Fund at the per share net asset value determined as of the date of
cancellation of such checks.
Dividends paid by a Fund from net taxable investment income, including
dividends, interest and net short-term gains, will be taxable to shareholders as
ordinary income. For corporate investors, no portion of dividends paid by either
Fund is expected to qualify for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) are taxable as long-term capital gains,
regardless of the length of time shareholders have owned shares in a Fund. To
the extent that a Fund makes a distribution in excess of its current and
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing the tax basis in a shareholder's shares,
and then, to the extent the distribution exceeds such basis, as a taxable gain
to be realized upon sale of such shares. Taxable dividends and capital gains are
taxable to shareholders of a Fund in the same manner whether received in cash or
reinvested in additional Fund shares.
CGM American Tax Free Fund anticipates that a substantial portion of
its investment income will be tax-exempt interest income. Dividends paid by the
Fund from net tax-exempt interest income will be excluded from a shareholder's
gross income for federal income tax purposes. Shareholders who are recipients of
Social Security benefits should be aware that exempt-interest dividends received
from the Fund are includable in their "modified adjusted gross income" for
purposes of determining the amount of such Social Security benefits, if any,
that is required to be included in their gross income. The exemption of certain
dividends from federal income tax does not necessarily result in exemption under
the income tax laws of any state or local taxing authority. Shareholders should
consult their own tax advisers about the status of dividends and distributions
of CGM American Tax Free Fund in their own states and localities.
If a shareholder of CGM American Tax Free Fund receives an
exempt-interest dividend with respect to any share and redeems or exchanges such
share before holding it for more than six months, any loss on the redemption or
exchange will be disallowed to the extent of such exempt-interest dividend.
Similarly, if a shareholder of CGM American Tax Fee Fund receives a distribution
taxable as long-term capital gain with respect to any share and redeems or
exchanges such share before holding it for more than six months, any loss on the
redemption or exchange (not otherwise disallowed as attributable to an
exempt-interest dividend) will be treated as long-term capital loss to the
extent of the long-term capital gain recognized on such distribution.
CGM American Tax Free Fund may invest in private activity bonds.
Interest on private activity bonds issued after August 7, 1986, although
generally excludable from gross income for federal income tax purposes, may be
subject to the federal alternative minimum tax ("AMT"). AMT is imposed on
taxpayers who utilized to a significant degree certain tax deductions and
exclusions (known as "items of tax preference"). Interest from private activity
bonds is an item of tax preference that is included with items of income from
certain other sources in calculating if a taxpayer is subject to AMT and the
amount thereof. Shareholders should consult their own tax advisers regarding the
potential applicability of the AMT to them.
If CGM Fixed Income Fund invests in foreign securities, it may be
subject to foreign withholding taxes on income earned on such securities and may
be unable to pass through to shareholders foreign tax credits and deductions
with respect to such taxes.
A distribution will be treated as paid by a Fund and received by its
respective shareholders on December 31 of the current calender year if it is
declared in October, November, or December of that year with a record date in
such a month and paid in January of
the subsequent year.
Any dividends or distributions paid shortly after a purchase of shares
will have the effect of reducing the per share net asset value of the shares by
the amount of the dividends or distributions. Although in effect a return of
capital, these distributions (if derived from taxable investment income or net
capital gains) are subject to tax, even if their effect is to reduce the per
share net asset value below a shareholder's cost. To the extent that a Fund
makes a distribution in excess of its current and accumulated earnings and
profits, the distribution will be treated first as a tax-free return of capital,
reducing the tax basis in a shareholder's shares, and then, to the extent the
distribution exceeds such basis, as a taxable gain to be realized upon the sale
of such shares. Each Fund will notify you annually as to the tax status of
dividend and capital gains distributions paid by the Fund.
The sale or other disposition of shares of a Fund, including a
redemption of shares or an exchange of shares into another fund, is a taxable
event and may result in a capital gain or loss which will be long-term or
short-term, generally depending upon the shareholder's holding period for the
shares.
Each Fund is required to withhold and remit to the U.S. Treasury 31% of
all dividends from net investment income and capital gains distributions,
whether distributed in cash or reinvested in shares of the Fund, paid or
credited to any shareholder account for which an incorrect or no taxpayer
identification number has been provided or where the Fund is notified that the
shareholder has underreported income in the past (or the shareholder fails to
certify that he is not subject to withholding). In addition, each Fund will be
required to withhold and remit to the U.S. Treasury 31% of the amount of the
proceeds of any redemption of Fund shares from a shareholder account for which
an incorrect or no taxpayer identification number has been provided or where the
Fund is notified that the shareholder has underreported income in the past (or
the shareholder fails to certify that he is not subject to such withholding).
As required by federal law, detailed federal tax information is
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year. BFDS, the shareholder servicing agent, will send you and
the Internal Revenue Service an annual statement detailing federal tax
information, including information about dividends and distributions paid to you
during the preceding year. If you redeem or exchange shares in any year,
following the end of a year, you will receive a statement providing the cost
basis and gain or loss of each share lot that you sold in each year. Your CGM
account cost basis will be calculated using the "single category average cost
method," which is one of the four calculation methods allowed by the IRS. Be
sure to keep these statements as permanent records. A fee may be charged for any
duplicate information that you request.
Dividend distributions, capital gains distributions, and capital gains
or losses from redemptions and exchanges may also be subject to state and local
taxes. In certain states, a portion of each Fund's income derived from certain
direct U.S. Government obligations may be exempt from state and local taxes.
Each year, each Fund will indicate the portion of its income, if any, that is
derived from such obligations.
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FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The financial statements and Report of Independent Accountants for the
year ended December 31, 1996 for each Fund, which are included in the respective
Fund's Annual Report to Shareholders for the year ended December 31, 1996, are
incorporated herein by reference.
<PAGE>
CGM TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements with respect to CGM Mutual Fund, CGM
Realty Fund, CGM Fixed Income Fund, and CGM American Tax Free
Fund are incorporated herein by reference to each Fund's Annual
Report to Shareholders for the year ended December 31, 1996
(File No. 2-10653) filed on February 21, 1997.
(b) Exhibits:
(1) Amended and Restated Agreement and Declaration of Trust of
the Registrant is filed herewith.
(2) By-Laws of the Registrant are filed herewith.
(3) None.
(4) (A) Form of share certificate of the Registrant's CGM
Mutual Fund is filed herewith.
(B) Form of share certificate of the Registrants' CGM
Fixed Income Fund is filed herewith.
(C) Form of share certificate of the Registrant's CGM
American Tax Free Fund is filed herewith.
(D) Form of share certificate of the Registrant's CGM
Realty Fund is filed herewith.
(5) (A) Advisory Agreement of the Registrant dated December
13, 1996 with respect to CGM Mutual Fund is filed
herewith.
(B) Advisory Agreement of the Registrant dated December
13, 1996 with respect to CGM Fixed Income Fund is
filed herewith.
(C) Advisory Agreement of the Registrant dated August 30,
1996 with respect to CGM American Tax Free Fund is
filed herewith.
(D) Advisory Agreement of the Registrant dated August 30,
1996 with respect to CGM Realty Fund is filed
herewith.
(6) None.
(7) None.
(8) (A) Custodian Agreement with respect to CGM Mutual Fund is
filed herewith.
(B) Supplement dated March 6, 1992 to Custodian Contract
with respect to CGM Mutual Fund is filed herewith.
(C) Custodian Contract dated March 6, 1992 with respect to
CGM Fixed Income Fund is filed herewith.
(D) Amendment dated April 16, 1992 to the Custodian
Contract with respect to CGM Fixed Income Fund is
filed herewith.
(E) Custodian Contract with respect to CGM American Tax
Free Fund is filed herewith.
(F) Custodian Contract with respect to CGM Realty Fund is
filed herewith.
(9) (A) Transfer Agency and Service Agreement with respect to
CGM Mutual Fund dated June 1, 1987 is filed herewith.
(B) Supplement dated March 6, 1992 to Transfer Agency and
Service Agreement with respect to CGM Mutual Fund is
filed herewith.
(C) Transfer Agency and Service Agreement dated March 6,
1992 with respect to CGM Fixed Income Fund is filed
herewith.
(D) Transfer Agency Agreement with respect to CGM American
Tax Free Fund is filed herewith.
(E) Powers of Attorney are filed herewith.
(F) Transfer Agency Agreement with respect to CGM Realty
Fund is filed herewith.
(10) Opinion and consent of counsel with respect to shares
of CGM Mutual Fund, dated February 27, 1997, is filed
herewith.
(11) Consent of independent accountants is filed herewith.
(12) None.
(13) None.
(14) Forms of The CGM Funds Retirement Plans are filed
herewith.
(15) None.
(16) None.
(17) Financial data schedule is filed herewith.
(18) None.
Item 25. Persons Controlled by or Under Common Control with Registrant
Information pertaining to persons controlled by or under common
control with the Registrant is hereby incorporated by reference to
the section captioned "The Fund's Investment Manager" in each
Prospectus and the section captioned "Investment Advisory and Other
Services -- Advisory Agreement" in each Statement of Additional
Information.
Item 26. Number of Holders of Securities
The following table sets forth the number of record holders of each
class of securities of the Registrant as of December 31, 1996:
Number of Record
Title of Class Holders
-------------- ---------------
Shares of Beneficial Interest, CGM Mutual Fund 68,041
Shares of Beneficial Interest, CGM Fixed Income
Fund 2,544
Shares of Beneficial Interest, CGM American Tax
Free Fund 944
Shares of Beneficial Interest, CGM Realty Fund 7,846
Item 27. Indemnification
See Article 4 of the Trust's By-Laws filed herewith. In addition, the
Trust maintains a trustees and officers liability insurance policy
with maximum coverage of $5 million under which the Trust and its
trustees and officers will be named insureds.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the Trust's By-Laws, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against the public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Capital Growth Management Limited Partnership ("CGM"), the investment
manager of CGM Mutual Fund, CGM Fixed Income Fund, CGM American Tax
Free Fund and CGM Realty Fund, provides investment advice to a number
of other registered investment companies and to other organizations
and individuals.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents required
by the specified rules:
(a) Registrant
Rule 31a-1(a)(4); Rule 31a-1(d); Rule 31a-2(a); Rule 31a-2(c)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a); Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8);
Rule 31a-2(a)
(c) Capital Growth Management Limited Partnership
One International Place
Boston, Massachusetts 02110
Rule 31a-1(a); Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f);
Rule 31a-2(a); Rule 31a-2(e)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 as though such provision of the
Act were applicable to the Registrant, except that the request
referred to therein may only be made by shareholders who hold in
the aggregate at least one percent of the outstanding shares of
the Registrant or shares with an aggregate net asset value of
$25,000.
(b) The Registrant undertakes, with respect to CGM Mutual Fund, CGM
Fixed Income Fund, CGM American Tax Free Fund and CGM Realty
Fund, to furnish, upon request and without charge, to each
person to whom a fund's prospectus is delivered, a copy of such
fund's latest annual report to shareholders.
<PAGE>
CGM TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Boston, and the Commonwealth of
Massachusetts, on the 27th day of February, 1997.
CGM Trust
By: /s/ Robert L. Kemp
------------------------
Robert L. Kemp
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to this Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
President (Principal
/s/ Robert L. Kemp Executive Officer) and February 27, 1997
- ---------------------------- Trustee
Robert L. Kemp
Treasurer (Principal
/s/ Frank N. Strauss Financial and Accounting February 27, 1997
- ---------------------------- Officer)
Frank N. Strauss
* Trustee February 27, 1997
- ----------------------------
Peter O. Brown
* Trustee February 27, 1997
- ----------------------------
Nicholas J. Grant
* Trustee February 27, 1997
- ----------------------------
G. Kenneth Heebner
* Trustee February 27, 1997
- ----------------------------
Robert B. Kittredge
* Trustee February 27, 1997
- ----------------------------
Laurens MacLure
* Trustee February 27, 1997
- ----------------------------
James Van Dyke Quereau, Jr.
* Trustee February 27, 1997
- ----------------------------
J. Baur Whittlesey
*By: /s/ Robert L. Kemp
---------------------------
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
1 Amended and Restated Agreement and
Declaration of Trust
2 By-Laws
4A Form of share certificate of the Registrant's
CGM Mutual Fund
4B Form of share certificate of the Registrant's CGM Fixed
Income Fund
4C Form of share certificate of the Registrat's CGM American
Tax Free Fund
4D Form of share certificate of the Registrant's CGM Realty
Fund
5A Advisory Agreement of the Registrant with respect to CGM
Mutual Fund
5B Advisory Agreement of the Registrant with respect to CGM
Fixed Income Fund
5C Advisory Agreement of the Registrant with respect to CGM
American Tax Free Fund
5D Advisory Agreement of the Registrant with respect to CGM
Realty Fund
8A Custodian Agreement with respect to CGM Mutual Fund
8B Supplement to Custodian Contract with respect to CGM
Mutual Fund
8C Custodian Contract with respect to CGM Fixed Income Fund
8D Amendment to Custodian Contract with respect to CGM Fixed
Income Fund
8E Custodian Contract with respect to CGM American Tax Free
Fund
8F Custodian Contract with respect to CGM Realty Fund
9A Transfer Agency and Service Agreement with respect to CGM
Mutual Fund
9B Supplement to Transfer Agency and Service Agreement with
respect to CGM Mutual Fund
9C Transfer Agency and Service Agreement with respect to CGM
Fixed Income Fund
9D Transfer Agency Agreement with respect to CGM American
Tax Free Fund
9E Powers of Attorney
9F Transfer Agency Agreement with respect to CGM Realty Fund
10 Opinion and consent of counsel with respect to shares of
CGM Mutual Fund, dated February 27, 1997
11 Consent of Independent Accountants
14 Forms of the CGM Retirement Plans
17 Financial Data Schedule
152768.c5
<PAGE>
EXHIBIT (1)
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
CGM TRUST
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts on this 23rd day of January, 1997 by the Trustees hereunder and
the holders of shares of beneficial interest issued hereunder and to be issued
hereunder as hereinafter provided:
WHEREAS this Trust has been formed to carry on the business of an
investment company;
WHEREAS the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth; and
WHEREAS the Trustees desire to amend and restate the Agreement and
Declaration of Trust dated January 16, 1986 (the "Original Trust Agreement") in
its entirety by adopting this Amended and Restated Agreement and Declaration of
Trust, which shall supersede the Original Trust Agreement and be the governing
instrument of the Trust from and after the date hereof.
NOW, THEREFORE, the Trustees hereby amend and restate the Original Trust
Agreement in its entirety and direct that this Amended and Restated Agreement
and Declaration of Trust be filed with the Secretary of The Commonwealth of
Massachusetts and with the City Clerk of the City of Boston and do hereby
declare that they will hold all cash, securities and other assets, which they
may from time to time acquire in any manner as Trustees hereunder IN TRUST to
manage and dispose of the same upon the following terms and conditions for the
pro rata benefit of the holders from time to time of Shares in this Trust as
hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. Name and Principal Office. This Trust shall be known as CGM
Trust and the Trustees shall conduct the business of the Trust under that name
or any other name or names as they may from time to time determine. The
principal office of the Trust shall be located at 222 Berkeley Street, Boston,
Massachusetts 02116 or at such other location as the Trustees may from time to
time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "Trust" refers to the Massachusetts business trust established
by this Agreement and Declaration of Trust, as amended or restated from time to
time;
(b) "Trustees" refers to the Trustees of the Trust named in Article
IV hereof or elected in accordance with such Article;
(c) "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust or in the Trust property belonging to
any Series of the Trust (as the context may require) shall be divided from time
to time;
(d) "Shareholder" means a record owner of Shares;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Commission" and "principal underwriter" shall have
the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust, as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time;
(i) "Series Company" refers to the form of registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in any
successor statutory provision; and
(j) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities and debt instruments.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in the
Trust shall at all times be divided into an unlimited number of Shares, without
par value. Subject to the provisions of Section 6 of this Article III, each
Share shall have voting rights as provided in Article V hereof, and holders of
the Shares of any Series shall be entitled to receive dividends, when and as
declared with respect thereto in the manner provided in Article VI, Section 1
hereof. No Share shall have any priority or preference over any other Share of
the same Series with respect to dividends or distributions upon termination of
the Trust or of such Series made pursuant to Article VIII, Section 4 hereof. All
dividends and distributions shall be made ratably among all Shareholders of a
particular Series from the assets belonging to such Series according to the
number of Shares of such Series held of record by such Shareholders on the
record date for any dividend or on the date of termination, as the case may be.
Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust. The Trustees may from
time to time divide or combine the Shares of any particular Series into a
greater or lesser number of Shares of that Series without thereby changing the
proportionate beneficial interest of the Shares of that Series in the assets
belonging to that Series or in any way affecting the rights of Shares of any
other Series.
Section 2. Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Series. No
certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the transfer of Shares of each Series and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders of each Series and as to the number of Shares of each Series
held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept investments
in the Trust from such persons and on such terms and for such consideration as
they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the same nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but entitles such representative
only to the rights of said deceased Shareholder under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholders, nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
Section 5. Power of Trustees to Change Provisions Relating to Shares.
Notwithstanding any other provisions of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as provided
elsewhere herein, the Trustees shall have the power to amend this Declaration of
Trust, at any time and from time to time, in such manner as the Trustees may
determine in their sole discretion, without the need for Shareholder action, so
as to add to, delete, replace or otherwise modify any provisions relating to the
Shares contained in this Declaration of Trust for the purpose of (i) responding
to or complying with any regulations, orders, rulings or interpretations of any
governmental agency or any laws, now or hereafter applicable to the Trust, or
(ii) designating and establishing Series in addition to the Series established
in Section 6 of this Article III; provided that before adopting any such
amendment without Shareholder approval the Trustees shall determine that it is
consistent with the fair and equitable treatment of all Shareholders. The
establishment and designation of any Series or class of Shares in addition to
the Series established and designated in Section 6 of this Article III shall be
effective upon the execution by a majority of the then Trustees of an amendment
to this Declaration of Trust, taking the form of a complete restatement or
otherwise, setting forth such establishment and designation and the relative
rights and preferences of such Series, or as otherwise provided in such
instrument.
Without limiting the generality of the foregoing, the Trustees may, for
the above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series or classes of Shares (in addition to
any Series or classes already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment therein as the
Trustees shall determine and reclassify any or all outstanding Shares as shares
of particular Series or classes in accordance with such eligibility
requirements;
(b) amend any of the provisions set forth in paragraphs (a) through
(i) of Section 6 of this Article III;
(c) combine one or more Series or classes of Shares into a single
Series or class on such terms and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment
in Shares of any Series or class, including without limitation the power to
provide for the issue of Shares of any Series or class in connection with any
merger or consolidation of the Trust with another trust or company or any
acquisition by the Trust of part or all of the assets of another trust or
company;
(e) change the designation of any Series or class of Shares;
(f) change the method of allocating dividends among the various
Series and classes of Shares;
(g) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series or
classes of Shares;
(h) specifically allocate assets to any or all Series or classes of
Shares or create one or more additional Series or classes of Shares which are
preferred over all other Series or classes of Shares in respect of assets
specifically allocated thereto or any dividends paid by the Trust with respect
to any net income, however determined, earned from the investment and
reinvestment of any assets so allocated or otherwise and provide for any special
voting or other rights with respect to such Series or classes.
Section 6. Establishment and Designation of Series. Without limiting the
authority of the Trustees set forth in Section 5, inter alia, to establish and
designate any further Series or classes or to modify the rights and preferences
of any Series, the Trustees hereby establish and designate four Series: "CGM
Mutual Fund" (formerly, "Original Series"), "CGM Fixed Income Fund" (formerly,
"CGM Bond Fund"), the "CGM American Tax Free Fund" and "CGM Realty Fund."
Shares of each Series established in this Section 6 shall have the
following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to that
Series for all purposes, subject only to the rights of creditors, and shall be
so recorded upon the books of account of the Trust. Such consideration, assets,
income, earnings, profits and proceeds thereof, from whatever source derived,
including, without limitation, any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are herein
referred to as "assets belonging to" that Series. In the event that there are
any assets, income, earnings, profits and proceeds thereof, funds or payments
which are not readily identifiable as belonging to any particular Series
(collectively "General Assets"), the Trustees shall allocate such General Assets
to, between or among any one or more of the Series established and designated
from time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable, and any General Asset so allocated to a
particular Series shall belong to that Series. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged solely with the liabilities of the Trust in
respect to that Series, expenses, costs, charges and reserves attributable to
that Series, and any general liabilities of the Trust which are not readily
identifiable as belonging to any particular Series but which are allocated and
charged by the Trustees to and among any one or more of the Series established
and designated from time to time in a manner and on such basis as the Trustees
in their sole discretion deem fair and equitable. The liabilities, expenses,
costs, charges, and reserves so charged to a Series are herein referred to as
"liabilities belonging to" that Series. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the holders of all Series for all purposes.
(c) Dividends, Distributions, Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration, including, without
limitation, Article VI, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
Series) with respect to, nor any redemption or repurchase of, the Shares of any
Series shall be effected by the Trust other than from the assets belonging to
such Series, nor shall any Shareholder of any particular Series otherwise have
any right or claim against the assets belonging to any other Series except to
the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series.
(d) Voting. Notwithstanding any of the other provisions of this
Declaration, including, without limitation, Section 1 of Article V, the
Shareholders of any particular Series shall not be entitled to vote on any
matters as to which such Series is not affected. On any matter submitted to a
vote of Shareholders, all Shares of the Trust then entitled to vote shall be
voted by individual Series, unless otherwise required by the 1940 Act or other
applicable law.
(e) Equality. All the Shares of each particular Series shall
represent an equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to that Series), and each Share of any
particular Series shall be equal to each other Share of that Series.
(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.
(h) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series unless otherwise required
by applicable law, to combine the assets and liabilities belonging to any two or
more Series into assets and liabilities belonging to a single series or class.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and to
rescind the establishment and designation thereof, such amendment to be effected
in the manner provided in Section 5 of this Article III.
Section 7. Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of his
or her being or having been a Shareholder of the Trust or of a particular Series
and not because of his or her acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Series of which he is a Shareholder or former Shareholder to
be held harmless from and indemnified against all loss and expense arising from
such liability.
Section 8. No Preemptive Rights. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
ARTICLE IV
The Trustees
Section 1. Election and Tenure. The Trustees hereof are Peter O. Brown,
700 Midtown Tower, Rochester, New York 14604, Nicholas J. Grant, 10 Leslie Road,
Winchester, Massachusetts 01890, G. Kenneth Heebner, 222 Berkeley Street,
Boston, Massachusetts 02116, Robert L. Kemp, 222 Berkeley Street, Boston,
Massachusetts 02116, Robert B. Kittredge 21 Sturdivant Avenue, Cumberland
Foreside, Maine 04110, Laurens MacLure, 183 Sohier Street, Cohassett,
Massachusetts 02025, James Van Dyke Quereau, Jr., 610 W. Germantown Pike - Suite
300, Plymouth Meeting, Pennsylvania 19462 and J. Baur Whittlesey, 133 Ridgeview
Circle, Princeton, New Jersey 08540. The Trustees may fix the number of
Trustees, fill vacancies in the Trustees, including vacancies arising from an
increase in the number of Trustees, or remove Trustees with or without cause.
Each Trustee shall serve during the continued lifetime of the Trust until he
dies, resigns or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and until the election
and qualification of his successor. Any Trustee may resign at any time by
written instrument signed by him and delivered to any officer of the Trust or to
a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee resigning
and no Trustee removed shall have any right to any compensation for any period
following his resignation or removal, or any right to damages on account of such
removal. The Shareholders may fix the number of Trustees and elect Trustees at
any meeting of Shareholders called by the Trustees for that purpose and to the
extent required by applicable law, including paragraphs (a) and (b) of Section
16 of the 1940 Act.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of the Trustees, or
any of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and they shall have
all powers necessary or convenient to carry out that responsibility including
the power to engage in securities transactions of all kinds on behalf of the
Trust. Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the Shareholders; they may
fill vacancies in or remove from their number (including any vacancies created
by an increase in the number of Trustees); they may remove from their number
with or without cause; they may elect and remove such officers and appoint and
terminate such agents as they consider appropriate; they may appoint from their
own number and terminate one or more committees consisting of two or more
Trustees which may exercise the powers and authority of the Trustees to the
extent that the Trustees determine; they may employ one or more custodians of
the assets of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a system or
systems for the central handling of securities or with a Federal Reserve Bank,
retain a transfer agent or a shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the Trust or to any
such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease,
or write options with respect to or otherwise deal in any property rights
relating to any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of
or against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(i) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(j) To borrow funds or other property;
(k) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
liability; and
(m) To pay pensions as deemed appropriate by the Trustees and to
adopt, establish and carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive and benefit plans,
trusts and provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. The Trustees shall
not be required to obtain any court order to deal with any assets of the Trust
or take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are authorized
to pay or cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or arising in connection
with the Trust, or in connection with the management thereof, including but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditor, counsel, custodian, transfer agent, shareholder
servicing agent, and such other agents or independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer, shareholder servicing
or similar agent, an amount fixed from time to time by the Trustees, by setting
off such charges due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trustees.
Section 7. Advisory, Management and Distribution Contracts. Subject to
such requirements and restrictions as may be set forth in the By-Laws, the
Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory and/or management services for the Trust or for any Series
with Capital Growth Management Limited Partnership or any other corporation,
trust, association or other organization (the "Manager"); and any such contract
may contain such other terms as the Trustees may determine, including without
limitation, authority for a Manager to determine from time to time without prior
consultation with the Trustees what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments. The Trustees may
also, at any time and from time to time, contract with the Manager or any other
corporation, trust, association or other organization, appointing it exclusive
or nonexclusive distributor or principal underwriter for the Shares, every such
contract to comply with such requirements and restrictions as may be set forth
in the By-Laws; and any such contract may contain such other terms as the
Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, distributor or affiliate or agent of or for any
corporation, trust, association, or other organization, or of or for any parent
or affiliate of any organization, with which an advisory or management contract,
or principal underwriter's or distributor's contract, or transfer, shareholder
servicing or other agency contract may have been or may hereafter be made, or
that any such organization, or any parent or affiliate thereof, is a Shareholder
or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization
with which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's contract, or
transfer, shareholder servicing or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article IV, Section 1, (ii) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Article VIII, Section 8, (iii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
(iv) with respect to the termination of the Trust or any Series to the extent
and as provided in Article VIII, Section 4, (v) to remove Trustees from office
to the extent and as provided in Article V, Section 7 and (vi) with respect to
such additional matters relating to the Trust as may be required by this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. At any time when no Shares of a
Series are outstanding the Trustees may exercise all rights of Shareholders of
that Series with respect to matters affecting that Series and may with respect
to that Series take any action required by law, this Declaration of Trust or the
By-Laws to be taken by the Shareholders.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may be
called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least twenty days before
such meeting, postage prepaid, stating the time and place of the meeting, to
each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by law, by the By-Laws or by this Declaration of Trust, 40% of the
Shares entitled to vote shall constitute a quorum at a Shareholders' meeting.
When any one or more Series is to vote as a single class separate from any other
Shares which are to vote on the same matters as a separate class or classes, 40%
of the Shares of each such class entitled to vote shall constitute a quorum at a
Shareholder's meeting of that class. Any meeting of Shareholders may be
adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original meeting
without further notice. When a quorum is present at any meeting, a majority of
the Shares voted shall decide any questions and a plurality shall elect a
Trustee, except when a larger vote is required by any provision of this
Declaration of Trust or the By-Laws or by law. If any question on which the
Shareholders are entitled to vote would adversely affect the rights of any
Series or class of Shares, the vote of a majority (or such larger vote as is
required as aforesaid) of the Shares of such Series or class which are entitled
to vote, voting separately, shall also be required to decide such question.
Section 4. Action by Written Consent. Any action taken by Shareholders may
be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the
By-Laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series or class entitled to vote separately on the matter consent
to the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the Shareholders
of any Series who are entitled to vote or act at any meeting or any adjournment
thereof, the Trustees may from time to time fix a time, which shall be not more
than 90 days before the date of any meeting of Shareholders, as the record date
for determining the Shareholders of such Series having the right to notice of
and to vote at such meeting and any adjournment thereof, and in such case only
Shareholders of record on such record date shall have such right,
notwithstanding any transfer of shares on the books of the Trust after the
record date. For the purpose of determining the Shareholders of any Series who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a date, which shall be before the date
for the payment of such dividend or such other payment, as the record date for
determining the Shareholders of such Series having the right to receive such
dividend or distribution. Without fixing a record date the Trustees may for
voting and/or distribution purposes close the register or transfer books for one
or more Series for all or any part of the period between a record date and a
meeting of shareholders or the payment of a distribution. Nothing in this
section shall be construed as precluding the Trustees from setting different
record dates for different Series.
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
Section 7. Removal of Trustees. No natural person shall serve as Trustee
after the holders of record of not less than two-thirds of the outstanding
Shares have declared that such Trustee be removed from that office either by
declaration in writing filed with the Trust's custodian or by votes cast in
person or by proxy at a meeting called for the purpose. The Trustees shall
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee when requested in writing so to do by the
record holders of not less than 10 per centum of the outstanding Shares.
Whenever ten or more shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate Shares having a net asset value of at least 1 per centum of the
outstanding Shares shall apply to the Trustees in writing, stating that they
wish to communicate with other shareholders with a view to obtaining signatures
to a request for a meeting pursuant to this Section and accompanied by a form of
communication and request which they wish to transmit, the Trustees shall within
five business days after receipt of such application either (a) afford to such
applicants access to a list of the names and addresses of all shareholders as
recorded on the books of the Trust; or (b) inform such applicants as to the
approximate cost of mailing to them the proposed communication and form of
request. If the Trustees elect to follow the course specified in clause (b), the
Trustees, upon the written request of such applicants, accompanied by a tender
of the material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all shareholders of record at
their addresses as recorded on the books of the Trust, unless within five
business days after such tender the Trustees shall mail to such applicants and
file with the Commission, together with a copy of the material proposed to be
mailed, a written statement signed by at least a majority of the Trustees to the
effect that in their opinion either such material contains untrue statements of
fact or omits to state facts necessary to make the statements contained therein
not misleading, or would be in violation of applicable law, and specifying the
basis of such opinion. If the Commission shall enter an order refusing to
sustain any of the objections specified in the written statement so filed, or
if, after the entry of an order sustaining one or more of such objections, the
Commission shall find, after notice and opportunity for hearing, that all
objections so sustained have been met, and shall enter an order so declaring,
the Trustees shall mail copies of such material to all shareholders with
reasonable promptness after the entry of such order and the renewal of such
tender.
ARTICLE VI
Net Income, Distributions, and Redemptions and Repurchases
Section 1. Distributions of Net Income. The Trustees shall each year, or
more frequently if they so determine in their sole discretion, distribute to the
Shareholders of each Series, in shares of that Series, cash or otherwise, an
amount approximately equal to the net income attributable to the assets
belonging to such Series and may from time to time distribute to the
Shareholders of each Series, in shares of that Series, cash or otherwise, such
additional amounts, but only from the assets belonging to such Series, as they
may authorize. All dividends and distributions on Shares of a particular Series
shall be distributed pro rata to the holders of that Series in proportion to the
number of Shares of that Series held by such holders and recorded on the books
of the Trust at the date and time of record established for that payment of such
dividend or distributions.
The manner of determining net income, income, asset values, capital gains,
expenses, liabilities and reserves of any Series may from time to time be
altered as necessary or desirable in the judgment of the Trustees to conform
such manner of determination to any other method prescribed or permitted by
applicable law. Net income shall be determined by the Trustees or by such person
as they may authorize at the times and in the manner provided in the By-Laws.
Determinations of net income of any Series and determination of income, asset
value, capital gains, expenses, and liabilities made by the Trustees, or by such
person as they may authorize, in good faith, shall be binding on all parties
concerned. The foregoing sentence shall not be construed to protect any Trustee,
officer or agent of the Trust against any liability to the Trust 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.
If, for any reason, the net income of any Series determined at any time is
a negative amount, the pro rata share of such negative amount allocable to each
Shareholder of such Series shall constitute a liability of such Shareholder to
that Series which shall be paid out of such Shareholder's account at such times
and in such manner as the Trustees may from time to time determine (x) out of
the accrued dividend account of such Shareholder, (y) by reducing the number of
Shares of that Series in the account of such Shareholder, or (z) otherwise.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer and the certificate, if any, for such Shares
together with a request directed to the Trust or a person designated by the
Trust that the Trust purchase such Shares or in accordance with such other
procedures for redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof, as determined in
accordance with the By-Laws, next determined. Payment for said Shares shall be
made by the Trust to the Shareholder within seven days after the date on which
the request is made. The obligation set forth in this Section 2 is subject to
the provision that in the event that any time the New York Stock Exchange is
closed for other than weekends or holidays, or if permitted by the rules of the
Commission during periods when trading on the Exchange is restricted or during
any emergency which makes it impracticable for the Trust to dispose of the
investments of the applicable Series or to determine fairly the value of the net
assets belonging to such Series or during any other period permitted by order of
the Commission for the protection of investors, such obligations may be
suspended or postponed by the Trustees. The Trust may also purchase or
repurchase Shares at a price not exceeding the net asset value of such Shares in
effect when the purchase or repurchase or any contract to purchase or repurchase
is made.
The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest of
the remaining Shareholders of the Series the Shares of which are being redeemed.
In making any such payment wholly or partly in kind, the Trust shall, so far as
may be practicable, deliver assets which approximate the diversification of all
of the assets belonging at the time to the Series the Shares of which are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any corporation or other person
in transferring securities selected for delivery as all or part of any payment
in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in Section 1 of this Article VI: (i) if
at such time such Shareholder owns Shares of any Series having an aggregate net
asset value of less than an amount determined from time to time by the Trustees;
or (ii) to the extent that such Shareholder owns Shares equal to or in excess of
a percentage determined from time to time by the Trustees of the outstanding
Shares of the Trust or of any Series.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be responsible
or liable in any event for any neglect or wrong-doing of any officer, agent,
employee, Manager or principal underwriter of the Trust, nor shall any Trustee
be responsible for the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability 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.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice. All
persons extending credit to, contracting with or having any claim against the
Trust or any Series shall look only to the assets of the Trust, or, to the
extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series, only to the assets belonging to
the relevant Series, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee against
any liability to which such Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Trust by the Trustees, by any officers or officer or
otherwise shall give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite that the same
was executed or made by or on behalf of the Trust or by them as Trustee or
Trustees or as officers or officer or otherwise and not individually and that
the obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust or upon the assets belonging to the Series for the benefit of which
the Trustees have caused the note, bond, contract, instrument, certificate or
undertaking to be made or issued, and may contain such further recital as he or
they may deem appropriate, but the omission of any such recital shall not
operate to bind any Trustee or Trustees or officers or officer or Shareholders
or any other person individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust or Series. Unless terminated as provided
herein, the Trust shall continue without limitation of time. The Trust may be
terminated at any time by vote of at least 66-2/3% of the Shares of each Series
entitled to vote and voting separately by Series or by the Trustees by written
notice to the Shareholders. Any Series may be terminated at any time by vote of
at least 66-2/3% of the Shares of that Series or by the Trustees by written
notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be), after
paying or otherwise providing for all charges, taxes, expenses and liabilities
belonging, severally, to each Series (or the applicable Series, as the case may
be), whether due or accrued or anticipated as may be determined by the Trustees,
the Trust shall in accordance with such procedures as the Trustees consider
appropriate reduce the remaining assets belonging, severally, to each Series (or
the applicable Series, as the case may be), to distributable form in cash or
shares or other securities, or any combination thereof, and distribute the
proceeds belonging to each Series (or the applicable Series, as the case may
be), to the Shareholders of that Series, as a Series, ratably according to the
number of Shares of that Series held by the several Shareholders on the date of
termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust to
be merged into or consolidated with another trust or company or its shares
exchanged under or pursuant to any state or federal statute, if any, or
otherwise to the extent permitted by law, if such merger or consolidation or
share exchange has been authorized by vote of a majority of the outstanding
Shares; provided that in all respects not governed by statute or applicable law,
the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation.
Section 6. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made and as to any matters in connection with
the Trust hereunder; and, with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder", shall be deemed to refer to this instrument as amended
or affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Section 7. Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then Trustees when
authorized so to do by vote of a majority of the Shares entitled to vote, except
that amendments described in Article III, Section 5 hereof or having the purpose
of changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision contained herein shall not require authorization by Shareholder vote.
IN WITNESS WHEREOF, all of the Trustees as aforesaid do hereto set their
hands this 23rd day of January, 1997.
/s/ Peter O. Brown /s/ Robert B. Kittredge
- -------------------------------------- --------------------------------------
Peter O. Brown Robert B. Kittredge
/s/ Nicholas J. Grant /s/ Laurens MacLure
- -------------------------------------- --------------------------------------
Nicholas J. Grant Laurens MacLure
/s/ G. Kenneth Heebner /s/ James Van Dyke Quereau, Jr.
- -------------------------------------- --------------------------------------
G. Kenneth Heebner James Van Dyke Quereau, Jr.
/s/ Robert L. Kemp /s/ J. Baur Whittlesey
- -------------------------------------- --------------------------------------
Robert L. Kemp J. Baur Whittlesey
<PAGE>
EXHIBIT (2)
BY-LAWS
OF
CGM TRUST
ARTICLE 1
Agreement and Declaration
of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time amended or restated
(the "Declaration of Trust"), of CGM Trust (the "Trust"), the Massachusetts
business trust established by the Declaration of Trust.
1.2 Principal Office of the Trust. The principal office of the Trust shall
be located in Boston, Massachusetts.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held, at any
time and at any place designated in the call of the meeting, when called by the
Chairman of the Board, if any, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Clerk or
an Assistant Clerk or by the officer or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his usual
or last known business or residence address or to give notice to him in person
or by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by him before or after the meeting, is filed with the records of the meeting, or
to any Trustee who attends the meeting without protesting prior thereto or at
its commencement the lack of notice to him. Neither notice of a meeting nor a
waiver of a notice need specify the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees then
in office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
2.5 Action by Vote. When a quorum is present at any meeting, a majority of
Trustees present may take any action, except when a larger vote is expressly
required by law, by the Declaration of Trust or by these By-Laws.
2.6 Action by Writing. Except as required by law, any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting if a majority of the Trustees (or such larger proportion thereof as
shall be required by any express provision of the Declaration of Trust or these
By-Laws) consent to the action in writing and such written consents are filed
with the records of the meetings of Trustees. Such consent shall be treated for
all purposes as a vote taken at a meeting of Trustees.
2.7 Presence through Communications Equipment. Except as required by law,
the Trustees may participate in a meeting of Trustees by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Clerk, and such other officers, if any, as the
Trustees from time to time may in their discretion elect. The Trust may also
have such agents as the Trustees from time to time may in their discretion
appoint. If a Chairman of the Board is elected, he shall be a Trustee and may
but need not be a Shareholder; and any other officer may be but none need be a
Trustee or Shareholder. Any two or more offices may be held by the same person.
3.2 Election and Tenure. The President, the Treasurer, the Clerk and such
other officers as the Trustees may in their discretion from time to time elect
shall each be elected by the Trustees to serve until his successor is elected or
qualified, or until he sooner dies, resigns, is removed or becomes disqualified.
Each officer shall hold office and each agent shall retain authority at the
pleasure of the Trustees.
3.3 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.4 President and Vice Presidents. The President shall have the duties and
powers specified in these By-Laws and shall have such other duties and powers as
may be determined by the Trustees.
Any Vice Presidents shall have such duties and powers as shall be designated
from time to time by the Trustees.
3.5 Chief Executive Officer. The Chief Executive Officer of the Trust
shall be the Chairman of the Board, the President or such other officer as is
designated by the Trustees and shall, subject to the control of the Trustees,
have general charge and supervision of the business of the Trust and, except as
the Trustees shall otherwise determine, preside at all meetings of the
stockholders and of the Trustees. If no such designation is made, the President
shall be the Chief Executive Officer.
3.6 Chairman of the Board. If a Chairman of the Board of Trustees is
elected, he shall have the duties and powers specified in these By-Laws and
shall have such other duties and powers as may be determined by the Trustees.
3.7 Treasurer. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.8 Clerk. The Clerk shall record all proceedings of the Shareholders and
the Trustees in books to be kept therefor, which books or a copy thereof shall
be kept at the principal office of the Trust. In the absence of the Clerk from
any meeting of the Shareholders or Trustees, an assistant Clerk, or if there be
none or if he is absent, a temporary clerk chosen at such meeting shall record
the proceedings thereof in the aforesaid books.
3.9 Resignations and Removals. Any officer may resign at any time by
written instrument signed by him and delivered to the President or the Clerk or
to a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. The Trustees may remove any
officer with or without cause. Except to the extent expressly provided in a
written agreement with the Trust, no officer resigning and no officer removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal.
ARTICLE 4
Indemnification
4.1 Trustees, Officers, etc. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of any alleged act or
omission as a Trustee or officer or by reason of his being or having been such a
Trustee or officer, except with respect to any matter as to which such Covered
Person shall have been finally adjudicated in any such action, suit or other
proceeding not to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interest of the Trust and except that no
Covered Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person, may be paid from
time to time by the Trust in advance of the final disposition of any such
action, suit or proceeding on the condition that the amounts so paid shall be
repaid to the Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article.
4.2 Compromise Payment. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 4.1 above, pursuant to
a consent decree or otherwise, no such indemnification either for said payment
or for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that it involved
such indemnification, (a) by a disinterested majority of the Trustees then in
office; or (b) by a majority of the disinterested Trustees then in office; or
(c) by any disinterested person or persons to whom the question may be referred
by the Trustees, provided that in the case of approval pursuant to clause (b) or
(c) there has been obtained an opinion in writing of independent legal counsel
to the effect that such Covered Person appears to have acted in good faith in
the reasonable belief that his or her action was in the best interests of the
Trust and that such indemnification would not protect such person against any
liability to the Trust or its Shareholders to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of office; or (d) by
vote of Shareholders holding a majority of the Shares entitled to vote thereon,
exclusive of any Shares beneficially owned by any interested Covered Person.
Approval by the Trustees pursuant to clause (a) or (b) or by any disinterested
person or persons pursuant to clause (c) of this Section shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
4.3 Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article 4, the term "Covered
Person" shall include such person's heirs, executors and administrators; an
"interested Covered Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding on the same
or similar grounds is then or has been pending; and a "disinterested Trustee" or
"disinterested person" is a Trustee or a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers shall render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as from time to time otherwise provided by the
Trustees, the fiscal year of the Trust shall end on December 31 in each year.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced die with
the word "Massachusetts," together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all checks, notes, drafts
and other obligations and all registration statements and amendments thereto and
all applications and amendments thereto to the Securities and Exchange
Commission shall be signed by the Chairman, if any, the President, any Vice
President or the Treasurer or any of such other officers or agents as shall be
designated for that purpose by a vote of the Trustees.
ARTICLE 9
Net Asset Value
9.1 General. The net asset value of a share of beneficial interest of the
Trust shall be determined by or under authority of the board of trustees in
accordance with the Declaration of Trust as of the close of trading on the New
York Stock Exchange on each day upon which such Exchange is open for
unrestricted trading and at such other times as the board of trustees shall
designate.
ARTICLE 10
Amendments to the By-Laws
10.1 General. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees.
Adopted on January 23, 1997
<PAGE>
EXHIBIT (4)(A)
Number Shares
XXXXX XXXXXX
CGM TRUST
CGM MUTUAL FUND
This is to certify that
Is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP
......................................................................... shares
of fully paid and non-assessable shares, without par value, of beneficial
interest of the above referenced series of CGM Trust, the said shares being
issued, received and held under and subject to the terms and provisions of the
Amended and Restated Agreement and Declaration of Trust dated January 23, 1997,
and all amendments thereto (the "Agreement and Declaration of Trust"), copies of
which are on file with the Secretary of State of the Commonwealth of
Massachusetts. The said owner by accepting this certificate agrees to and is
bound by all of the said terms and provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by attorney upon
surrender of this certificate to the Trustees properly endorsed for transfer.
This certificate is executed on behalf of the Trustees of the Trust, as
Trustees, and not individually, and the obligations hereof are not binding upon
any of the Trustees, officers or shareholders of the Trust individually but are
binding only upon the assets and property of the Trust. In addition, the rights,
obligations and remedies represented by this certificate constitute rights,
obligations and remedies only with respect to the above-referenced series and
the assets thereof, and no other series of CGM Trust shall have any rights,
obligations or remedies with respect hereto. This certificate is not valid until
countersigned by the Transfer Agent.
IN WITNESS WHEREOF, CGM Trust has caused facsimiles of the signatures of
its duly authorized officers to be hereunto affixed.
Dated
By
/s/ Frank N. Strauss /s/ Robert L. Kemp
- -------------------------------- --------------------------------
Frank N. Strauss Robert L. Kemp
TREASURER PRESIDENT
KC
<PAGE>
CGM TRUST
Under certain circumstances and in accordance with its Agreement and
Declaration of Trust, the Trust has the right, at its option, to redeem shares
held in certain shareholder accounts. All shares are subject to the provisions
of the Trust's Agreement and Declaration of Trust and By-Laws, as amended from
time to time.
SEE CURRENT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST
FOR FURTHER INFORMATION CONCERNING REDEMPTION OF SHARES.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UGMA / TRANSFERS
UTMA
____________ Custodian for ______________
(Cust) (Minor)
under Uniform Gifts/Transfers to Minors Act of ____________
(State)
Additional abbreviations may also be used though not in the above list.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------------------
- ---------------------------------------------
FOR VALUE RECEIVED ..................hereby sell, assign, and transfer unto
................................................................................
................................................................................
................................................................................
................................................................................
..........................................................................Shares
of the _________________ of CGM Trust represented by the within certificate,
and do irrevocably constitute and appoint ......................................
Attorney to transfer the said shares on the books of CGM Trust with full power
of substitution in the premises.
Dated.......................
Signature(s)........................................
................................................
NOTE: The Signature to this Assignment must
correspond with the name as written upon the
face of this Certificate in every particular,
without alteration or enlargement or any change
whatever. (If more than one owner, all must
sign. Persons acting in a fiduciary capacity or
on behalf of a Corporation, Partnership or Trust
must specify, in full, the capacity in which
they are signing.)
Signature Guaranteed:
....................................................
Signature(s) must be guaranteed by a bank, a member
firm of a national stock exchange, or other eligible
guarantor institution in accordance with procedures
established by the Trust's Transfer Agent.
<PAGE>
EXHIBIT (4)(B)
Number Shares
XXXXX XXXXXX
CGM TRUST
CGM FIXED INCOME FUND
This is to certify that
Is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP
......................................................................... shares
of fully paid and non-assessable shares, without par value, of beneficial
interest of the above referenced series of CGM Trust, the said shares being
issued, received and held under and subject to the terms and provisions of the
Amended and Restated Agreement and Declaration of Trust dated January 23, 1997,
and all amendments thereto (the "Agreement and Declaration of Trust"), copies of
which are on file with the Secretary of State of the Commonwealth of
Massachusetts. The said owner by accepting this certificate agrees to and is
bound by all of the said terms and provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by attorney upon
surrender of this certificate to the Trustees properly endorsed for transfer.
This certificate is executed on behalf of the Trustees of the Trust, as
Trustees, and not individually, and the obligations hereof are not binding upon
any of the Trustees, officers or shareholders of the Trust individually but are
binding only upon the assets and property of the Trust. In addition, the rights,
obligations and remedies represented by this certificate constitute rights,
obligations and remedies only with respect to the above-referenced series and
the assets thereof, and no other series of CGM Trust shall have any rights,
obligations or remedies with respect hereto. This certificate is not valid until
countersigned by the Transfer Agent.
IN WITNESS WHEREOF, CGM Trust has caused facsimiles of the signatures of
its duly authorized officers to be hereunto affixed.
Dated
By
/s/ Frank N. Strauss /s/ Robert L. Kemp
- -------------------------------- --------------------------------
Frank N. Strauss Robert L. Kemp
TREASURER PRESIDENT
KC
<PAGE>
CGM TRUST
Under certain circumstances and in accordance with its Agreement and
Declaration of Trust, the Trust has the right, at its option, to redeem shares
held in certain shareholder accounts. All shares are subject to the provisions
of the Trust's Agreement and Declaration of Trust and By-Laws, as amended from
time to time.
SEE CURRENT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST
FOR FURTHER INFORMATION CONCERNING REDEMPTION OF SHARES.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UGMA / TRANSFERS
UTMA
____________ Custodian for ______________
(Cust) (Minor)
under Uniform Gifts/Transfers to Minors Act of ____________
(State)
Additional abbreviations may also be used though not in the above list.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------------------
- ---------------------------------------------
FOR VALUE RECEIVED ..................hereby sell, assign, and transfer unto
................................................................................
................................................................................
................................................................................
................................................................................
..........................................................................Shares
of the _________________ of CGM Trust represented by the within certificate, and
do irrevocably constitute and appoint ..........................................
Attorney to transfer the said shares on the books of CGM Trust with full power
of substitution in the premises.
Dated.......................
Signature(s)........................................
................................................
NOTE: The Signature to this Assignment must
correspond with the name as written upon the
face of this Certificate in every particular,
without alteration or enlargement or any change
whatever. (If more than one owner, all must
sign. Persons acting in a fiduciary capacity or
on behalf of a Corporation, Partnership or Trust
must specify, in full, the capacity in which
they are signing.)
Signature Guaranteed:
....................................................
Signature(s) must be guaranteed by a bank, a member
firm of a national stock exchange, or other eligible
guarantor institution in accordance with procedures
established by the Trust's Transfer Agent.
<PAGE>
EXHIBIT (4)(C)
Number Shares
XXXXX XXXXXX
CGM TRUST
CGM AMERICAN TAX FREE FUND
This is to certify that
Is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP
......................................................................... shares
of fully paid and non-assessable shares, without par value, of beneficial
interest of the above referenced series of CGM Trust, the said shares being
issued, received and held under and subject to the terms and provisions of the
Amended and Restated Agreement and Declaration of Trust dated January 23, 1997,
and all amendments thereto (the "Agreement and Declaration of Trust"), copies of
which are on file with the Secretary of State of the Commonwealth of
Massachusetts. The said owner by accepting this certificate agrees to and is
bound by all of the said terms and provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by attorney upon
surrender of this certificate to the Trustees properly endorsed for transfer.
This certificate is executed on behalf of the Trustees of the Trust, as
Trustees, and not individually, and the obligations hereof are not binding upon
any of the Trustees, officers or shareholders of the Trust individually but are
binding only upon the assets and property of the Trust. In addition, the rights,
obligations and remedies represented by this certificate constitute rights,
obligations and remedies only with respect to the above-referenced series and
the assets thereof, and no other series of CGM Trust shall have any rights,
obligations or remedies with respect hereto. This certificate is not valid until
countersigned by the Transfer Agent.
IN WITNESS WHEREOF, CGM Trust has caused facsimiles of the signatures of
its duly authorized officers to be hereunto affixed.
Dated
By
/s/ Frank N. Strauss /s/ Robert L. Kemp
- -------------------------------- --------------------------------
Frank N. Strauss Robert L. Kemp
TREASURER PRESIDENT
KC
<PAGE>
CGM TRUST
Under certain circumstances and in accordance with its Agreement and
Declaration of Trust, the Trust has the right, at its option, to redeem shares
held in certain shareholder accounts. All shares are subject to the provisions
of the Trust's Agreement and Declaration of Trust and By-Laws, as amended from
time to time.
SEE CURRENT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST
FOR FURTHER INFORMATION CONCERNING REDEMPTION OF SHARES.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UGMA / TRANSFERS
UTMA
____________ Custodian for ______________
(Cust) (Minor)
under Uniform Gifts/Transfers to Minors Act of ____________
(State)
Additional abbreviations may also be used though not in the above list.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------------------
- ---------------------------------------------
FOR VALUE RECEIVED ..................hereby sell, assign, and transfer unto
................................................................................
................................................................................
................................................................................
................................................................................
..........................................................................Shares
of the _________________ of CGM Trust represented by the within certificate, and
do irrevocably constitute and appoint ..........................................
Attorney to transfer the said shares on the books of CGM Trust with full power
of substitution in the premises.
Dated.......................
Signature(s)........................................
................................................
NOTE: The Signature to this Assignment must
correspond with the name as written upon the
face of this Certificate in every particular,
without alteration or enlargement or any change
whatever. (If more than one owner, all must
sign. Persons acting in a fiduciary capacity or
on behalf of a Corporation, Partnership or Trust
must specify, in full, the capacity in which
they are signing.)
Signature Guranteed:
....................................................
Signature(s) must be guaranteed by a bank, a member
firm of a national stock exchange, or other eligible
guarantor institution in accordance with procedures
established by the Trust's Transfer Agent.
<PAGE>
EXHIBIT (4)(D)
Number Shares
XXXXX XXXXXX
CGM TRUST
CGM REALTY FUND
This is to certify that
Is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP
......................................................................... shares
of fully paid and non-assessable shares, without par value, of beneficial
interest of the above referenced series of CGM Trust, the said shares being
issued, received and held under and subject to the terms and provisions of the
Amended and Restated Agreement and Declaration of Trust dated January 23, 1997,
and all amendments thereto (the "Agreement and Declaration of Trust"), copies of
which are on file with the Secretary of State of the Commonwealth of
Massachusetts. The said owner by accepting this certificate agrees to and is
bound by all of the said terms and provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by attorney upon
surrender of this certificate to the Trustees properly endorsed for transfer.
This certificate is executed on behalf of the Trustees of the Trust, as
Trustees, and not individually, and the obligations hereof are not binding upon
any of the Trustees, officers or shareholders of the Trust individually but are
binding only upon the assets and property of the Trust. In addition, the rights,
obligations and remedies represented by this certificate constitute rights,
obligations and remedies only with respect to the above-referenced series and
the assets thereof, and no other series of CGM Trust shall have any rights,
obligations or remedies with respect hereto. This certificate is not valid until
countersigned by the Transfer Agent.
IN WITNESS WHEREOF, CGM Trust has caused facsimiles of the signatures of
its duly authorized officers to be hereunto affixed.
Dated
By
/s/ Frank N. Strauss /s/ Robert L. Kemp
- -------------------------------- --------------------------------
Frank N. Strauss Robert L. Kemp
TREASURER PRESIDENT
KC
<PAGE>
CGM TRUST
Under certain circumstances and in accordance with its Agreement and
Declaration of Trust, the Trust has the right, at its option, to redeem shares
held in certain shareholder accounts. All shares are subject to the provisions
of the Trust's Agreement and Declaration of Trust and By-Laws, as amended from
time to time.
SEE CURRENT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST
FOR FURTHER INFORMATION CONCERNING REDEMPTION OF SHARES.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UGMA / TRANSFERS
UTMA
____________ Custodian for ______________
(Cust) (Minor)
under Uniform Gifts/Transfers to Minors Act of ____________
(State)
Additional abbreviations may also be used though not in the above list.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------------------
- ---------------------------------------------
FOR VALUE RECEIVED ..................hereby sell, assign, and transfer unto
................................................................................
................................................................................
................................................................................
................................................................................
..........................................................................Shares
of the _________________ of CGM Trust represented by the within certificate, and
do irrevocably constitute and appoint ..........................................
Attorney to transfer the said shares on the books of CGM Trust with full power
of substitution in the premises.
Dated.......................
Signature(s)........................................
................................................
NOTE: The Signature to this Assignment must
correspond with the name as written upon the
face of this Certificate in every particular,
without alteration or enlargement or any change
whatever. (If more than one owner, all must
sign. Persons acting in a fiduciary capacity or
on behalf of a Corporation, Partnership or Trust
must specify, in full, the capacity in which
they are signing.)
Signature Guaranteed:
....................................................
Signature(s) must be guaranteed by a bank, a member
firm of a national stock exchange, or other eligible
guarantor institution in accordance with procedures
established by the Trust's Transfer Agent.
<PAGE>
EXHIBIT (5)(A)
ADVISORY AGREEMENT
AGREEMENT made this 13th day of December, 1996 by and between CGM
TRUST, a Massachusetts business trust (the "Trust"), with respect to its CGM
Mutual Fund series (the "Series"), and CAPITAL GROWTH MANAGEMENT LIMITED
PARTNERSHIP, a Massachusetts partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Series;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Trust and the Adviser agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Series and to perform the other services
herein set forth, subject to the supervision of the Board of Trustees of the
Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and
financial data and information and undertake such additional investment
research as it shall believe necessary or advisable for the management
of the investment and reinvestment of the assets belonging to the
Series in accordance with the Series, investment objective and
policies;
(b) take such steps as are necessary to implement the
investment policies of the Series by purchase and sale of securities,
including the placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Trust acting pursuant
to like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the bank selected to perform such services and
exclusive of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or to
reimburse the Trust for:
(a) any of the costs of printing and distributing the items
referred to in subsection (m) of this section 5, except as otherwise
provided in any agreement between the Trust and its principal
underwriter in effect from time to time relating to distribution of
shares of the Series;
(b) compensation of Trustees of the Trust who are not
directors, officers, partners or employees of the Adviser or of any
affiliated person (other than a registered investment company) of the
Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the Custodian appointed by the
Trust for custodial services;
(e) charges and expenses of independent accountants retained
by the Trust;
(f) charges and expenses of any transfer agents, paying
agents, plan agents and registrars appointed by the Trust;
(g) brokers, commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to
which the Trust is a party;
(h) taxes and fees payable by the Trust to Federal, State or
other governmental agencies;
(i) the cost of certificates representing shares of the
Series;
(j) expenses of meetings of shareholders and Trustees of the
Trust;
(k) charges and expenses of legal counsel retained by the
Trust;
(l) interest, including interest on borrowings by the Trust;
(m) the cost of services, including services of counsel,
required in connection with the preparation of the Trust's registration
statements and prospectuses with respect to shares of the Series,
including amendments and revisions thereto, annual, semiannual and
other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders of the Trust or regulatory
authorities, to the extent that any such materials relate to the Series
or to the shareholders thereof; and
(n) the Trust's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses with
respect to the Series.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rates of the corresponding levels of the
Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
0.90% of the first $500,000,000;
0.80% of the next $500,000,000; and
0.75% of such assets in excess of $1,000,000,000.
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Trust may from time to time determine and specify in writing to the Adviser. The
Adviser hereby acknowledges that the Trust's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes,
portfolio brokerage commissions and interest) for any fiscal year exceeds the
lowest applicable percentage of average net assets limitation prescribed by any
state in which shares of the Series are qualified for sale, the total fee
otherwise due the Adviser for such fiscal year pursuant to section 7 hereof
shall be reduced by the amount of such excess belonging to the Series, and, if,
after giving effect to such reduction, the total of all ordinary business
expenses continues to exceed any such applicable limitation, the Adviser shall
pay any such continuing excess belonging to the Series; provided, however, that
the Adviser will not reduce its fees nor pay any such expenses to an extent or
under circumstances which would result in the inability of the Series to qualify
as a regulated investment company under the Internal Revenue Code. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Trust shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Trust or belonging to the Series are
to be calculated, that figure shall be calculated by reference to the average
daily net assets of the Trust or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. The Adviser consents to the use by the Trust of the names "CGM
Trust" and "CGM Mutual Fund," or other names embodying the words "Capital Growth
Management" or "CGM" in such forms as the Adviser shall in writing approve, but
only on condition that so long as this Agreement shall remain in force the Trust
shall fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No such name
shall be used by the Trust at any time or in any place for any purposes or under
any conditions except as in this paragraph provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Trust, it will, at the request of the
Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
"Capital Growth Management" or "CGM" and will not thereafter transact any
business in a name containing "Capital Growth Management" or "CGM" in any form
or combination whatsoever, or designate itself as the same business trust as or
successor to a business trust of such name, or otherwise use the name "Capital
Growth Management" or "CGM" or any other reference to the Adviser. Such
covenants on the part of the Trust shall be binding upon it, its Trustees,
officers, shareholders, creditors and all other persons claiming under or
through it.
11. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, after two years from the date
of its execution this Agreement shall continue in effect only so long
as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of
the Trust or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty
days written notice to the Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days written notice to the Trust.
Termination of this Agreement pursuant to this section 11 shall be
without payment of any penalty.
12. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
13. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities", "interested person", "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities "belonging to" the Series shall
have the meaning defined in the Trust's Agreement and Declaration of Trust.
14. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Trust, to any shareholder of the Trust or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CGM TRUST on behalf of its CGM
Mutual Fund series
/s/ G. Kenneth Heebner
------------------------------
By: G. Kenneth Heebner
Vice President
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
/s/ Robert L. Kemp
------------------------------
By: Robert L. Kemp
President, Kenbob, Inc.,
General Partner
A copy of the Agreement and Declaration of Trust establishing CGM Trust
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Series on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
EXHIBIT (5)(B)
ADVISORY AGREEMENT
AGREEMENT made this 13th day of December, 1996 by and between CGM
TRUST, a Massachusetts business trust (the "Trust"), with respect to its CGM
Fixed Income Fund series (the "Series"), and CAPITAL GROWTH MANAGEMENT LIMITED
PARTNERSHIP, a Massachusetts partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Series;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Trust and the Adviser agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Series and to perform the other services
herein set forth, subject to the supervision of the Board of Trustees of the
Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and
financial data and information and undertake such additional investment
research as it shall believe necessary or advisable for the management
of the investment and reinvestment of the assets belonging to the
Series in accordance with the Series, investment objective and
policies;
(b) take such steps as are necessary to implement the
investment policies of the Series by purchase and sale of securities,
including the placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Trust acting pursuant
to like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the bank selected to perform such services and
exclusive of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or to
reimburse the Trust for:
(a) any of the costs of printing and distributing the items
referred to in subsection (m) of this section 5, except as otherwise
provided in any agreement between the Trust and its principal
underwriter in effect from time to time relating to distribution of
shares of the Series;
(b) compensation of Trustees of the Trust who are not
directors, officers, partners or employees of the Adviser or of any
affiliated person (other than a registered investment company) of the
Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the Custodian appointed by the
Trust for custodial services;
(e) charges and expenses of independent accountants retained
by the Trust;
(f) charges and expenses of any transfer agents, paying
agents, plan agents and registrars appointed by the Trust;
(g) brokers, commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to
which the Trust is a party;
(h) taxes and fees payable by the Trust to Federal, State or
other governmental agencies;
(i) the cost of certificates representing shares of the
Series;
(j) expenses of meetings of shareholders and Trustees of the
Trust;
(k) charges and expenses of legal counsel retained by the
Trust;
(l) interest, including interest on borrowings by the Trust;
(m) the cost of services, including services of counsel,
required in connection with the preparation of the Trust's registration
statements and prospectuses with respect to shares of the Series,
including amendments and revisions thereto, annual, semiannual and
other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders of the Trust or regulatory
authorities, to the extent that any such materials relate to the Series
or to the shareholders thereof; and
(n) the Trust's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses with
respect to the Series.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rates of the corresponding levels of the
Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
0.65% of the first $200,000,000;
0.55% of the next $300,000,000; and
0.40% of such assets in excess of $500,000,000.
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Trust may from time to time determine and specify in writing to the Adviser. The
Adviser hereby acknowledges that the Trust's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes,
portfolio brokerage commissions and interest) for any fiscal year exceeds the
lowest applicable percentage of average net assets limitation prescribed by any
state in which shares of the Series are qualified for sale, the total fee
otherwise due the Adviser for such fiscal year pursuant to section 7 hereof
shall be reduced by the amount of such excess belonging to the Series, and, if,
after giving effect to such reduction, the total of all ordinary business
expenses continues to exceed any such applicable limitation, the Adviser shall
pay any such continuing excess belonging to the Series; provided, however, that
the Adviser will not reduce its fees nor pay any such expenses to an extent or
under circumstances which would result in the inability of the Series to qualify
as a regulated investment company under the Internal Revenue Code. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Trust shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Trust or belonging to the Series are
to be calculated, that figure shall be calculated by reference to the average
daily net assets of the Trust or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. The Adviser consents to the use by the Trust of the names "CGM
Trust" and "CGM Fixed Income Fund," or other names embodying the words "Capital
Growth Management" or "CGM" in such forms as the Adviser shall in writing
approve, but only on condition that so long as this Agreement shall remain in
force the Trust shall fully perform, fulfill and comply with all provisions of
this Agreement expressed herein to be performed, fulfilled or complied with by
it. No such name shall be used by the Trust at any time or in any place for any
purposes or under any conditions except as in this paragraph provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Trust, it will, at the request of the
Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
"Capital Growth Management" or "CGM" and will not thereafter transact any
business in a name containing "Capital Growth Management" or "CGM" in any form
or combination whatsoever, or designate itself as the same business trust as or
successor to a business trust of such name, or otherwise use the name "Capital
Growth Management" or "CGM" or any other reference to the Adviser. Such
covenants on the part of the Trust shall be binding upon it, its Trustees,
officers, shareholders, creditors and all other persons claiming under or
through it.
11. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, after two years from the date
of its execution this Agreement shall continue in effect only so long
as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of
the Trust or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty
days written notice to the Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days written notice to the Trust.
Termination of this Agreement pursuant to this section 11 shall be
without payment of any penalty.
12. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
13. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities", "interested person", "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities "belonging to" the Series shall
have the meaning defined in the Trust's Agreement and Declaration of Trust.
14. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Trust, to any shareholder of the Trust or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CGM TRUST on behalf of its CGM Fixed
Income Fund series
/s/ G. Kenneth Heebner
------------------------------
By: G. Kenneth Heebner
Vice President
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
/s/ Robert L. Kemp
------------------------------
By: Robert L. Kemp
President, Kenbob, Inc.,
General Partner
A copy of the Agreement and Declaration of Trust establishing CGM Trust
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Series on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
298816.c2
<PAGE>
EXHIBIT (5)(C)
ADVISORY AGREEMENT FOR CGM AMERICAN TAX FREE FUND
AGREEMENT made this 30th day of August, 1996 by and between CGM TRUST,
a Massachusetts business trust (the "Trust"), with respect to its CGM AMERICAN
TAX FREE FUND (the "Series"), and CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP,
a Massachusetts partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Series;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Trust and the Adviser agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Series and to perform the other services
herein set forth, subject to the supervision of the Board of Trustees of the
Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and
financial data and information and undertake such additional investment
research as it shall believe necessary or advisable for the management
of the investment and reinvestment of the assets belonging to the
Series in accordance with the Series, investment objective and
policies;
(b) take such steps as are necessary to implement the
investment policies of the Series by purchase and sale of securities,
including the placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Trust acting pursuant
to like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the bank selected to perform such services and
exclusive of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or to
reimburse the Trust for:
(a) any of the costs of printing and distributing the items
referred to in subsection (m) of this section 5, except as otherwise
provided in any agreement between the Trust and its principal
underwriter in effect from time to time relating to distribution of
shares of the Series;
(b) compensation of Trustees of the Trust who are not
directors, officers, partners or employees of the Adviser or of any
affiliated person (other than a registered investment company) of the
Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the Custodian appointed by the
Trust for custodial services;
(e) charges and expenses of independent accountants retained
by the Trust;
(f) charges and expenses of any transfer agents, paying
agents, plan agents and registrars appointed by the Trust;
(g) brokers, commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to
which the Trust is a party;
(h) taxes and fees payable by the Trust to Federal, State or
other governmental agencies;
(i) the cost of certificates representing shares of the
Series;
(j) expenses of meetings of shareholders and Trustees of the
Trust;
(k) charges and expenses of legal counsel retained by the
Trust;
(l) interest, including interest on borrowings by the Trust;
(m) the cost of services, including services of counsel,
required in connection with the preparation of the Trust's registration
statements and prospectuses with respect to shares of the Series,
including amendments and revisions thereto, annual, semiannual and
other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders of the Trust or regulatory
authorities, to the extent that any such materials relate to the Series
or to the shareholders thereof; and
(n) the Trust's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses with
respect to the Series.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rates of the corresponding levels of the
Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
0.60% of the first $500,000,000;
0.55% of the next $500,000,000; and
0.45% of such assets in excess of $1,000,000,000.
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Trust may from time to time determine and specify in writing to the Adviser. The
Adviser hereby acknowledges that the Trust's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes,
portfolio brokerage commissions and interest) for any fiscal year exceeds the
lowest applicable percentage of average net assets limitation prescribed by any
state in which shares of the Series are qualified for sale, the total fee
otherwise due the Adviser for such fiscal year pursuant to section 7 hereof
shall be reduced by the amount of such excess belonging to the Series, and, if,
after giving effect to such reduction, the total of all ordinary business
expenses continues to exceed any such applicable limitation, the Adviser shall
pay any such continuing excess belonging to the Series; provided, however, that
the Adviser will not reduce its fees nor pay any such expenses to an extent or
under circumstances which would result in the inability of the Series to qualify
as a regulated investment company under the Internal Revenue Code. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Trust shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Trust or belonging to the Series are
to be calculated, that figure shall be calculated by reference to the average
daily net assets of the Trust or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. The Adviser consents to the use by the Trust of the names "CGM
Trust" and "CGM American Tax Free Fund," or other names embodying the words
"Capital Growth Management" or "CGM" in such forms as the Adviser shall in
writing approve, but only on condition that so long as this Agreement shall
remain in force the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed, fulfilled or
complied with by it. No such name shall be used by the Trust at any time or in
any place for any purposes or under any conditions except as in this paragraph
provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Trust, it will, at the request of the
Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
"Capital Growth Management" or "CGM" and will not thereafter transact any
business in a name containing "Capital Growth Management" or "CGM" in any form
or combination whatsoever, or designate itself as the same business trust as or
successor to a business trust of such name, or otherwise use the name "Capital
Growth Management" or "CGM" or any other reference to the Adviser. Such
covenants on the part of the Trust shall be binding upon it, its Trustees,
officers, shareholders, creditors and all other persons claiming under or
through it.
11. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, after two years from the date
of its execution this Agreement shall continue in effect only so long
as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of
the Trust or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty
days written notice to the Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days written notice to the Trust.
Termination of this Agreement pursuant to this section 11 shall be
without payment of any penalty.
12. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
13. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities", "interested person", "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities "belonging to" the Series shall
have the meaning defined in the Trust's Agreement and Declaration of Trust.
14. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Trust, to any shareholder of the Trust or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CGM TRUST on behalf of CGM AMERICAN
TAX FREE FUND
/s/ G. Kenneth Heebner
------------------------------
By: G. Kenneth Heebner
Vice President
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
/s/ Robert L. Kemp
------------------------------
By: Robert L. Kemp
President, Kenbob, Inc.,
General Partner
A copy of the Agreement and Declaration of Trust establishing CGM Trust
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Series on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
EXHIBIT (5)(D)
ADVISORY AGREEMENT FOR CGM REALTY FUND
AGREEMENT made this 30th day of August, 1996 by and between CGM TRUST,
a Massachusetts business trust (the "Trust"), with respect to its CGM REALTY
FUND (the "Series"), and CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP, a
Massachusetts partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Series;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Trust and the Adviser agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Series and to perform the other services
herein set forth, subject to the supervision of the Board of Trustees of the
Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and
financial data and information and undertake such additional investment
research as it shall believe necessary or advisable for the management
of the investment and reinvestment of the assets belonging to the
Series in accordance with the Series, investment objective and
policies;
(b) take such steps as are necessary to implement the
investment policies of the Series by purchase and sale of securities,
including the placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Trust acting pursuant
to like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the bank selected to perform such services and
exclusive of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or to
reimburse the Trust for:
(a) any of the costs of printing and distributing the items
referred to in subsection (m) of this section 5, except as otherwise
provided in any agreement between the Trust and its principal
underwriter in effect from time to time relating to distribution of
shares of the Series;
(b) compensation of Trustees of the Trust who are not
directors, officers, partners or employees of the Adviser or of any
affiliated person (other than a registered investment company) of the
Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the Custodian appointed by the
Trust for custodial services;
(e) charges and expenses of independent accountants retained
by the Trust;
(f) charges and expenses of any transfer agents, paying
agents, plan agents and registrars appointed by the Trust;
(g) brokers, commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to
which the Trust is a party;
(h) taxes and fees payable by the Trust to Federal, State or
other governmental agencies;
(i) the cost of certificates representing shares of the
Series;
(j) expenses of meetings of shareholders and Trustees of the
Trust;
(k) charges and expenses of legal counsel retained by the
Trust;
(l) interest, including interest on borrowings by the Trust;
(m) the cost of services, including services of counsel,
required in connection with the preparation of the Trust's registration
statements and prospectuses with respect to shares of the Series,
including amendments and revisions thereto, annual, semiannual and
other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders of the Trust or regulatory
authorities, to the extent that any such materials relate to the Series
or to the shareholders thereof; and
(n) the Trust's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses with
respect to the Series.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rates of the corresponding levels of the
Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
0.85% of the first $500,000,000;
0.75% of such assets in excess of $500,000,000.
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Trust may from time to time determine and specify in writing to the Adviser. The
Adviser hereby acknowledges that the Trust's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes,
portfolio brokerage commissions and interest) for any fiscal year exceeds the
lowest applicable percentage of average net assets limitation prescribed by any
state in which shares of the Series are qualified for sale, the total fee
otherwise due the Adviser for such fiscal year pursuant to section 7 hereof
shall be reduced by the amount of such excess belonging to the Series, and, if,
after giving effect to such reduction, the total of all ordinary business
expenses continues to exceed any such applicable limitation, the Adviser shall
pay any such continuing excess belonging to the Series; provided, however, that
the Adviser will not reduce its fees nor pay any such expenses to an extent or
under circumstances which would result in the inability of the Series to qualify
as a regulated investment company under the Internal Revenue Code. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Trust shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Trust or belonging to the Series are
to be calculated, that figure shall be calculated by reference to the average
daily net assets of the Trust or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. The Adviser consents to the use by the Trust of the names "CGM
Trust" and "CGM Realty Fund," or other names embodying the words "Capital Growth
Management" or "CGM" in such forms as the Adviser shall in writing approve, but
only on condition that so long as this Agreement shall remain in force the Trust
shall fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No such name
shall be used by the Trust at any time or in any place for any purposes or under
any conditions except as in this paragraph provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Trust, it will, at the request of the
Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
"Capital Growth Management" or "CGM" and will not thereafter transact any
business in a name containing "Capital Growth Management" or "CGM" in any form
or combination whatsoever, or designate itself as the same business trust as or
successor to a business trust of such name, or otherwise use the name "Capital
Growth Management" or "CGM" or any other reference to the Adviser. Such
covenants on the part of the Trust shall be binding upon it, its Trustees,
officers, shareholders, creditors and all other persons claiming under or
through it.
11. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, after two years from the date
of its execution this Agreement shall continue in effect only so long
as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of
the Trust or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty
days written notice to the Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days written notice to the Trust.
Termination of this Agreement pursuant to this section 11 shall be
without payment of any penalty.
12. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
13. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities", "interested person", "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities "belonging to" the Series shall
have the meaning defined in the Trust's Agreement and Declaration of Trust.
14. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Trust, to any shareholder of the Trust or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CGM TRUST on behalf of CGM REALTY FUND
/s/ G. Kenneth Heebner
------------------------------
By: G. Kenneth Heebner
Vice President
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
/s/ Robert L. Kemp
------------------------------
By: Robert L. Kemp
President, Kenbob, Inc.,
General Partner
A copy of the Agreement and Declaration of Trust establishing CGM Trust
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Series on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
EXHIBIT (8)(A)
CUSTODIAN AGREEMENT
BETWEEN
LOOMIS-SAYLES MUTUAL FUND
AND
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE NO.
--------
1. Employment of Custodian and Property to be Held by It ............ 1
2. Duties of the Custodian with Respect to Property of the Fund Held
by the Custodian ................................................. 2
2.1 Holding Securities .......................................... 2
2.2 Delivery of Securities ...................................... 2
2.3 Registration of Securities .................................. 5
2.4 Bank Accounts ............................................... 5
2.5 Payments for Shares ......................................... 6
2.6 Investment and Availability of Federal Funds ................ 6
2.7 Collection of Income ........................................ 7
2.8 Payment of Fund Moneys ...................................... 8
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased ................................................... 10
2.10 Payments for Repurchase or Redemptions of Shares of the Fund 10
2.11 Appointiment of Agents ...................................... 11
2.12 Deposit of Fund Assets in Securities Systems ................ 11
2.13 Ownership Certificates for Tax Purposes ..................... 13
2.14 Proxies ..................................................... 13
2.15 Communications Relating to Fund Portfolio Securities ........ 14
2.16 Proper Instructions ......................................... 14
2.17 Actions Permitted without Express Authority ................. 15
2.18 Evidence of Authority ....................................... 16
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income .................... 17
4. Records .......................................................... 18
5. Opinion of Fund's Independent Accountant ......................... 19
6. Reports to Fund by Independent Public Accountants ................ 19
7. Compensation of Custodian ........................................ 20
8. Responsibility of Custodian ...................................... 20
9. Effective Period, Termination and Amendment ...................... 21
10. Successor Custodian .............................................. 22
11. Interpretive and Additional Provisions ........................... 24
12. Massachusetts Law to Apply ....................................... 24
13. Prior Contracts .................................................. 25
<PAGE>
CUSTODIAN CONTRACT
This Contract between LOOMIS-SAYLES MUTUAL FUND, a business trust
organized and existing under the laws of Massachusetts, having its principal
place of business at One Financial Center, Boston, Massachusetts 02111
(hereinafter called the "Fund") and STATE STREET BANK AND TRUST COMPANY,
having its usual place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (hereinafter called the "Custodian"),
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It.
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Fund's By-Laws. The Fund agrees to deliver
to the Custodian all securities and cash owned by it, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares of common stock,
$1.00 par value, ("Shares") of the Fund as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of the Fund held
or received by the Fund and not delivered to the Custodian.
The Custodian may from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Trustees of the Fund
certified to the Custodian in the manner set forth in Section 2.18 hereof, and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the Custodian.
Notwithstanding the foregoing, each approval by the Board of Trustees of the
Fund of the employment of a particular sub-custodian shall not relieve the
Custodian of its obligations to exercise reasonable care in selecting such
sub-custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian.
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than securities which are maintained in a
"Securities System" as defined in Section 2.12 hereof.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of proper instructions, which may
by their terms be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depositary agent in connection with tender or other similar
offers for portfolio securities of the Fund;
5) To the Issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the Issuer thereof, or its agent, for transfer into the name of the
Fund or into the name of any nominee or nominees of the Fund or the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or nominee name of any sub-
custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) To the broker selling the same for examination in accordance with the
"street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Fund, but only against receipt by the Custodian of adequate collateral
as set forth in proper instructions from the Fund, which collateral
may be in the form of cash or obligations issued by the Unites States
government, its agencies or instrumentalities or in any other form
approved in a vote of the Board of Trustees of the Fund certified to
the Custodian in the manner set forth in Section 2.18 hereof;
11) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only against receipt of
amounts borrowed or to provide additional collateral if it is required
to secure a borrowing already made;
12) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the Fund's currently effective
prospectus, in satisfaction of requests by holders of Shares for
repurchase or redemption; and
13) For any other proper trust purpose, but only upon receipt of, in
addition to proper instructions, a certified copy of a resolution of
the Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purposes to be
proper trust purposes, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or or any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies in the same Mutual Fund group as the
Fund, or in the name or nominee name of any agent appointed pursuant to
Section 2.11 or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on behalf of
the Fund under the terms of this Contract shall be in "street" or other good
delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received
by it from or for the account of the Fund, other than cash maintained by the
Fund in a bank account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940. Funds held by the Custodian for the
Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Trustees of the Fund certified
to the Custodian in the manner set forth in Section 2.18 hereof. Such funds
shall be deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from the
distributor for the Fund's Shares or from the Transfer Agent of the Fund and
deposit into the Fund's account such payments as are received for Shares of
the Fund issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund and the Transfer Agent of any receipt
by it of payments for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the receipt of
proper instructions,
1) invest, in such instruments as may be set forth in such instructions on
the same day as received, all federal funds received after a time
agreed upon between the Custodian and the Fund; and
2) make federal funds available to the Fund as of specified times agreed
upon from time to time by the Fund and the Custodian in the amount of
checks received in payment for Shares of the Fund which checks are
deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis
all income and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due
on securities held hereunder.
In any case in which the Custodian does not receive any due and unpaid
such income within a reasonable time after it has made proper demands for the
same (which shall be presumed to consist of at least three demand letters and
at least one telephonic demand), it shall so notify the Fund in writing,
including copies of all demand letters, any written responses thereto, and
memoranda of all oral responses thereto and to telephonic demands, and await
proper instructions; the Custodian shall not be obliged to take legal action
for collection unless and until reasonably indemnified to its satisfaction. It
shall also notify the Fund as soon as reasonably practicable whenever income
due on securities, in respect to which the Fund requests such notice, is not
collected in due course.
2.8 Payment of Fund Moneys. Upon receipt of proper instructions, which
may by their terms be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the following cases
only:
1) Upon the purchase of securities for the account of the Fund but only
(a) against the delivery of such securities to the Custodian (or any
bank, banking firm or trust company doing business in the United States
or abroad which is qualified under the Investment Company Act of 1940,
as amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of the
Fund or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer. All securities
accepted by the Custodian shall be accompanied by payment of, or a "due
bill" for, any dividends, interest, or other distributions of the
issuer, due the purchaser; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions set
forth in Section 2.12 hereof; or (c) in the case of repurchase
agreements entered into between the Fund and the Custodian, or another
bank, (i) against delivery of the securities either in certificate form
or through an entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Fund of securities owned by the
Custodian along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund;
2) In connection with conversion, exchange or surrender of securities
owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as set
forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of principal on any loan to the Fund upon receipt of
the collateral, if any, for such loan and upon the surrender of any
note or notes evidencing such loan;
6) For the payment of any dividends declared pursuant to the governing
documents of the Fund;
7) For the repayment of any collateral upon the return of securities
loaned or payment to return excess collateral to the borrower of such
securities;
8) For any other proper purpose, but only upon receipt of, in addition to
proper instructions, a certified copy of a resolution of the Trustees
or of the Executive Committee of the Fund signed by an officer of the
Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to be
made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of securities for
the account of the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from the
Fund to so pay in advance, the Custodian shall be absolutely liable to the
Fund for such securities to the same extent as if the securities had been
received by the Custodian, except that in the case of repurchase agreements
entered into by the Fund with a bank which is a member of the Federal Reserve
System, the Custodian may transfer funds to the account of such bank prior to
the receipt of written evidence that the securities subject to such repurchase
agreement have been transferred by book-entry into a segregated non-
proprietary account of the Custodian maintained with the Federal Reserve Bank
of Boston or of the safe-keeping receipt, provided that such securities have
in fact been so transferred by book-entry.
2.10 Payments for Repurchase or Redemptions of Shares of the Fund. From
such funds as may be available for the purpose but subject to the limitations
of the Fund's Agreement and Declaration of Trust and By-Laws and any
applicable votes of the Trustees of the Fund pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection
with the redemption or repurchase of Shares of the Fund, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire funds
to or through a commercial bank designated by the redeeming shareholders to
the extent authorized and in accordance with any procedures set forth in the
Fund's current prospectus.
2.11 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
provided, that the appointment of any agent shall not relieve the Custodian of
its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a securities depository, or
in the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, each of which is referred to herein as "a Securities
System" in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Fund in a Securities System
provided that such securities are represented in an account ("Account")
of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in the Securities System shall identify by book-
entry those securities belonging to the Fund;
3) The Custodian shall pay for the Fund upon (i) receipt of advice from
the Securities System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account of the
Fund. The Custodian shall transfer securities sold or loaned for the
account of the Fund upon (i) receipt of advice from the Securities
System that payment or collateral for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System
of transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be provided
to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund on the next business day;
4) The Custodian shall promptly provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited
in the Securities System;
5) The Custodian shall have received the initial or annual certificate, as
the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any other person
which the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made whole for
any such loss or damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to securities of the Fund held by it and in connection with transfers
of securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies, without indication of the manner
in which such proxies are to be voted, and shall promptly deliver to the Fund
such proxies, all proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Fund all written information (including,
without limitation, pendency of calls and maturities of securities and
expirations of rights in connection therewith) received by the Custodian from
issuers of the securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the Fund
shall notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person or persons
as the Trustees of the Fund shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions pursuant to
written authorizations and procedures agreed to by the Fund and the Custodian if
the Custodian reasonably believes such oral instructions to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Trustees of the Fund accompanied by a detailed
description of procedures approved by the Trustees, Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices unless the Custodian indicates within two days after receipt
of such procedures that it objects to such procedures.
2.17 Actions Permitted without Express Authority. The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
contract, provided that all such payments shall be promptly accounted
for to the Fund;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise
directed by the Trustees of the Fund.
2.18 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other
instrument or paper reasonably believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of a vote of the Trustees of the Fund as conclusive
evidence (a) of the authority of any person to act in accordance with such
vote or (b) of any determination or of any action by the Trustees pursuant to
the Articles of Incorporation as described in any vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Trustees of the Fund to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Fund as described in the Fund's currently effective
prospectus and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net
asset value per share and the daily income of the Fund shall be made at the
time or times described from time to time in the Fund's currently effective
prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Fund. All
such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents
of the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations. The Custodian shall provide
to the Fund as of the end of each month a list of all securities transactions
that remain unsettled at such time.
5. Opinion of Fund's Independent Accountant.
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to the Fund's activities hereunder
in connection with the preparation of the Fund's Form N-1 and Form N-1R or
other annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this
Contract; such reports, which shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
8. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereof received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to
such advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of
some other form, the Custodian may require the Fund, as a prerequisite to
requiring the Custodian to take such action, and the Fund shall provide
indemnity to the Custodian in an amount and form satisfactory to it.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue
in full force and effect until termination as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than one hundred twenty (120) days after the date of such delivery or mailing;
provided, however, that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Trustees of the Fund have approved the initial
use of a particular Securities System and the receipt of an annual certificate
of the Secretary or an Assistant Secretary that the Trustees have reviewed the
use by the Fund of such Securities System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended; provided further,
however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Agreement and Declaration of Trust, and further provided, that the Fund
may at any time by action of its Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller
of the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Trustees of the Fund,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities than held by it hereunder.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Trustees of the
Fund, deliver at the office of the Custodian such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published
report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owning to
failure of the Fund to procure the certified copy of vote referred to or of
the Trustees to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall
be annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Agreement and Declaration of Trust of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment to this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
13. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 30th day of April, 1986.
SEAL
ATTEST LOOMIS-SAYLES MUTUAL FUND
/s/ Illegible /s/ Robert B. Kittredge
- ---------------------------- ----------------------------------------
President
SEAL
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ V. Renzi /s/ E.D. Hawkes, Jr.
- ---------------------------- ----------------------------------------
Assistant Secretary Vice President
A copy of the Agreement and Declaration of Trust establishing Loomis-
Sayles Mutual Fund is on file with the Secretary of State of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed
with respect to the Fund on behalf of the Fund by officers of the Fund as
officers and not individually and that the obligations of or arising out of
this Agreement are not binding upon any trustees, officers or shareholders
individually but are binding only upon the assets and property belonging to
the Fund.
<PAGE>
EXHIBIT (8)(B)
March 6, 1992
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Re: Supplement to Custodian Contract with Respect to
CGM Mutual Fund, a Series of CGM Trust
Ladies and Gentlemen:
CGM Mututal Fund (formerly, Loomis-Sayles Mutual Fund) hereby advises you
that, effective December 20, 1991, (i) the name of CGM Mutual Fund has been
changed to CGM Trust (the "Trust"); (ii) the Trust has created a new series of
shares of beneficial interest designated as CGM Fixed Income Fund; and (iii) the
Trust has redesignated its Original Series as CGM Mutual Fund (the "Mutual Fund
Series").
The Trust desires that State Street Bank and Trust Company ("State Street")
continue to serve as Custodian with respect to the Mutual Fund Series pursuant
to the terms and conditions of the Custodian Agreement by and between the Trust
and State Street, dated April 30, 1986 (the "Custodian Contract"), subject to
the following: (A) the appointment of, and service by, State Street as Custodian
under the Custodian Contract shall apply only with respect to the shares of
beneficial interest of the Mutual Fund Series; and (B) notwithstanding any other
provision of the Custodian Contract, the rights, obligations and remedies of the
parties thereto shall constitute rights, obligations and remedies only with
respect to the Mutual Fund Series and the assets of the Mutual Fund Series, and
no other series of the Trust shall have any rights, obligations or remedies
under the Custodian Contract.
Please acknowledge your agreement to serve as Custodian for the Mutual Fund
Series in accordance with the terms and conditions of the Custodian Contract, as
supplemented hereby, by executing this letter agreement in the space provided
below and returning it to the undersigned.
Very Truly Yours,
CGM TRUST
By: /s/Robert L. Kemp
----------------------------------
Name: Robert L. Kemp
Title: President
Agreed and accepted:
STATE STREET BANK AND TRUST COMPANY
By: /s/Ronald E. Logue
------------------------------------
Name: Ronald E. Logue
Title: Senior Vice President
<PAGE>
EXHIBIT (8)(C)
CUSTODIAN CONTRACT
BETWEEN
CGM TRUST
AND
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Employment of Custodian and Property to be Held by It ................... 1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian ................................................... 2
2.1 Holding Securities ................................................. 2
2.2 Delivery of Securities ............................................. 2
2.3 Registration of Securities ......................................... 4
2.4 Bank Accounts ...................................................... 5
2.5 Payments for Shares ................................................ 6
2.6 Investment and Availability of Federal Funds ....................... 6
2.7 Collection of Income ............................................... 6
2.8 Payment of Fund Moneys ............................................. 7
2.9 Liability for Payment in Advance of Receipt of Securities Purchased 9
2.10 Payments for Repurchase or Redemptions of Shares of the Fund ....... 9
2.11 Appointment of Agents .............................................. 10
2.12 Deposit of Fund Assets in Securities Systems ....................... 10
2.13 Ownership Certificates for Tax Purposes ............................ 12
2.14 Proxies ............................................................ 12
2.15 Communications Relating to Fund Portfolio Securities ............... 13
2.16 Proper Instructions ................................................ 13
2.17 Actions Permitted without Express Authority ........................ 14
2.18 Evidence of Authority .............................................. 15
3. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income ....................................... 15
4. Records ................................................................. 16
5. Opinion of Fund's Independent Accountant ................................ 17
6. Reports to Fund by Independent Public Accountants ....................... 17
7. Compensation of Custodian ............................................... 17
8. Responsibility of Custodian ............................................. 17
9. Effective Period, Termination and Amendment ............................. 18
10. Successor Custodian ..................................................... 20
11. Interpretive and Additional Provisions .................................. 21
12. Massachusetts Law to Apply .............................................. 22
13. Prior Contracts ......................................................... 22
14. Multiple Series ......................................................... 22
<PAGE>
CUSTODIAN CONTRACT
This Contract between CGM Trust, a business trust organized and existing
under the laws of Massachusetts, having its principal place of business at One
International Place, Boston, Massachusetts 02110 (hereinafter called the "Fund")
and STATE STREET BANK AND TRUST COMPANY, having its usual place of business at
225 Franklin Street, Boston, Massachusetts 02110 (hereinafter called the
"Custodian"),
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It.
The Fund hereby employs the Custodian as the custodian of its assets held in
CGM Fixed Income Fund, a series of the Fund (the "Series"), pursuant to the
provisions of the Fund's By-Laws. The Fund agrees to deliver to the Custodian
all securities and cash owned by the Series, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Series from time to time, and the cash consideration
received by it for such new or treasury shares of common stock, $1.00 par value,
("Shares") of the Series as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund held or received
by the Fund and not delivered to the Custodian.
The Custodian may from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Trustees of the Fund certified
to the Custodian in the manner set forth in Section 2.18 hereof, and provided
that the Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian. Notwithstanding the foregoing,
each approval by the Board of Trustees of the Fund of the employment of a
particular sub-custodian shall not relieve the Custodian of its obligations to
exercise reasonable care in selecting such sub-custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian.
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all securities
owned by the Fund, other than securities which are maintained in a "Securities
System" as defined in Section 2.12 hereof.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of proper instructions, which may by
their terms be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;
5) To the Issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the Issuer thereof, or its agent, for transfer into the name of the
Fund or into the name of any nominee or nominees of the Fund or the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units; provided that, or any
such case, the new securities are to be delivered to the Custodian;
7) To the broker selling the same for examination in accordance with the
"street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Fund, but only against receipt by the Custodian of adequate collateral
as set forth in proper instructions from the Fund, which collateral may
be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities or in any other form
approved in a vote of the Board of Trustees of the Fund certified to the
Custodian in the manner set forth in Section 2.18 hereof;
11) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only against receipt of
amounts borrowed or to provide additional collateral if it is required
to secure a borrowing already made;
12) Upon receipt of instructions from the transfer agent ("Transfer Agent")
for the Fund, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described
from time to time in the Fund's currently effective prospectus, in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
13) For any other proper trust purpose, but only upon receipt of, in
addition to proper instructions, a certified copy of a resolution of the
Trustees or of the Executive Committee signed by an officer of the Fund
and certified by the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purposes to be proper trust
purposes, and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than
bearer securities) shall be registered in the name of the Fund or in the name of
any nominee of the Fund or of any nominee of the Custodian which nominee shall
be assigned exclusively to the Fund, unless the Fund has authorized in writing
the appointment of a nominee to be used in common with other registered
investment companies in the same Mutual Fund group as the Fund, or in the name
or nominee name of any agent appointed pursuant to Section 2.11 or in the name
or nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the terms of
this Contract shall be in "street" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by vote of a
majority of the Trustees of the Fund certified to the Custodian in the manner
set forth in Section 2.18 hereof. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and deposit into
the Fund's account such payments as are received for Shares of the Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the receipt of
proper instructions,
1) invest, in such instruments as may be set forth in such instructions on
the same day as received, all federal funds received after a time
agreed upon between the Custodian and the Fund; and
2) make federal funds available to the Fund as of specified times agreed
upon from time to time by the Fund and the Custodian in the amount of
checks received in payment for Shares of the Fund which checks are
deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder
to which the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder.
In any case in which the Custodian does not receive any due and unpaid such
income within a reasonable time after it has made proper demands for the same
(which shall be presumed to consist of at least three demand letters and at
least one telephonic demand), it shall so notify the Fund in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto and to telephonic demands, and await proper
instructions; the Custodian shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction. It shall
also notify the Fund as soon as reasonably practicable whenever income due on
securities, in respect to which the Fund requests such notice, is not collected
in due course.
2.8 Payment of Fund Moneys. Upon receipt of proper instructions, which may
by their terms be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the following cases
only:
1) Upon the purchase of securities for the account of the Fund but only (a)
against the delivery of such securities to the Custodian (or any bank,
banking firm or trust company doing business in the United States or
abroad which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer. All securities accepted by the Custodian
shall be accompanied by payment of, or a "due bill" for, any dividends,
interest, or other distributions of the issuer, due the purchaser; (b) in
the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12 hereof; or (c)
in the case of repurchase agreements entered into between the Fund and
the Custodian, or another bank, (i) against delivery of the securities
either in certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund of securities
owned by the Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Fund;
2) In connection with conversion, exchange or surrender of securities
owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as set
forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of principal on any loan to the Fund upon receipt of
the collateral, if any, for such loan and upon the surrender of any
note or notes evidencing such loan;
6) For the payment of any dividends declared pursuant to the governing
documents of the Fund;
7) For the repayment of any collateral upon the return of securities
loaned or payment to return excess collateral to the borrower of such
securities;
8) For any other proper purpose, but only upon receipt of, in addition to
proper instructions, a certified copy of a resolution of the Trustees or
of the Executive Committee of the Fund signed by an officer of the Fund
and certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose, and naming
the person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to so
pay in advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian, except that in the case of repurchase agreements entered into by the
Fund with a bank which is a merger of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of written
evidence that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston or of the
safe-keeping receipt, provided that such securities have in fact been so
transferred by book-entry.
2.10 Payments for Repurchase or Redemptions of Shares of the Fund. From such
funds as may be available for the purpose but subject to the limitations of the
Fund's Agreement and Declaration of Trust and By-Laws and any applicable votes
of the Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders to the extent authorized and in
accordance with any procedures set forth in the Fund's current prospectus.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and certain
federal agencies, each of which is referred to herein as "a Securities System"
in accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities System
provided that such securities are represented in an account ("Account")
of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in the Securities System shall identify by book-
entry those securities belonging to the Fund;
3) The Custodian shall pay for the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold or loaned for the account of the
Fund upon (i) receipt of advice from the Securities System that payment
or collateral for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its request. The
Custodian shall furnish the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account of the
Fund on the next business day;
4) The Custodian shall promptly provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited
in the Securities System;
5) The Custodian shall have received the initial or annual certificate, as
the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the Custodian
shall be liable to the Fund for any loss or damage to the Fund resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Fund all written information
received by the Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialed by one or more person or persons
as the Trustees of the Fund shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions pursuant to
written authorizations and procedures agreed to by the Fund and the Custodian if
the Custodian reasonably believes such oral instructions to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Trustees of the Fund accompanied by a detailed
description of procedures approved by the Trustees, Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices unless the Custodian indicates within two days after receipt
of such procedures that it objects to such procedures.
2.17 Actions Permitted without Express Authority. The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
contract, provided that all such payments shall be promptly accounted for
to the Fund;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise directed
by the Trustees of the Fund.
2.18 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument or
paper reasonably believed by it to be genuine and to have been properly executed
by or on behalf of the Fund. The Custodian may receive and accept a certified
copy of a vote of the Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Trustees pursuant to the Fund's Agreement
and Declaration of Trust as described in any vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Trustees of the Fund to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the daily income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations. The Custodian shall provide to the Fund as of the end of each month
a list of all securities transactions that remain unsettled at such time.
5. Opinion of Fund's Independent Accountant.
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to the Fund's activities hereunder in
connection with the preparation of the Fund's Form N-1 and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, which shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Fund, to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
8. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereof received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Custodian shall
be held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominees assigned
to the Fund being liable for the payment of money or incurring liability of some
other form, the Custodian may require the Fund, as a prerequisite to requiring
the Custodian to take such action, and the Fund shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than one hundred
twenty (120) days after the date of such delivery or mailing; provided, however
that the Custodian shall not act under Section 2.12 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Trustees of the Fund have approved the initial use of a particular
Securities System and the receipt of an annual certificate of the Secretary or
an Assistant Secretary that the Trustees have reviewed the use by the Fund of
such Securities System, as required in each case by Rule 17f-4 under the
Investment Company Act of 1940, as amended; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Agreement and
Declaration of Trust, and further provided, that the Fund may at any time by
action of its Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Trustees of the
Fund, deliver at the office of the Custodian such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owning to
failure of the Fund to procure the certified copy of vote referred to or of the
Trustees to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Agreement and Declaration of Trust of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment to this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
13. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
14. Multiple Series.
Notwithstanding any other provision hereof, the rights, obligations and
remedies under this Contract of the parties hereto shall constitute rights,
obligations and remedies only with respect to the Series and the assets of the
Series, and no other series of the Fund shall have any rights, obligations or
remedies under this Contract.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 6th day of March, 1992.
SEAL
ATTEST CGM TRUST
/s/ Leslie A. Lake /s/ Robert L. Kemp
- ---------------------------- -------------------------------
President
SEAL
ATTEST STATE STREET BANK AND
TRUST COMPANY
/s/ [illegible] /s/ [illegible]
- ---------------------------- -------------------------------
Assistant Secretary Vice President
A copy of the Agreement and Declaration of Trust establishing CGM Trust is
on file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the Fund
on behalf of the Fund by officers of the Fund as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any trustees, officers or shareholders individually but are binding only
upon the assets and property belonging to the Fund.
<PAGE>
EXHIBIT (8)(D)
AMENDMENT TO THE CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust Company (the
"Custodian") and CGM Trust (the "Fund") with respect to CGM Fixed Income Fund, a
Series of the Fund (the "Series").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated March 6, 1992 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the Custodian Contract
to provide for the maintenance of the Fund's foreign securities, and cash
incidental to transactions in such securities, in the custody of certain foreign
banking institutions and foreign securities depositories acting as
sub-custodians in conformity with the requirements of Rule 17f-5 under the
Investment Company Act of 1940;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and conditions;
1. Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Fund's securities and other assets maintained outside the
United States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 2.16 of the Custodian
Contract, together with a certified resolution of the Fund's Board of Directors,
the Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of Proper Instructions, the
Fund may instruct the Custodian to cease the employment of any one or more of
such sub-custodians for maintaining custody of the Fund's assets.
2. Assets to be Held
The Custodian shall limit the securities and other assets maintained in the
custody of the foreign sub-custodians to: (a) "foreign securities", as defined
in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, and
(b) cash and cash equivalents in such amounts as the Custodian or the Fund may
determine to be reasonably necessary to effect the Fund's foreign securities
transactions.
3. Foreign Securities Depositories
Except as may otherwise be agreed upon in writing by the Custodian and the
Fund, assets of the Fund shall be maintained in foreign securities depositories
only through arrangements implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the provisions set
forth in Section 5 hereof.
4. Segregation of Securities
The Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign sub-custodian. Each
agreement pursuant to which the Custodian employs a foreign banking institution
shall require that such institution establish a custody account for the
Custodian on behalf of the Fund and physically segregate in that account,
securities and other assets of the Fund, and, in the event that such institution
deposits the Fund's securities in a foreign securities depository, that it shall
identify on its books as belonging to the Custodian, as agent for the Fund, the
securities so deposited.
5. Agreements with Foreign Banking Institutions
Each agreement with a foreign banking institution shall be substantially in
the form set forth in Exhibit 1 hereto and shall provide that: (a) the Fund's
assets will not be subject to any right, charge, security interest, lien or
claim of any kind in favor of the foreign banking institution or its creditors
or agents, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the Fund's assets will be freely transferable
without the payment of money or value other than for custody or administration;
(c) adequate records will be maintained identifying the assets as belonging to
the Fund; (d) officers of or auditors employed by, or other representatives of
the Custodian, including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given access to the books
and records of the foreign banking institution relating to its actions under its
agreement with the Custodian; and (e) assets of the Fund held by the foreign
sub-custodian will be subject only to the instructions of the Custodian or its
agents.
6. Access of Independent Accountants of the Fund
Upon request of the Fund, the Custodian will use its best efforts to arrange
for the independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the performance of
such foreign banking institution under its agreement with the Custodian.
7. Reports by Custodian
The Custodian will supply to the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and other assets of the Fund held
by foreign sub-custodians, including but not limited to an identification of
entities having possession of the Fund's securities and other assets and advices
or notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on behalf
of the Fund indicating, as to securities acquired for the Fund, the identity of
the entity having physical possession of such securities.
8. Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this Section 8, the
provisions of Sections 2.2 and 2.8 of the Custodian Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of the Custodian Contract to the contrary,
settlement and payment for securities received for the account of the Fund and
delivery of securities maintained for the account of the Fund may be effected in
accordance with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set forth
in Section 2.3 of the Custodian Contract, and the Fund agrees to hold any such
nominee harmless from any such liability as a holder of record of such
securities.
9. Liability of Foreign Sub-Custodians
Each agreement pursuant to which the Custodian employs a foreign banking
institution as a foreign sub-custodian shall require the institution to exercise
reasonable care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian with respect
to any claims against a foreign banking institution as a consequence of any such
loss, damage, cost, expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage, cost, expense, liability
or claim.
10. Liability of Custodian
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to sub-custodians
generally in the Custodian Contract and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank as contemplated by paragraph 13 hereof,
the Custodian shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has otherwise
exercised reasonable care. Notwithstanding the foregoing provisions of this
paragraph 10, in delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to the Fund for any loss
due to such delegation, except such loss as may result from (a) political risk
(including, but not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed hostilities)
or (b) other losses (excluding a bankruptcy or insolvency of State Street London
Ltd. not caused by political risk) due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
11. Reimbursement for Advances
If the Fund requires the Custodian to advance cash or securities for any
purpose including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee shall incur
or be assessed any taxes, charges, expenses, assessments, claims or liabilities
in connection with the performance of this Contract, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct, property at any time held for the account of the Fund, not
to exceed 10% of the Fund's gross assets, shall be security therefor and should
the Fund fail to repay the Custodian promptly, the Custodian shall be entitled
to utilize available cash and to dispose of the Fund assets to the extent
necessary to obtain reimbursement.
12. Monitoring Responsibilities
The Custodian shall furnish annually to the Fund, during the month of June,
information concerning the foreign sub-custodians employed by the Custodian.
Such information shall be similar in kind and scope to that furnished to the
Fund in connection with the initial approval of this amendment to the Custodian
Contract. In addition, the Custodian will promptly inform the Fund in the event
that the Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the assets of the
Fund or in the case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted U.S.
accounting principles).
13. Branches of U.S. Banks
(a) Except as otherwise set forth in this amendment to the Custodian
Contract, the provisions hereof shall not apply where the custody of the Fund
assets is maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940
meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by paragraph
1 of the Custodian Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained in an
interest bearing account established for the Fund with the Custodian's London
Branch, which account shall be subject to the direction of the Custodian, State
Street London Ltd. or both.
14. Applicability of Custodian Contract
Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 16th day of April, 1992.
ATTEST: CGM TRUST
/s/Leslie A. Lake By: /s/Robert L. Kemp
- -------------------------------------- ----------------------
(Title) President
ATTEST: STATE STREET BANK AND
AND TRUST COMPANY
/s/[illegible] By: /s/[illegible]
- ------------------------------------- --------------------------
Assistant Secretary Sr. Vice President
<PAGE>
SCHEDULE A
The following foreign banking institutions, foreign branches of U.S. banks
and foreign securities depositories have been approved by the Board of Directors
of CGM Trust for use as sub-custodians for the Fund's securities and other
assets.
Foreign Custodians
Australia and New Zealand Banking Group Limited (ANZ) -- Australia Canada
Trust Company -- Canada Kansallis-Osake-Pankki (KOP) -- Finland Credit
Commercial De France (CCF) -- France Berliner Handels-und Frankfurter Bank
(BHF) -- Germany Standard Chartered Bank, Hong Kong -- Hong Kong Standard
Chartered Bank, Jakarta -- Indonesia Credito Italiano -- Italy Sumitomo
Trust & Banking Co., Ltd. (Sumitomo) -- Japan Bank of Seoul -- Korea Westpac
Banking Corporation (Westpac) -- New Zealand Standard Chartered Bank, Manila
-- Philippines Union Bank of Switzerland -- Switzerland State Street London
Limited -- United Kingdom
Foreign Branches of U.S. Banks
Branches of Citibank, N.A. in Argentina, Brazil, Mexico and Venezuela
Depositories
Caja de Valores (CDV) -- Argentina
Austraclear Limited -- Australia
Bolsa de Valores de Sao Paulo (Bovespa) -- Brazil Canadian Depository for
Securities Limited (CDS) -- Canada Societe Interprofessionnelle pour la
Compensation des Valeurs Mobilieres (SICOVAM) -- France The Deutscher
Kassenverein AG -- Germany Monte Titoli S.P.A. -- Italy Instituto Nacional
para el Deposito de Valores (INDEVAL) -- Mexico Schweizerische Effekten-Giro
AG (SEGA) -- Switzerland The Central Gilts Office (CGO) -- United Kingdom
The Euroclear System, Belgium (Euroclear) -- Transnational Centrale de
Livraison de Valeurs Mobilieres, S.A., Luxembourg (Cedel) -- Transnational
Certified:
/s/Robert L. Kemp
- ------------------------------
Fund's Authorized Officer
Dated: April 16, 1992
ZP-8384/C
<PAGE>
EXHIBIT 1
CUSTODIAN AGREEMENT
TO:
Gentlemen:
The undersigned ("State Street") hereby requests that you (the "Bank")
establish a custody account and a cash account for each State Street client
whose account is identified to this Agreement. Each such custody or cash account
as applicable will be referred to herein as the "Account" and will be subject to
the following terms and conditions:
1. The Bank shall hold as agent for State Street and shall physically
segregate in the Account such cash, bullion, coin, stocks, shares, bonds,
debentures, notes and other securities and other property which is delivered to
the Bank for that State Street Account (the "Property").
2. (a) Without the prior approval of State Street it will not deposit
securities in any securities depository or utilize a clearing agency,
incorporated or organized under the laws of a country other than the United
States, unless such depository or clearing house operates the central system for
handling of securities or equivalent book-entries in that country or operates a
transnational system for the central handling of securities or equivalent
book-entries.
(b) When Securities held for an Account are deposited in a securities
depository or clearing agency by the Bank, the Bank shall identify on its books
as belonging to State Street as agent for such Account, the Securities so
deposited.
The Bank represents that either:
3. (a) It currently has stockholders' equity in excess of $200 million
(U.S. dollars or the equivalent of U.S. dollars computed in accordance with
generally accepted U.S. accounting principles) and will promptly inform State
Street in the event that there appears to be a substantial likelihood that its
stockholders' equity will decline below $200 million, or in any event, at such
time as its stockholders' equity in fact declines below $200 million; or
(b) It is the subject of an exemptive order issued by the United States
Securities and Exchange Commission, which such order permits State Street to
employ the Bank as a subcustodian, notwithstanding the fact that the Bank's
stockholders' equity is currently below $200 million or may in the future
decline below $200 million due to currency fluctuation.
4. Upon the written instructions of State Street as permitted by Sections 8,
the Bank is authorized to pay out cash from the Account and to sell, assign,
transfer, deliver or exchange, or to purchase for the Account, any and all
stocks, shares, bonds, debentures, notes and other securities ("Securities"),
bullion, coin and other property, but only as provided in such written
instructions. The Bank shall not be held liable for any act or omission to act
on instructions given or purported to be given should there be any error in such
instructions.
5. Unless the Bank receives written instructions of State Street to the
contrary, the Bank is authorized:
a. To promptly receive and collect all income and principal with respect to
the Property and to credit cash receipts to the Account;
b. To promptly exchange Securities where the exchange is purely ministerial
(including, without limitation, the exchange of temporary Securities for
those in definitive form and and the exchange of warrants, or other
documents of entitlement to Securities, for the Securities themselves);
c. To promptly surrender Securities at maturity or when called for
redemption upon receiving payment therefor;
d. Whenever notification of a rights entitlement or a fractional interest
resulting from a rights issue, stock dividend or stock split is received
for the Account and such rights entitlement or fractional interest bears
an expiration date, the Bank will endeavor to obtain State Street's
instructions, but should these not be received in time for the Bank to
take timely action, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Account;
e. To hold registered in the name of the nominee of the Bank or its agents
such Securities as are ordinarily held in registered form;
f. To execute in State Street's name for the Account, whenever the Bank
deems it appropriate, such ownership and other certificates as may be
required to obtain the payment of income from the Property; and
g. To pay or cause to be paid from the Account any and all taxes and levies
in the nature of taxes imposed on such assets by any governmental
authority, and shall use reasonable efforts to promptly reclaim any
foreign withholding tax relating to the Account.
6. If the Bank shall receive any proxies, notices, reports, or other
communications relative to any of the Securities of the Account in connection
with tender offers, reorganizations, mergers, consolidations, or similar events
which may have an impact upon the issuer thereof, the Bank shall promptly
transmit any such communication to State Street by means as will permit State
Street to take timely action with respect thereto.
7. The Bank is authorized in its discretion to appoint brokers and agents in
connection with the Bank's handling of transactions relating to the Property
provided that any such appointment shall not relieve the Bank of any of its
responsibilities or liabilities hereunder.
8. Written instructions shall include (i) instructions in writing signed by
such persons as are designated in writing by State Street (ii) telex or tested
telex instructions of State Street, (iii) other forms of instruction in computer
readable form as shall be customarily utilized for the transmission of like
information and (iv) such other forms of communication as from time to time
shall be agreed upon by State Street and the Bank.
9. The Bank shall supply periodic reports with respect to the safekeeping of
assets held by it under this Agreement. The content of such reports shall
include but not be limited to any transfer to or from any Account held by the
Bank hereunder and such other information as State Street may reasonably
request.
10. In addition to its obligations under Section 2 hereof, the Bank shall
maintain such other records as may be necessary to identify the assets hereunder
as belonging to each State Street client identified to this Agreement from time
to time.
11. The Bank agrees that its books and records relating to its actions under
this Agreement shall be opened to the physical, on-premises inspection and audit
at reasonable times by officers of, auditors employed by or other
representatives of State Street (including to the extent permitted under _______
law the independent public accountants for any entity whose Property is
being held hereunder) and shall be retained for such period as shall be agreed
by State Street and the Bank.
12. The Bank shall be entitled to reasonable compensation for its services
and expenses as custodian under this Agreement, as agreed upon from time to time
by the Bank and State Street.
13. The Bank shall exercise reasonable care in the performance of its duties
as are set forth or contemplated herein or contained in instructions given to
the Bank which are not contrary to this Agreement, and shall maintain adequate
insurance and agrees to indemnify and hold State Street and each Account from
and against any loss, damage, cost, expense, liability or claim arising out of
or in connection with the Bank's performance of its obligations hereunder.
14. The Bank agrees that (i) the Property is not subject to any right,
charge, security interest, lien or claim of any kind in favor of the Bank or any
of its agents or its creditors except a claim of payment for their safe custody
and administration and (ii) the beneficial ownership of the Property shall be
freely transferable without the payment of money or other value other than for
safe custody or administration.
15. This Agreement may be terminated by the Bank or State Street by at least
60 days' written notice to the other, sent by registered mail or express
courier. The Bank, upon the date this Agreement terminates pursuant to notice
which has been given in a timely fashion, shall deliver the Property in
accordance with written instructions of State Street specifying the name(s) of
the person(s) to whom the Property shall be delivered.
16. The Bank and State Street shall each use its best efforts to maintain
the confidentiality of the Property in each Account, subject, however, to the
provisions of any laws requiring the disclosure of the Property.
17. The Bank agrees to follow such Operating Requirements as State Street
may require from time to time. A copy of the current State Street Operating
Requirements is attached as an exhibit to this Agreement.
18. Unless otherwise specified in this Agreement, all notices with respect
to matters contemplated by this Agreement shall be deemed duly given when
received in writing or by tested telex by the Bank or State Street at their
respective addresses set forth below, or at such other address as specified in
each case in a notice similarly given:
To State Street: Global Custody Services Division
STATE STREET BANK AND TRUST COMPANY
P.O. Box 470
Boston, Massachusetts 02102
To the Bank:
19. This Agreement shall be governed by and construed in accordance with
the laws of ______________.
Please acknowledge your agreement to the foregoing by executing a copy of
this letter.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By -------------------------------------
Agreed to by:
By -----------------------------
Date ---------------------------
<PAGE>
EXHIBIT (8)(E)
CUSTODIAN CONTRACT
BETWEEN
CGM TRUST
AND
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held by It ........... 1
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian ..................................... 2
2.1 Holding Securities ......................................... 2
2.2 Delivery of Securities ..................................... 2
2.3 Registration of Securities ................................. 4
2.4 Bank Accounts .............................................. 5
2.5 Payments for Shares ........................................ 6
2.6 Investment and Availability of Federal Funds ............... 6
2.7 Collection of Income ....................................... 6
2.8 Payment of Fund Moneys ..................................... 7
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased ..................................... 9
2.10 Payments for Repurchase or Redemptions of
Shares of the Fund ....................................... 9
2.11 Appointment of Agents ...................................... 10
2.12 Deposit of Fund Assets in Securities Systems ............... 10
2.13 Ownership Certificates for Tax Purposes .................... 12
2.14 Proxies .................................................... 12
2.15 Communications Relating to Fund Portfolio Securities ....... 13
2.16 Proper Instructions ........................................ 13
2.17 Actions Permitted without Express Authority ................ 14
2.18 Evidence of Authority ...................................... 15
3. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income .............. 15
4. Records ......................................................... 16
5. Opinion of Fund's Independent Accountant ........................ 17
6. Reports to Fund by Independent Public Accounts .................. 17
7. Compensation of Custodian ....................................... 17
8. Responsibility of Custodian ..................................... 17
9. Effective Period, Termination and Amendment ..................... 18
10. Successor Custodian ............................................. 20
11. Interpretive and Additional Provisions .......................... 21
12. Massachusetts Law to Apply ...................................... 22
13. Prior Contracts ................................................. 22
14. Multiple Series ................................................. 22
CUSTODIAN CONTRACT
This Contract between CGM Trust, a business trust organized and existing
under the laws of Massachusetts, having its principal place of business at One
International Place, Boston, Massachusetts, 02110 (hereinafter called the
"Fund") and STATE STREET BANK AND TRUST COMPANY, having its usual place of
business at 225 Franklin Street, Boston, Massachusetts, 02110 (hereinafter
called the "Custodian").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows
1. Employment of Custodian and Property to be Held by it.
The Fund hereby employs the Custodian as the custodian of its assets held
in CGM American Tax Free Fund, a series of the Fund (the "Series"), pursuant to
the provisions of the Fund's By-Laws. The Fund agrees to deliver to the
Custodian all securities and cash owned by the Series, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Series from time to time, and the cash
consideration received by it for such new or treasury shares of common stock,
$1.00 par value, ("Shares") of the Series as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of the Fund held
or received by the Fund and not delivered to the Custodian.
The Custodian may from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Trustees of the Fund certified
to the Custodian in the manner set forth in Section 2.18 hereof, and provided
that the Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian. Notwithstanding the foregoing,
each approval by the Board of Trustees of the Fund of the employment of a
particular sub-custodian shall not relieve the Custodian of its obligations to
exercise reasonable care in selecting such sub-custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian.
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all securities
owned by the Fund, other than securities which are maintained in a "Securities
System" as defined in Section 2.12 hereof.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of proper instructions, which may by
their terms be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;
5) To the Issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the Issuer thereof, or its agent, for transfer into the name of the
Fund or into the name of any nominee or nominees of the Fund or the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units; provided that, or any
such case, the new securities are to be delivered to the Custodian;
7) To the broker selling the same for examination in accordance with the
"street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Fund, but only against receipt by the Custodian of adequate collateral
as set forth in proper instructions from the Fund, which collateral may
be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities or in any other form
approved in a vote of the Board of Trustees of the Fund certified to the
Custodian in the manner set forth in Section 2.18 hereof;
11) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only against receipt of
amounts borrowed or to provide additional collateral if it is required
to secure a borrowing already made;
12) Upon receipt of instructions from the transfer agent ("Transfer Agent")
for the Fund, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described
from time to time in the Fund's currently effective prospectus, in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
13) For any other proper trust purpose, but only upon receipt of, in
addition to proper instructions, a certified copy of a resolution of the
Trustees or of the Executive Committee signed by an officer of the Fund
and certified by the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purposes to be proper trust
purposes, and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than
bearer securities) shall be registered in the name of the Fund or in the name of
any nominee of the Fund or of any nominee of the Custodian which nominee shall
be assigned exclusively to the Fund, unless the Fund has authorized in writing
the appointment of a nominee to be used in common with other registered
investment companies in the same Mutual Fund group as the Fund, or in the name
or nominee name of any agent appointed pursuant to Section 2.11 or in the name
or nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the terms of
this Contract shall be in "street" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order by
the custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by vote of a
majority of the Trustees of the Fund certified to the Custodian in the manner
set forth in Section 2.18 hereof. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and deposit into
the Fund's account such payments as are received for Shares of the Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the receipt of
proper instructions,
1) invest, in such instruments as may be set forth in such instructions on
the same day as received, all federal funds received after a time
agreed upon between the Custodian and the Fund; and
2) make federal funds available to the Fund as of specified times agreed
upon from time to time by the Fund and the Custodian in the amount of
checks received in payment for Shares of the Fund which checks are
deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder
to which the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder.
In any case in which the Custodian does not receive any due and unpaid such
income within a reasonable time after it has made proper demands for the same
(which shall be presumed to consist of at least three demand letters and at
least one telephonic demand), it shall so notify the Fund in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto and to telephonic demands, and await proper
instructions; the Custodian shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction. It shall
also notify the Fund as soon as reasonably practicable whenever income due on
securities, in respect to which the Fund requests such notice, is not collected
in due course.
2.8 Payments of Fund Moneys. Upon receipt of proper instructions, which may
be their terms be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the following cases
only:
1) Upon the purchase of securities for the account of the Fund but only (a)
against the delivery of such securities to the Custodian (or any bank,
banking firm or trust company doing business in the United States or
abroad which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer. All securities accepted by the Custodian
shall be accompanied by payment of, or a "due bill" for, any dividends,
interest, or other distributions of the issuer, due the purchaser; (b) in
the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12 hereof; or (c)
in the case of repurchase agreements entered into between the Fund and
the Custodian, or another bank, (i) against delivery of the securities
either in certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund of securities
owned by the Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Fund;
2) In connection with conversion, exchange or surrender of securities
owned by the Fund as set forth on Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as set
forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent, and
legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of principal on any loan to the Fund upon receipt of
the collateral, if any, for such loan and upon the surrender of any
note or notes evidencing such loan;
6) For the payment of any dividends declared pursuant to the governing
documents of the Fund;
7) For the repayment of any collateral upon the return of securities
loaned or payment to return excess collateral to the borrower of such
securities;
8) For any other proper purpose, but only upon receipt of, in addition to
proper instructions, a certified copy of a resolution of the Trustees or
of the Executive Committee of the Fund signed by an officer of the Fund
and certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose, and naming
the person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to so
pay in advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian, except that in the case of repurchase agreements entered into by the
Fund with a bank which is a merger of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of written
evidence that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated nonproprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston or of the
safe-keeping receipt, provided that such securities have in fact been to
transferred by book-entry.
2.10 Payments for Repurchase or Redemptions of Shares of the Fund. From such
funds as may be available for the purpose but subject to the limitations of the
Fund's Agreement and Declaration of Trust and By-Laws and any applicable votes
of the Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders to the extent authorized and in
accordance with any procedures set forth in the Fund's current prospectus.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and certain
federal agencies, each of which is referred to herein as "a Securities System"
in accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities System
provided that such securities are represented in an account ("Account")
of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in the Securities System shall identify by book-
entry those securities belonging to the Fund;
3) The Custodian shall pay for the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold or loaned for the account of the
Fund upon (i) receipt of advice from the Securities System that payment
or collateral for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its request. The
Custodian shall furnish the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account of the
Fund on the next business day;
4) The Custodian shall promptly provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited
in the Securities System;
5) The Custodian shall have received the initial or annual certificate, as
the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the Custodian
shall be liable to the Fund for any loss or damage to the Fund resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss of damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Fund all written information
received by the Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialed by one or more person or persons
as the Trustees of the Fund shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions pursuant to
written authorizations and procedures agreed to by the Fund and the Custodian if
the Custodian reasonably believes such oral instructions to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Trustees of the Fund accompanied by a detailed
description of procedures approved by the Trustees, Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices unless the Custodian indicates within two days after receipt
of such procedures that it objects to such procedures.
2.17 Actions Permitted without Express Authority. The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
contract, provided that all such payments shall be promptly accounted for
to the Fund;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise directed
by the Trustees of the Fund.
2.18 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument or
paper reasonably believed by it to be genuine and to have been properly executed
by or on behalf of the Fund. The Custodian may receive and accept a certified
copy of a vote of the Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Trustees pursuant to the Fund's Agreement
and Declaration of Trust as described in any vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Trustees of the Fund to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the daily income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certification numbers in such
tabulations. The Custodian shall provide to the Fund as of the end of each month
a list of all securities transactions that remain unsettled at such time.
5. Opinion of Fund's Independent Accountant.
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to the Fund's activities hereunder in
connection with the preparation of the Fund's Form N-1 and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, which shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Fund, to provide reasonable assurance that any
material in adequacies would be disclosed by such examination, and, if there are
no such inadequacies, shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
8. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Custodian shall
be held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Custodian may require the Fund, as a prerequisite to requiring
the Custodian, to take such action, and the Fund shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than one hundred
twenty (120) days after the date of such delivery or mailing; provided, however
that the Custodian shall not act under Section 2.12 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Trustees of the Fund have approved the initial use of a particular
Securities System and the receipt of an annual certificate of the Secretary or
an Assistant Secretary that the Trustees have reviewed the use by the Fund of
such Securities System, as required in each case by Rule 17f-4 under the
Investment Company Act of 1940, as amended; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Agreement and
Declaration of Trust, and further provided, that the Fund may at any time by
action of its Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Trustees of the
Fund, deliver at the office of the Custodian such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owning to
failure of the Fund to procure the certified copy of vote referred to or of the
Trustees to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Agreement and Declaration of Trust of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
13. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
14. Multiple Series.
Notwithstanding any other provision hereof, the rights, obligations and
remedies under this Contract of the parties hereto shall constitute rights,
obligations and remedies only with respect to the Series and the assets of the
Series, and no other series of the Fund shall have any rights, obligations or
remedies under this Contract.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 24th day of March, 1994.
SEAL
ATTEST CGM TRUST
/s/ Leslie A. Lake /s/ Robert L. Kemp
- ---------------------------------- ------------------------------------------
President
SEAL
ATTEST STATE STREET BANK AND
TRUST COMPANY
/s/ Illegible /s/ Illegible
- ---------------------------------- ------------------------------------------
Assistant Secretary Executive Vice President
A copy of the Agreement and Declaration of Trust establishing CGM Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the Fund
on behalf of the Fund by officers of the Fund as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any trustees, officers or shareholders individually but are binding only
upon the assets and property to the Fund.
YP-6712/c
9/28/93
<PAGE>
EXHIBIT (8)(F)
CUSTODIAN CONTRACT
Between
CGM TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Employment of Custodian and Property to be Held by It .............. (1)
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian ...................................................... (2)
2.1 Holding Securities ........................................ (2)
2.2 Delivery of Securities .................................... (2)
2.3 Registration of Securities ................................ (4)
2.4 Bank Accounts ............................................. (4)
2.5 Payments for Shares ....................................... (5)
2.6 Investment and Availability of Federal Funds .............. (5)
2.7 Collection of Income ...................................... (5)
2.8 Payment of Fund Moneys .................................... (6)
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased ................................................. (7)
2.10 Payments for Repurchase or Redemptions of Shares of the
Fund ..................................................... (8)
2.11 Appointment of Agents .................................... (8)
2.12 Deposit of Fund Assets in Securities Systems ............. (9)
2.13 Ownership Certificates for Tax Purposes .................. (10)
2.14 Proxies .................................................. (10)
2.15 Communications Relating to Fund Portfolio Securities ..... (11)
2.16 Proper Instructions ...................................... (11)
2.17 Actions Permitted without Express Authority .............. (12)
2.18 Evidence of Authority .................................... (12)
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income ...................... (13)
4. Records ............................................................ (13)
5. Opinion of Fund's Independent Accountant ........................... (14)
6. Reports to Fund by Independent Public Accounts ..................... (14)
7. Compensation of Custodian .......................................... (15)
8. Responsibility of Custodian ........................................ (15)
9. Effective Period, Termination and Amendment ........................ (16)
10. Successor Custodian ................................................ (17)
11. Interpretive and Additional Provisions ............................. (18)
12. Massachusetts Law to Apply ......................................... (18)
13. Prior Contracts .................................................... (18)
14. Multiple Series .................................................... (18)
<PAGE>
CUSTODIAN CONTRACT
This Contract between CGM Trust, a business trust organized and existing
under the laws of Massachusetts, having its principal place of business at One
International Place, Boston, Massachusetts, 02110 (hereinafter called the
"Fund") and STATE STREET BANK AND TRUST COMPANY, having its usual place of
business at 225 Franklin Street, Boston, Massachusetts, 02110 (hereinafter
called the "Custodian),
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows
1. Employment of Custodian and Property to be Held by It.
The Fund hereby employs the Custodian as the custodian of its assets held in
CGM Realty Fund, a series of the Fund (the "Series"), pursuant to the provisions
of the Fund's By-Laws. The Fund agrees to deliver to the Custodian all
securities and cash owned by the Series, and all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Series from time to time, and the cash consideration received by it
for such new or treasury shares of common stock, $1.00 par value ("Shares"), of
the Series as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Fund held or received by the Fund and not
delivered to the Custodian.
The Custodian may from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Trustees of the Fund certified
to the Custodian in the manner set forth in Section 2.18 hereof, and provided
that the Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian. Notwithstanding the foregoing,
each approval by the Board of Trustees of the Fund of the employment of a
particular sub-custodian shall not relieve the Custodian of its obligations to
exercise reasonable care in selecting such sub-custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian.
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all securities
owned by the Fund, other than securities which are maintained in a "Securities
System" as defined in Section 2.12 hereof.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of proper instructions, which may by
their terms be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;
5) To the Issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the Issuer thereof, or its agent, for transfer into the name of
the Fund or into the name of any nominee or nominees of the Fund or
the Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, or any such case, the new securities are to be
delivered to the Custodian;
7) To the broker selling the same for examination in accordance with the
"street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to,be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities made by the
Fund, but only against receipt by the Custodian of adequate
collateral as set forth in proper instructions from the Fund, which
collateral may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities or in any
other form approved in a vote of the Board of Trustees of the Fund
certified to the Custodian in the manner set forth in Section 2.18
hereof;
11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed or to provide additional collateral if it
is required to secure a borrowing already made;
12) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the Fund's currently effective
prospectus, in satisfaction of requests by holders of Shares for
repurchase or redemption; and
13) For any other proper trust purpose, but only upon receipt of, in
addition to proper instructions, a certified copy of a resolution of
the Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purposes to be
proper trust purposes, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Fund, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other registered
investment companies in the same Mutual Fund group as the Fund, or in the name
or nominee name of any agent appointed pursuant to Section 2.11 or in the name
or nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the terms of
this Contract shall be in "street" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by vote of a
majority of the Trustees of the Fund certified to the Custodian in the manner
set forth in Section 2.18 hereof. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
2.5 Pavments for Shares. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and deposit into
the Fund's account such payments as are received for Shares of the Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the receipt of
proper instructions,
1) invest, in such instruments as may be set forth in such instructions
on the same day as received, all federal funds received after a time
agreed upon between the Custodian and the Fund; and
2) make federal funds available to the Fund as of specified times agreed
upon from time to time by the Fund and the Custodian in the amount of
cheeks received in payment for Shares of the Fund which cheeks are
deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis
all income and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder.
In any case in which the Custodian does not receive any due and unpaid
such income within a reasonable time after it has made proper demands for the
same (which shall be presumed to consist of at least three demand letters and at
least one telephonic demand), it shall so notify the Fund in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto and to telephonic demands, and await proper
instructions; the Custodian shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction. It shall
also notify the Fund as soon as reasonably practicable whenever income due on
securities, in respect to which the Fund requests such notice, is not collected
in due course.
2.8 Payment of Fund Moneys. Upon receipt of proper instructions, which
may by their terms be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the following cases
only:
1) Upon the purchase of securities for the account of the Fund but only
(a) against the delivery of such securities to the Custodian (or any
bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment Company Act
of 1940, as amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the name
of the Fund or in the name of a nominee of the Custodian referred to
in section 2.3 hereof or in proper form for transfer. All securities
accepted by the Custodian shall be accompanied by payment of, or a
"due bill" for, any dividends, interest, or other distributions of
the issuer, due the purchaser; (b) in the case of-a purchase effected
through a Securities System, in accordance with the conditions set
forth in Section 2.12 hereof; or (c) in the case of repurchase
agreements entered into between the Fund and the Custodian, or
another bank, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Fund;
2) In connection with conversion, exchange or surrender of securities
owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as set
forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account
of the Fund: interest, taxes, management, accounting, transfer
agent, and legal fees, and operating expenses of the Fund whether or
not such expenses are to be in whole or part capitalized or treated
as deferred expenses;
5) For the payment of principal on any loan to the Fund upon receipt of
the collateral, if any, for such loan and upon the surrender of any
note or notes evidencing such loan;
6) For the payment of any dividends declared pursuant to the governing
documents of the Fund;
7) For the repayment of any collateral upon the return of securities
loaned or payment to return excess collateral to the borrower of such
securities;
8) For any other proper purpose, but only upon receipt of, in addition
to proper instructions, a certified copy of a resolution of the
Trustees or of the executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose
to be a proper purpose, and naming the person or persons to whom such
payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for the account
of the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to so
pay in advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian, except that in the case of repurchase agreements entered into by the
Fund with a bank which is a merger of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of written
evidence that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston or of the
safe-keeping receipt, provided that such securities have in fact been so
transferred by book-entry.
2.10 Payments for Repurchase or Redemptions of Shares of the Fund. From
such funds as may be available for the purpose but subject to the limitations of
the Fund's Agreement and Declaration of Trust and By-Laws and any applicable
votes of the Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders to the extent authorized and in
accordance with any procedures set forth in the Fund's current prospectus.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, each of which is referred to herein as "a Securities
System" in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities System
provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in the Securities System shall identify by book
entry those securities belonging to the Fund;
3) The Custodian shall pay for the Fund upon (i) receipt of advice from
the Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account of the
Fund. The Custodian shall transfer securities sold or loaned for the
account of the Fund upon (i) receipt of advice from the Securities
System that payment or collateral for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System
of transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be provided
to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in
the form of a written advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's transactions
in the Securities System for the account of the Fund on the next
business day;
4) The Custodian shall promptly provide the Fund with any report
obtained by the Custodian on the Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual certificate,
as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian. shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of the Fund,
it shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the Securities System or any other
person which the Custodian may have as a consequence of any such loss
or damage if and to the extent that the Fund has not been made whole
for any such loss or damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Fund all written information
received by the Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialed by one or more person or persons
as the Trustees of the Fund shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions pursuant to
written authorizations and procedures agreed to by the Fund and the Custodian if
the Custodian reasonably believes such oral instructions to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Trustees of the Fund accompanied by a detailed
description of procedures approved by the Trustees, Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices unless the Custodian indicates within two days after receipt
of such procedures that it objects to such procedures.
2.17 Actions Permitted without Express Authority. The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
contract, provided that all such payments shall be promptly accounted
for to the Fund;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as
otherwise directed by the Trustees of the Fund.
2.18 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other instrument
or paper reasonably believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may receive and accept a
certified copy of a vote of the Trustees of the Fund as conclusive evidence (a)
of the authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Trustees pursuant to the Fund's Agreement
and Declaration of Trust as described in any vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Trustees of the Fund to keep the books
of account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the daily income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations. The Custodian shall provide to the Fund as of the end of each month
a list of all securities transactions that remain unsettled at such time.
5. Opinion of Fund's Independent Accountant.
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to the Fund's activities hereunder in
connection with the preparation of the Fund's Form N-1A and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
6. Reports to Fund by Independent Public Accounts.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, which shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Fund, to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
8. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Custodian may require the Fund, as a prerequisite to requiring
the Custodian to take such action, and the Fund shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
9. Effective Period. Termination and Amendment.
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than one hundred twenty (120) days after the date of such delivery or mailing;
provided; however, that the Custodian shall not act under Section 2.12 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Trustees of the Fund have approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Trustees have reviewed the use
by the Fund of such Securities System, as required in each case by Rule 17f-4
under the Investment Company Act of 1940, as amended; provided further, however,
that the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Agreement and
Declaration of Trust, and further provided, that the Fund may at any time by
action of its Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Trustees of the Fund,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Trustees of
the Fund, deliver at the office of the Custodian such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owning to
failure of the Fund to procure the certified copy of vote referred to or of the
Trustees to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Agreement and Declaration of Trust of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
13. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
14. Multiple Series.
Notwithstanding any other provision hereof, the rights, obligations and
remedies under this Contract of the parties hereto shall constitute rights,
obligations and remedies only with respect to the Series and the assets of the
Series, and no other series of the Fund shall have any rights, obligations or
remedies under this Contract.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 13th day of May, 1994.
SEAL
ATTEST CGM TRUST
Leslie A. Lake Robert L. Kemp
- ------------------------------ -------------------------------
President
SEAL
ATTEST STATE STREET BANK AND TRUST
COMPANY
[illegible] [illegible]
- ------------------------------ -------------------------------
Assistant Secretary Executive Vice President
A copy of the Agreement and Declaration of Trust establishing CGM Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Series on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any trustees, officers or shareholders individually but are
binding only upon the assets and property belonging to the Series.
<PAGE>
EXHIBIT (9)(A)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
LOOMIS-SAYLES MUTUAL FUND
AND
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
---
Article 1 Terms of Appointment; Duties of the Bank .................... 1
Article 2 Fees and Expenses ........................................... 5
Article 3 Representations and Warranties of the Bank .................. 6
Article 4 Representations and Warranties of the Fund .................. 7
Article 5 Indemnification ............................................. 7
Article 6 Covenants of the Trust and the Bank ......................... 11
Article 7 Termination of Agreement .................................... 12
Article 8 Assignment .................................................. 12
Article 9 Amendment ................................................... 13
Article 10 Massachusetts Law to Apply .................................. 13
Article 11 Entire Agreement ............................................ 13
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of June, 1987, by and between LOOMIS-
SAYLES MUTUAL FUND, a Massachusetts business trust (the "Trust"), having its
principal office and place of business at One Financial Center, Boston,
Massachusetts 02111, 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 Trust, on behalf of its Original Series (the "Fund"), desires
to appoint the Bank as its transfer agent, dividend disbursing agent 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 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement, the
Trust 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 beneficial
interest ("Shares"), dividend disbursing agent 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 Trust and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to
the Authorized Custodian 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 therefor to
the Custodian;
(iv) 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;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions; upon receipt of proper
request for transfer and surrender to it of Share certificates in
proper form for transfer, the Bank is authorized to transfer
Shares on the records of the Trust maintained by it from time to
time and upon cancellation of surrendered certificates to credit a
like amount of Shares to the transferee and to countersign, issue
and deliver new certificates, if requested;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Trust;
(vii) Maintain records of account for and advise the Trust and its
Shareholders as to the foregoing;
(viii) 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 issued and outstanding. Bank shall also provide the
Trust on a regular basis with the total number of Shares which are
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 state blue sky laws relating
to the issue or sale of such Shares, which functions shall be the
sole responsibility of the Trust; and
(ix) If a Shareholder of uncertified Shares requests the issuance of a
Share certificate or the registration of a pledge of such Shares,
the Bank, as Transfer Agent, shall countersign and mail by first
class mail a Share certificate to the Shareholder at his address
as set forth on the transfer books of the Trust, subject to any
other instructions for delivery of certificates which the Trust
may give to the Bank with respect to certificates representing
newly purchased Shares, and subject to the limitation that no
certificates representing newly purchased Shares shall be mailed
until the cash purchase price of the Shares has been deposited in
the bank account of the Fund maintained by the Custodian.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), the Bank shall: (i) perform all of the customary services of a
transfer agent, dividend disbursing agent 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, receiving and tabulating proxies, mailing Shareholder
reports and prospectuses to current Shareholders, withholding taxes on
non-resident alien accounts, withholding income dividends, capital gains
distributions and redemption proceeds as required by federal withholding
regulations, 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 Trust to monitor the total number of Shares sold in each state. The
Trust shall (i) identify to the Bank in writing those Fund 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 blue sky state registration status of the
Trust and the Fund is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Trust or the Fund, as
appropriate, and the reporting of such transactions to the Trust as provided
above.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Trust and the Bank.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement, the Trust
agrees on behalf of each of the Fund, 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 Trust and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Trust agrees,
on behalf of the Fund, to reimburse the Bank for out-of-pocket expenses 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 Trust, will be reimbursed by the Trust on behalf of the
Fund.
2.03 The Trust agrees, on behalf of the Fund, to pay all fees and
reimbursable expenses within five days following the mailing 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
Trust on behalf of 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 Trust 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 business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust, as amended (the "Declaration of Trust") and By-Laws to
enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end, diversified management investment company registered
under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 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.
4.06 The beneficial interest in the Fund is divided into an unlimited number
of Shares of beneficial interest, without a par value.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Trust on behalf of 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 Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Trust hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records and documents which (i) are received by the Bank or its
agents or subcontractors and furnished to it by or on behalf of the Fund, and
(ii) have been prepared and/or maintained by the Fund or any other person or
firm on behalf of the Fund.
(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.
5.02 The Bank shall indemnify and hold the Trust harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Trust 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 without
negligence and in good faith 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 Trust, 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 Trust, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Trust. 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 registrar, or of a co-transfer
agent or co-registrar.
5.04 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. The Bank shall use its best efforts to minimize the likelihood of
such damage resulting from the events described in the immediately preceding
sentence and if such damage occurs, the Bank shall use its best efforts to
mitigate the effects of such events.
5.05 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.06 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Convenants of the Trust and the Bank
6.01 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Trust
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the trust 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.
6.03 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.
6.04 The Bank and the Trust 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.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust relating to the Fund, the Bank will endeavor to
notify the Trust and to secure instructions from an authorized officer of the
Trust 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 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Trust on behalf of the Fund. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such termination.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.03 The Bank may, without further consent on the part of the Trust,
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 ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a transfer
agent pursuant to Section 17A(c)(1); provided, however, that the Bank shall be
as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 11 Entire Agreement
11.01 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
LOOMIS-SAYLES MUTUAL FUND
By: /s/ [Illegible]
----------------------------------
President
ATTEST:
/s/ [Illigible]
----------------------------------
Assistant Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ W.J. Hayes
------------------------------
Vice President
ATTEST:
/s/ [Illegible]
----------------------------------
Assistant Secretary
A copy of the Agreement and Declaration of Trust establishing Loomis-Sayles
Mutual Fund is on file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that this Agreement is executed with respect to the
Fund on behalf of the Fund by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers and shareholders individually but
are binding only upon the assets and property belonging to the Fund.
<PAGE>
STATE STREET BANK AND TRUST COMPANY
FEE SCHEDULE FOR SERVICES AS
PLAN, TRANSFER AND DIVIDEND DISBURSING AGENT
LOOMIS-SAYLES MUTUAL FUND
- ------------------------------------------------------------------------------
Annual Maintenance ......................................... $4.80 per account
The annual maintenance charge includes the processing of all transactions
and correspondence. The fee is billable on a monthly basis at the rate of
1/12 of the annual fee. A charge is made for an account in the month that
an account opens or closes.
Out-of-Pocket Expenses
Out-of-Pocket Expenses include but are not limited to: postage, forms,
telephone, microfilm, microfiche and expenses incurred at the specific
direction of the Fund.
A charge is made for forgery coverage of the deductible amount of State
Street Bankers Blanket Bond.
Postage for mass mailings is due seven days in advance of the mailing date.
Monthly Minimum Fee Schedule
No minimum will be assessed since this is part of the NEL Fund complex.
Other Services (as requested)
Appraisal Service -- $.25/month/group statement
-- Assume Loomis maintains cross index file
ARMS -- $.06/master mailing record/month -- Assumes Loomis data enters
mailing list
LOOMIS-SAYLES MUTUAL FUND STATE STREET BANK & TRUST COMPANY
/s/ [Illegible] /s/ E. Hawkes, Jr.
- ---------------------------------- --------------------------------------
Treasurer Vice-President
Date [Illegible]
<PAGE>
EXHIBIT (9)(B)
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Re: Supplement to Agency Agreement with Respect to
CGM Mutual Fund, a Series of CGM Trust
Ladies and Gentlemen:
CGM Mutual Fund (formerly, Loomis-Sayles Mutual Fund) hereby advises you
that, effective December 20, 1991, (i) the name of CGM Mutual Fund has been
changed to CGM Trust (the "Trust"); (ii) the Trust has created a new series of
shares of beneficial interest designated as CGM Fixed Income Fund; and (iii) the
Trust has redesignated its Original Series as CGM Mutual Fund (the "Mutual Fund
Series").
The Trust desires that State Street Bank and Trust Company ("State Street")
continue to serve as Transfer Agent with respect to the shares of beneficial
interest of the Mutual Fund Series, Dividend Disbursing Agent for the Mutual
Fund Series and Plan Agent for shareholders of the Mutual Fund Series pursuant
to the terms and conditions of the Agency Agreement by and between the Trust and
State Street, dated June 1, 1987 (the "Agency Agreement"), subject to the
following: (A) the appointment of, and service by, State Street as Transfer
Agent, Dividend Disbursing Agent and Plan Agent under the Agency Agreement shall
apply only with respect to the Mutual Fund Series and its shares of beneficial
interest and the holders thereof; and (B) notwithstanding any other provision of
the Agency Agreement, the rights, obligations and remedies of the parties
thereto shall constitute rights, obligations and remedies only with respect to
the Mutual Fund Series (and its shares of beneficial interest and the holders
thereof) and the assets of the Mutual Fund Series, and no other series, shares
or shareholders of the Trust shall have any rights, obligations or remedies
under the Agency Agreement.
Please acknowledge your agreement to serve as Transfer Agent with respect to
the shares of beneficial interest of the Mutual fund Series, Dividend Disbursing
Agent for the Mutual Fund Series and Plan Agent for shareholders of the Mutual
Fund Series, in accordance with the terms and conditions of the Agency
Agreement, as supplemented hereby, by executing this letter agreement in the
space provided below and returning it to the undersigned.
Very Truly Yours,
CGM TRUST
By: /s/Robert L. Kemp
--------------------------------
Name: Robert L. Kemp
Title: President
Agreed and accepted:
STATE STREET BANK AND TRUST COMPANY
By: /s/Ronald E. Logue
-------------------------------------------
Name: Ronald E. Logue
Title: Senior Vice President
ZP-7663/C
CR .002
<PAGE>
EXHIBIT (9)(C)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
CGM TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank .................... 1
Article 2 Fees and Expenses ........................................... 5
Article 3 Representations and Warranties of the Bank .................. 6
Article 4 Representations and Warranties of the Fund .................. 7
Article 5 Indemnification ............................................. 7
Article 6 Covenants of the Trust and the Bank ......................... 11
Article 7 Termination of Agreement .................................... 12
Article 8 Assignment .................................................. 13
Article 9 Amendment ................................................... 13
Article 10 Massachusetts Law to Apply .................................. 13
Article 11 Entire Agreement ............................................ 13
Article 12 Multiple Series ............................................. 13
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 6th day of March 1992, by and between CGM
Trust, a Massachusetts business trust (the "Trust"), having its principal office
and place of business at One International Place, Boston, Massachusetts 02110,
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 Trust, on behalf of CGM Fixed Income Fund, a series of the
Trust (the "Series" or the "Fund") desires to appoint the Bank as the Fund's
transfer agent, dividend disbursing agent 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 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement,
the Trust 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
beneficial interest ("Shares"), dividend disbursing agent 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 Trust and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to
the Authorized Custodian 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 therefor to
the Custodian;
(iv) 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;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions; upon receipt of proper
request for transfer and surrender to it of Share certificates in
proper form for transfer, the Bank is authorized to transfer
Shares on the records of the Trust maintained by it from time to
time and upon cancellation of surrendered certificates to credit a
like amount of Shares to the transferee and to countersign, issue
and deliver new certificates, if requested;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Trust;
(vii) Maintain records of account for and advise the Trust and its
Shareholders as to the foregoing;
(viii) 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 issued and outstanding. Bank shall also provide
the Trust on a regular basis with the total number of Shares which
are 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 state blue sky laws relating
to the issue or sale of such Shares, which functions shall be the
sole responsibility of the Trust; and
(ix) If a Shareholder of uncertified Shares requests the issuance of a
Share certificate or the registration of a pledge of such Shares,
the Bank, as Transfer Agent, shall countersign and mail by first
class mail a Share certificate to the Shareholder at his address
as set forth on the transfer books of the Trust, subject to any
other instructions for delivery of certificates which the Trust
may give to the Bank with respect to certificates representing
newly purchased Shares, and subject to the limitation that no
certificates representing newly purchased Shares shall be mailed
until the cash purchase price of the Shares has been deposited in
the bank account of the Fund maintained by the Custodian.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), the Bank shall: (i) perform all of the customary services
of a transfer agent, dividend disbursing agent 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, receiving and tabulating proxies,
mailing Shareholder reports and prospectuses to current Shareholders,
withholding taxes on non-resident alien accounts, withholding income dividends,
capital gains distributions and redemption proceeds as required by federal
withholding regulations, 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 Trust to monitor the total number of Shares sold in each state. The
Trust shall (i) identify to the Bank in writing those Fund 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 blue sky state registration status of the
Trust and the Fund is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Trust or the Fund, as
appropriate, and the reporting of such transactions to the Trust as provided
above.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Trust and the Bank.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement, the Trust
agrees on behalf of each of the Fund, 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 Trust and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Trust
agrees, on behalf of the Fund, to reimburse the Bank for out-of-pocket expenses
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 Trust, will be reimbursed by the Trust on
behalf of the Fund.
2.03 The Trust agrees, on behalf of the Fund, to pay all fees and
reimbursable expenses within five days following the mailing 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
Trust on behalf of 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 Trust 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 business trust duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust, as amended (the "Declaration of Trust") and By-Laws to
enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 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.
4.06 The beneficial interest in the Fund is divided into an unlimited
number of Shares of beneficial interest, without a par value.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Trust on behalf of
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 Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Trust hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records and documents which (i) are received by the Bank or its
agents or subcontractors and furnished to it by or on behalf of the Fund, and
(ii) have been prepared and/or maintained by the Fund or any other person or
firm on behalf of the Fund.
(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.
5.02 The Bank shall indemnify and hold the Trust harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Trust 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 without
negligence and in good faith 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 Trust, 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 Trust, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Trust. 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 registrar, or of a co-transfer
agent or co-registrar.
5.04 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. The Bank shall use its best efforts to minimize the likelihood of
such damage resulting from the events described in the immediately preceding
sentence and if such damage occurs, the Bank shall use its best efforts to
mitigate the effects of such events.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Covenants of the Trust and the Bank
6.01 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Trust
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust 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.
6.03 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.
6.04 The Bank and the Trust 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.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust relating to the Fund, the Bank will endeavor to
notify the Trust and to secure instructions from an authorized officer of the
Trust 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 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Trust on behalf of the Fund. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such termination.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
8.03 The Bank may, without further consent on the part of the Trust,
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 ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a transfer
agent pursuant to Section 17A(c)(1); provided, however, that the Bank shall be
as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 11 Entire Agreement
11.01 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 12 Multiple Series
Notwithstanding any other provision hereof, the rights, obligations and
remedies under this Agreement of the parties hereto shall constitute rights,
obligations and remedies only with respect to the Series and the assets of the
Series, and no other series of the Trust shall have any rights, obligations or
remedies under this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
CGM Trust
BY: /s/ Robert L. Kemp
------------------------------
President
ATTEST:
/s/ Leslie A. Lake
- ---------------------------------
Vice President and Secretary
STATE STREET BANK AND TRUST COMPANY
BY: /s/ [Illegible]
------------------------------
Senior Vice President
ATTEST:
/s/ [Illegible]
- ---------------------------------
Assistant Secretary
A copy of the Agreement and Declaration of Trust establishing CGM Trust
is on file with the Secretary of The Commonwealth of Massachusetts, and notice
is hereby given that this Agreement is executed with respect to the Fund on
behalf of the Fund by officers of the Trust as officers and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the trustees, officers and shareholders individually but are binding only
upon the assets and property belonging to the Fund.
<PAGE>
STATE STREET BANK AND TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
Bank Fund
1. Receives orders for the purchase of Shares. X
2. Issue Shares and hold Shares in Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above directly with broker-dealers. X
5. Pay over monies to redeeming Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control book for
each issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X
15. Withhold taxes on U.S. resident and non-resident alien
accounts. X
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation statements
for Shareholders. X
18. Provide Shareholder account information. X
19. Blue sky reporting. X
*Such services are more fully described in Article 1.02(a), (b) and (c) of the
Agreement.
CGM Trust
BY: /s/ Robert L. Kemp
--------------------------------------
President
ATTEST:
/s/ Leslie A. Lake
- ------------------------------------
Vice President and Secretary
STATE STREET BANK AND TRUST COMPANY
BY: /s/ [Illegible]
--------------------------------------
Senior Vice President
ATTEST:
/s/ [Illegible]
- ------------------------------------
Assistant Secretary
<PAGE>
EXHIBIT (9)(D)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
CGM TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
-----
Article 1 Terms of Appointment; Duties of the Bank .................... 1
Article 2 Fees and Expenses ........................................... 5
Article 3 Representations and Warranties of the Bank .................. 6
Article 4 Representations and Warranties of the Fund .................. 7
Article 5 Indemnification ............................................. 7
Article 6 Covenants of the Trust and the Bank ......................... 11
Article 7 Termination of Agreement .................................... 12
Article 8 Assignment .................................................. 13
Article 9 Amendment ................................................... 13
Article 10 Massachusetts Law to Apply .................................. 13
Article 11 Entire Agreement ............................................ 13
Article 12 Multiple Series ............................................. 13
i0,0
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 24th day of March, 1994, by and between CGM Trust,
a Massachusetts business trust (the "Trust"), having its principal office and
place of business at One International Place, Boston, Massachusetts 02110, 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 Trust, on behalf of CGM American Tax Free Fund, a series of the
Trust (the "Series" or the "Fund"), desires to appoint the Bank as its transfer
agent, dividend disbursing agent 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 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Bank to act as, and the Bank agrees at act
as its transfer agent for the Fund's authorized and issued shares of beneficial
interest ("Shares"), dividend disbursing agent 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 is will perform the following services:
(a) In accordance with procedures established from time to time by agreement
between the Trust and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to
the Authorized Custodian 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 therefor to
the Custodian;
(iv) 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;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions; upon receipt of proper
request for transfer and surrender to it of Share certificates in
proper form for transfer, the Bank is authorized to transfer
Shares on the records of the Trust maintained by it from time to
time and upon cancellation of surrendered certificates to credit a
like amount of Shares to the transferee and to countersign, issue
and deliver new certificates, if requested;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Trust;
(vii) Maintain records of account for and advise the Trust and its
Shareholders as to the foregoing;
(viii) 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 issued and outstanding. Bank shall also provide the
Trust on a regular basis with the total number of Shares which are
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 state blue sky laws relating
to the issue or sale of such Shares, which functions shall be the
sole responsibility of the Trust; and
(ix) If a Shareholder of uncertified Shares requests the issuance of a
Share certificate or the registration of a pledge of such Shares,
the Bank, as Transfer Agent, shall countersign and mail by first
class mail a Share certificate to the Shareholder at his address
as set forth on the transfer books of the Trust, subject to any
other instructions for delivery of certificates which the Trust
may give to the Bank with respect to certificates representing
newly purchased Shares, and subject to the limitation that no
certificates representing newly purchased Shares shall be mailed
until the cash purchase price of the Shares has been deposited in
the bank account of the Fund maintained by the Custodian.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), the Bank shall: (i) perform all of the customary services of a
transfer agent, dividend disbursing agent 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, receiving and tabulating proxies, mailing Shareholder
reports and prospectuses to current Shareholders, withholding taxes on
non-resident alien accounts, withholding income dividends, capital gains
distributions and redemption proceeds as required by federal withholding
regulations, 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 Trust to monitor the total number of Shares sold in each state. The
Trust shall (i) identify to the Bank in writing those Fund 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 blue sky state registration status of the
Trust and the Fund is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Trust or the Fund, as
appropriate, and the reporting of such transactions to the Trust as provided
above.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Trust and the Bank.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement, the Trust
agrees on behalf of each of the Fund, 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 Trust and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Trust agrees,
on behalf of the Fund, to reimburse the Bank for out-of-pocket expenses 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 Trust, will be reimbursed by the Trust on behalf of the
Fund.
2.03 The Trust agrees, on behalf of the Fund, to pay all fees and
reimbursable expenses within five days following the mailing 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
Trust on behalf of 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 Trust 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 business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust, as amended (the "Declaration of Trust") and By-Laws to
enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end, diversified management investment company registered
under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 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.
4.06 The beneficial interest in the Fund is divided into an unlimited number
of Shares of beneficial interest, without a par value.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Trust on behalf of 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 Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Trust hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records and documents which (i) are received by the Bank or its
agents or subcontractors and furnished to it by or on behalf of the Fund, and
(ii) have been prepared and/or maintained by the Fund or any other person or
firm on behalf of the Fund.
(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.
5.02 The Bank shall indemnify and hold the Trust harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Trust 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 without
negligence and in good faith 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 Trust, 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 Trust, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Trust. 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 registrar, or of a co-transfer
agent or co-registrar.
5.04 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. The Bank shall use its best efforts to minimize the likelihood of
such damage resulting from the events described in the immediately preceding
sentence and if such damage occurs, the Bank shall use its best efforts to
mitigate the effects of such events.
5.05 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.06 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Convenants of the Trust and the Bank
6.01 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Trust
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust 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.
6.03 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.
6.04 The Bank and the Trust 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.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust relating to the Fund, the Bank will endeavor to
notify the Trust and to secure instructions from an authorized officer of the
Trust 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 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Trust on behalf of the Fund. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such termination.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.03 The Bank may, without further consent on the part of the Trust,
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 ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a transfer
agent pursuant to Section 17A(c)(1); provided, however, that the Bank shall be
as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 11 Entire Agreement
11.01 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 12 Multiple Series
Notwithstanding any other provision hereof, the rights, obligations and
remedies under this Agreement of the parties hereto shall constitute rights,
obligations and remedies only with respect to the Series and the assets of the
Series, and no other series of the Trust shall have any rights, obligations or
remedies under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
CGM Trust
BY: /s/ Robert L. Kemp
--------------------
President
ATTEST:
/s/Leslie A. Lake
-------------------------------------
Vice President
and Secretary
STATE STREET BANK AND TRUST COMPANY
BY: /s/[ILLEGIBLE]
-----------------------------
Executive Vice President
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------
Assistant Secretary
A copy of the Agreement and Declaration of Trust establishing CGM Trust is
on file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this Agreement is executed with respect to the Fund on behalf
of the Fund by officers of the Trust as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any of
the trustees, officers and shareholders individually but are binding only upon
the assets and property belonging to the Fund.
<PAGE>
STATE STREET BANK AND TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
<TABLE>
<CAPTION>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
<C> <S> <C> <C>
1. Receives orders for the purchase of Shares. X
2. Issue Shares and hold Shares in Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above directly with broker-dealers. X
5. Pay over monies to redeeming Shareholder. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control book for each issue X
of securities.
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X
15. Withhold taxes on U.S. resident and non-resident alien accounts. X
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation statements for Shareholders. X
18. Provide Shareholder account information. X
19. Blue sky reporting. X
</TABLE>
*Such services are more fully described in Article 1.02(a), (b) and (c) of the
Agreement.
CGM Trust
BY: /s/Robert L. Kemp
---------------------------
President
ATTEST:
/s/Leslie A. Lake
-----------------------------------------
Vice President and Secretary
STATE STREET BANK AND TRUST COMPANY
BY: /s/[ILLEGIBLE]
--------------------------
Executive Vice President
ATTEST:
/s/-----------------------------------
Assistant Secretary
<PAGE>
EXHIBIT (9)(E)
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this post-effective amendment to this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Know all men by these presents that each person whose signature appears
below constitutes and appoints Robert L. Kemp, G. Kenneth Heebner and Frank N.
Strauss, and each of them, as his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and in his name, place and stead, in
any and all capacities to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Robert L. Kemp President (Principal September 9, 1993
------------------------- Executive Officer)
Robert L. Kemp and Trustee
/s/ Frank N. Strauss Treasurer (Principal September 9, 1993
------------------------- Financial and
Frank N. Strauss Accounting Officer)
/s/ Peter O. Brown Trustee September 3, 1993
-------------------------
Peter O. Brown
/s/ Nicholas J. Grant Trustee September 9, 1993
-------------------------
Nicholas J. Grant
/s/ G. Kenneth Heebner Trustee September 9, 1993
-------------------------
G. Kenneth Heebner
/s/ Robert B. Kittredge Trustee September 9, 1993
-------------------------
Robert B. Kittredge
/s/ Laurens MacLure Trustee September 9, 1993
-------------------------
Laurens MacLure
/s/ James Van Dyke Quereau, Jr. Trustee September 2, 1993
-------------------------
James Van Dyke Quereau, Jr.
/s/ J. Baur Whittlesey Trustee September 9, 1993
-------------------------
J. Baur Whittlesey
<PAGE>
EXHIBIT (9)(F)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
CGM TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
-----
Article 1 Terms of Appointment ........................................ 1
Article 2 Fees and Expenses ........................................... 5
Article 3 Representations and Warranties of the Bank .................. 5
Article 4 Representations and Warranties of the Fund .................. 6
Article 5 Indemnification ............................................. 7
Article 6 Covenants of the Trust and the Bank ......................... 10
Article 7 Termination of Agreement .................................... 11
Article 8 Assignment .................................................. 11
Article 9 Amendment ................................................... 12
Article 10 Massachusetts Law to Apply .................................. 12
Article 11 Entire Agreement ............................................ 12
Article 12 Multiple Series ............................................. 12
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 13th day of May, 1994, by and between CGM Trust,
a Massachusetts business trust (the "Trust"), having its principal office and
place of business at One International Place, Boston, Massachusetts 02110, 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 Trust, on behalf of CGM Realty Fund, a series of the Trust
(the "Series" or the "Fund") desires to appoint the Bank as the Fund's transfer
agent, dividend disbursing agent 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 1 Terms of Appointment
1.01 Subject to the terms and conditions set forth in this Agreement, the
Trust 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 beneficial
interest ("Shares"), dividend disbursing agent 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 Trust and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to
the Authorized Custodian 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 therefor to
the Custodian;
(iv) 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;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions; upon receipt of proper
request for transfer and surrender to it of Share certificates in
proper form for transfer, the Bank is authorized to transfer
Shares on the records of the Trust maintained by it from time to
time and upon cancellation of surrendered certificates to credit a
like amount of Shares to the transferee and to countersign, issue
and deliver new certificates, if requested;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Trust;
(vii) Maintain records of account for and advise the Trust and its
Shareholders as to the foregoing;
(viii) 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 issued and outstanding. Bank shall also provide the
Trust on a regular basis with the total number of Shares which are
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 state blue sky laws relating
to the issue or sale of such Shares which functions shall be the
sole responsibility of the Trust; and
(ix) If a Shareholder of uncertified Shares requests the issuance of a
Share certificate or the registration of a pledge of such Shares,
the Bank, as Transfer Agent, shall countersign and mail by first
class mail a Share certificate to the Shareholder at his address
as set forth on the transfer books of the Trust, subject to any
other instructions for delivery of certificates which the Trust
may give to the Bank with respect to certificates representing
newly purchased Shares, and subject to the limitation that no
certificates representing newly purchased Shares shall be mailed
until the cash purchase price of the Shares has been deposited in
the bank account of the Fund maintained by the Custodian.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), the Bank shall: (i) perform all of the customary services of a
transfer agent, dividend disbursing agent 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, receiving and tabulating proxies, mailing Shareholder
reports and prospectuses to current Shareholders, withholding taxes on
non-resident alien accounts, withholding income dividends, capital gains
distributions and redemption proceeds as required by federal withholding
regulations, 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 Trust to monitor the total number of Shares sold in each state. The
Trust shall (i) identify to the Bank in writing those Fund 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 blue sky state registration status of the
Trust and the Fund is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Trust or the Fund, as
appropriate, and the reporting of such transactions to the Trust as provided
above.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Trust and the Bank.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement, the Trust
agrees on behalf of each of the Fund, 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 Trust and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Trust agrees,
on behalf of the Fund, to reimburse the Bank for out-of-pocket expenses 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 Trust, will be reimbursed by the Trust on behalf of the
Fund.
2.03 The Trust agrees, on behalf of the Fund, to pay all fees and
reimbursable expenses within five days following the mailing 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
Trust on behalf of 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 Trust 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 business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust, as amended (the "Declaration of Trust") and By-Laws to
enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end, diversified management investment company registered
under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 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.
4.06 The beneficial interest in the Fund is divided into an unlimited number
of Shares of beneficial interest, without a par value.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Trust on behalf of 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 Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Trust hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records and documents which (i) are received by the Bank or its
agents or subcontractors and furnished to it by or on behalf of the Fund, and
(ii) have been prepared and/or maintained by the Fund or any other person or
firm on behalf of the Fund.
(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.
5.02 The Bank shall indemnify and hold the Trust harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Trust 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 without
negligence and in good faith 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 Trust, 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 Trust, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Trust. 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 registrar, or of a co-transfer
agent or co-registrar.
5.04 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. The Bank shall use its best efforts to minimize the likelihood of
such damage resulting from the events described in the immediately preceding
sentence and if such damage occurs, the Bank shall use its best efforts to
mitigate the effects of such events.
5.05 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.06 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Convenants of the Trust and the Bank
6.01 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Trust
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust 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.
6.03 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.
6.04 The Bank and the Trust 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.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust relating to the Fund, the Bank will endeavor to
notify the Trust and to secure instructions from an authorized officer of the
Trust 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 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Trust on behalf of the Fund. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such termination.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.03 The Bank may, without further consent on the part of the Trust,
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 ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a transfer
agent pursuant to Section 17A(c)(1); provided, however, that the Bank shall be
as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 11 Entire Agreement
11.01 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 12 Multiple Series
Notwithstanding any other provision hereof, the rights, obligations and
remedies under this Agreement of the parties hereto shall constitute rights,
obligations and remedies only with respect to the Series and the assets of the
Series, and no other series of the Trust shall have any rights, obligations or
remedies under this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
CGM Trust
BY: /s/ Robert L. Kemp
-----------------------------
President
ATTEST:
/s/ Leslie A. Lake
---------------------------------
Vice President and Secretary
STATE STREET BANK AND TRUST COMPANY
BY: /s/ [ILLEGIBLE]
-----------------------------
Executive Vice President
ATTEST:
/s/ [ILLEGIBLE]
---------------------------------
Assistant Secretary
A copy of the Agreement and Declaration of Trust establishing CGM Trust is
on file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this Agreement is executed with respect to the Series on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers and shareholders individually but are binding
only upon the assets and property belonging to the Series.
<PAGE>
EXHIBIT (10)
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
February 27, 1997
CGM Trust
One International Place
Boston, MA 02110
Ladies and Gentlemen:
As counsel to CGM Trust (the "Trust"), a Massachusetts business trust,
we have been asked to render our opinion with respect to the registration,
pursuant to Section 24(e) of the Investment Company Act of 1940, of 3,078,137
shares of beneficial interest of the Trust (the "Shares"), representing
interests in the CGM Mutual Fund series of the Trust by means of Post-Effective
Amendment No. 82 (the "Amendment") to the Trust's Registration Statement on Form
N-1A (Registration No. 2-10653) filed with the Securities and Exchange
Commission.
We have examined the Agreement and Declaration of Trust dated January
23, 1997, the By-Laws of the Trust, the records of certain meetings of the
Trustees or consents in lieu therof, the Prospectus and Statement of Additional
Information contained in the Amendment, and such other documents, records and
certificates as we have deemed necessary for the purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Shares, when
sold in accordance with the terms of the Prospectus and Statement of Additional
Information in effect at the time of sale, will be legally issued, fully paid
and non-assessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Amendment.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
363782.c1
<PAGE>
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 82 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated February 7, 1997 relating to the financial
statements and the financial highlights appearing in the December 31, 1996
Annual Reports to Shareholders of the CGM Mutual Fund, CGM Realty Fund, CGM
Fixed Income Fund and CGM American Tax Free Fund, which are also incorporated by
reference in the Registration Statement. We also consent to the references to us
under the heading "Financial Highlights" in the Prospectuses and under the
heading "Independent Accountants" in the Statements of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
February 27, 1997
<PAGE>
Exhibit 14
THE CGM FUNDS
- ------------------------------------------
IRA
PLAN DOCUMENT AND
DISCLOSURE STATEMENT
- ------------------------------------------
- ------------------------------------------
INSIDE . . .
- ------------------------------------------
- ------------------------------------------
PAGE 1 INVESTMENT OPTIONS
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- ------------------------------------------
PAGE 2 Q&As ABOUT IRAs
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- ------------------------------------------
PAGE 4 DISCLOSURE STATEMENT
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- ------------------------------------------
PAGE 9 PLAN DOCUMENT
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IRA2/97
<PAGE>
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INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
NO-LOAD MUTUAL FUNDS
The no-load funds eligible for your IRA investments are listed below. You may
invest either in one, or in a combination of the funds best suited to your
circumstances. The funds have different investment objectives and offer a range
of investment income and appreciation potential. Be sure to read each fund's
prospectus before you invest or send money.
STOCKS AND BONDS
CGM MUTUAL FUND is a flexibility managed balanced fund that seeks reasonable
long-term capital appreciation with a prudent approach to protection of capital
from undue risks. Consideration is given to the production of current income in
the selection of stocks and bonds for the Fund's portfolio.
BONDS
CGM FIXED INCOME FUND is a "total return" bond fund. The Fund's objective is to
maximize total return by investing in debt securities and preferred stocks that
provide current income, capital appreciation or a combination of both income and
appreciation.
MONEY MARKET
NEW ENGLAND CASH MANAGEMENT TRUST is a money market fund that seeks to provide
maximum current income consistent with preservation of capital. The Money Market
Series invests in a variety of high quality money market instruments. The U.S.
Government Series invests only in obligations backed by the full faith and
credit of the U.S. Government and in related repurchase agreements.
Both Series are managed by Back Bay Advisors, L.P.
STOCKS
CGM REALTY FUND is a mutual fund that seeks above-average income and long-term
growth of capital. The Fund pursues its objective by investing primarily in
equity securities of companies in the real estate industry.
CGM CAPITAL DEVELOPMENT FUND is an aggressively managed growth fund that seeks
long-term capital appreciation in a diverse group of companies and industries
believed to provide opportunities for capital development. Note: Shares are
available only to certain individuals. Eligibility categories are listed below.
ELIGIBILITY FOR CGM CAPITAL DEVELOPMENT FUND
Only shareholders of the Fund as of September 24, 1993 who have remained
shareholders continuously since that date may purchase additional shares of the
Fund. The Fund reserves the right to reject any purchase order. This policy
supersedes all previous eligibility requirements.
Fund shares are not generally available to other persons except in special
circumstances that have been approved by, or under the authority of, the Board
of Trustees of the Fund. The special circumstances currently approved by the
Board of Trustees of the Fund are limited to the offer and sale of shares of the
Fund to the following additional persons: trustees of the Fund, employees of the
Investment Manager and counsel to the Fund and the Investment Manager.
- --------------------------------------------------------------------------------
QUESTIONS AND ANSWERS ABOUT IRAs
- --------------------------------------------------------------------------------
ELIGIBILITY
WHO CAN OPEN AN IRA?
Anyone who earns income and is still under age 70 1/2 at the end of the calendar
year can set up an IRA.
CAN I SIMULTANEOUSLY HAVE TWO OR MORE IRA ACCOUNTS?
Yes. However, no more than a total of $2,000 may be contributed to your IRA
accounts in any one tax year.
CAN I CONTRIBUTE TO MY SPOUSE'S IRA?
Yes. A separate IRA (a "spousal IRA") can be set up for the benefit of your
spouse if
- --you have compensation or earned income,
- --your spouse has not attained age 70 1/2, and
- --you and your spouse file a joint income tax return.
CAN MY CHILD, WHO IS A MINOR, ESTABLISH AN IRA ACCOUNT?
Yes, provided he or she has earned income. The application must be signed by
both the parent and child.
CONTRIBUTIONS
WHAT IS THE MAXIMUM ANNUAL CONTRIBUTION I CAN MAKE TO MY IRA (DEDUCTIBLE PLUS
NON-DEDUCTIBLE)?
You may contribute $2,000 or 100% of your earned income, whichever is less.
Please refer to IRS Publication 590 for information about computing the amount
that may be deductible.
WHAT IS THE MAXIMUM ANNUAL CONTRIBUTION THAT CAN BE MADE TO MY IRA AND MY
SPOUSE'S IRA?
A total of $4,000 or 100% of your joint earned income, whichever is less, can be
contributed to your own IRA and your spouse's IRA. The contributions may be
divided between the two separate IRAs in any way you wish, provided neither IRA
receives more than $2,000, and the contribution to the higher earning spouse's
IRA does not exceed his or her earned income.
CAN I CONTRIBUTE LESS THAN THE MAXIMUM?
Yes, you can contribute any amount you wish up to the maximum amount for your
IRA (and your spouse's IRA) for each taxable year. CGM requires an initial
investment of $1,000 per account, and a $50 minimum for each subsequent
investment.
CAN BOTH A HUSBAND AND WIFE WHO WORK HAVE IRAS?
Yes. If you both have earned income, you can each have your own IRA.
WHEN DO I MAKE MY CONTRIBUTION?
You can make a contribution for a particular year any time from the beginning of
the tax year until April 15 of the following year.
TO WHOM SHOULD I MAKE MY CHECK PAYABLE?
Make your check payable to the fund in which you want to invest. If you are
investing in more than one fund, enclose a check for each fund. Be sure to add
$5 to your investment to establish your IRA.
WHEN WILL I RECEIVE A STATEMENT CONFIRMING MY INITIAL INVESTMENT?
Upon receipt of your application and check, we will establish your account and
send you a confirmation statement.
DO I HAVE TO CONTRIBUTE TO AN IRA EACH YEAR?
No. You need not contribute to an IRA each year. You can also vary the amount
of contributions to your IRA when you do contribute.
WHAT IF I CONTRIBUTE MORE THAN THE MAXIMUM AMOUNT ALLOWED?
If you withdraw the excess contribution and its earnings before you file your
tax return (including extensions) for the year, you won't be subject to the 6%
penalty on the excess contribution described below. You will be subject,
however, to income taxes (and a 10% penalty tax if you are under age 59 1/2) on
the earnings of the excess contribution.
Another method for correcting the excess contribution is to leave the money in
your IRA and apply the excess to your next year's contribution. If you do that,
however, you would be subject to a 6% penalty tax on the excess contribution in
the year in which it was made and each subsequent year it remains an excess
contribution.
MAY I MAKE ANNUAL CONTRIBUTIONS TO AN IRA AFTER I REACH AGE 70 1/2?
No. If you reach age 70 1/2 by the end of the year, you will not be able to make
a regular contribution to your IRA. (You may make a rollover contribution,
however.) In addition, no contributions may be made to your spouse's IRA after
he or she reaches age 70 1/2.
TRANSFERS AND ROLLOVERS
HOW DO I TRANSFER ASSETS OR DIRECTLY ROLLOVER ASSETS TO CGM?
Complete the CGM IRA Account Application, Direct Rollover Form or IRA Transfer
Form and send them to The CGM Funds at the address on the back of this booklet,
along with a check for $5.
IF I ALREADY HAVE RECEIVED A CHECK FOR MY ROLLOVER, WHAT FORMS DO I SUBMIT?
Send the CGM IRA Account Application and your investment check, plus $5 to CGM.
WHEN WILL I RECEIVE A STATEMENT CONFIRMING MY TRANSFER OF ASSETS OR DIRECT
ROLLOVER?
Upon receipt of your application and transfer or rollover request we will then
establish your Account and send your current trustee and you a Letter of
Acceptance. Once we receive the proceeds of the transfer or rollover, we will
send you a confirmation statement. Asset transfers generally take 2-4 weeks.
Direct rollovers can take as long as three months, depending on how frequently
the current trustee makes distributions from the plan.
WHAT IS A TRANSFER OF ASSETS?
A transfer of assets is the direct transfer of monies from one IRA to another
IRA. The assets must be transferred directly from one trustee, custodian or
insurance company to another.
WHAT ARE THE THREE TYPES OF IRA ROLLOVERS?
You may make three types of IRA rollovers: regular rollovers, direct rollovers
and indirect rollovers.
A REGULAR IRA ROLLOVER occurs when you withdraw assets from your IRA and, within
60 days, reinvest them into another IRA. Such rollovers may be made only once
every 365 days.
A DIRECT ROLLOVER takes place when you choose to have an eligible rollover
distribution from a qualified plan or 403(b) plan placed directly in an IRA
already established at a financial organization. In this case, there is no
mandatory tax withholding.
An INDIRECT ROLLOVER occurs when you receive an eligible rollover distribution
from a qualified plan or 403(b) plan and then, within 60 days, you roll the
distribution into an IRA plan. In this case, the payor is required by law to
withhold 20% of the amount of your distribution for taxes. You will receive only
80% of the distribution amount. Such distribution proceeds should not be
commingled with your contributory IRA account if you ever plan to reinvest the
assets in a qualified plan or tax sheltered annuity.
PLEASE NOTE: The IRS has no provisions for extending the 60 day rollover
period. The 60 days begin on the day that you receive the check and end on the
day you mail the check to the successor custodian.
- --------------------------------------------------------------------------------
DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
THE CGM FUNDS IRA
FEATURES OF THE PLAN
The following information is provided to you as required by the Internal Revenue
Code. Please read this information along with the Individual Retirement
Custodial Account Agreement for an explanation of the key features of the
applicable law and the Plan. Your right to your account, or, in the event of
death, the right of your beneficiary or estate, is at all times non-forfeitable.
RIGHT TO REVOKE
You may revoke your enrollment in an IRA account by giving written notice within
seven days after the account is established. Notice of revocation must be mailed
to the Custodian, State Street Bank and Trust Company, at P.O. Box 8511, Boston,
MA 02266 or hand delivered to the Custodian, c/o BFDS, 2 Heritage Drive, N.
Quincy, MA 02171. Notice will be deemed to have been mailed on the date of the
postmark (or if sent by registered or certified mail, the date of certification
or registration) when deposited in the mail in the United States, first class
postage prepaid, properly addressed. If you revoke your account, the entire
amount you paid in will be returned to you promptly, without deductions or
adjustments of any kind. If you participate in an IRA account plan established
by your employer, your seven-day withdrawal period will commence as of the date
on which your first contribution is made.
ELIGIBILITY
In general, everyone under age 70 1/2 who earns a wage or salary or earns a
profit from his work is eligible to participate. Also married individuals who
are eligible may establish a separate IRA on behalf of their non-working spouses
(a "Spousal IRA"). Furthermore, divorced or legally separated individuals may
contribute to an IRA based on the alimony payments they receive.
CONTRIBUTIONS
You are eligible to make a contribution each year to your IRA until the calendar
year in which you attain age 70 1/2. The maximum amount that you can contribute
in any year is an amount equal to the lesser of your total annual compensation
or $2,000. Compensation includes earned income from self-employment. Alimony
payments may be treated as compensation. If an IRA is also established for the
benefit of your spouse, the overall limit for contributions to both IRAs is
$2,250 for years before 1997 and $4,000 for 1997 and thereafter (but you still
may not contribute more than 100% of your total annual compensation, and the
amount contributed to either IRA may not exceed $2,000). Your contribution may
be made at any time during the taxable year or after the end of the taxable year
up to the time for filing your individual tax return for that year (without
regard to any extension). For most individuals, the deadline would be April 15.
You do not have to contribute each year, nor are you required to contribute the
same amount each year. You may make your contributions in convenient
installments as set forth in the Account Application. Your account will be in
your name, your spouse's account, if any, will be in his or her name, and you
are entitled to the tax deduction. To keep an IRA qualified, you will need to
report your deduction on your annual IRS tax return, Form 1040. You do not have
to itemize deductions in order to deduct an IRA contribution on your income tax
return. Your regular contributions must be made in cash or by check. Your
employer may be willing to help by deducting from your pay the amount you
specify and sending it to the Custodian for your account.
DEDUCTIBILITY OF IRA CONTRIBUTIONS
The amount of the contribution for which you may take a tax deduction will
depend upon whether you (or your spouse) are an active participant in an
employer-maintained retirement plan. If you (and your spouse) are not an active
participant, your IRA contribution will be totally deductible. If you (or your
spouse) are an active participant, the deductibility of your contribution will
depend on your adjusted gross income (AGI) for the tax year for which the
contribution was made. AGI is determined on your tax return (disregarding any
deductible IRA contribution).
Definition of Active Participant: Generally, you will be an active participant
if you are covered by one or more of the following employer-maintained
retirement plans:
1. a qualified pension, profit sharing, or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation plans
under IRC Section 457);
5. a tax sheltered annuity for employees of certain tax-exempt organizations
or public schools;
6. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan); and
7. a Savings Incentive Match Plan for Employees (SIMPLE) IRA or 401(k) plan.
If you do not know whether your employer maintains one of these plans or whether
you are an active participant in it, check with your employer and your tax
advisor. Also, the Form W-2 (Wage and Tax Statement) that you receive at the end
of the year from your employer will indicate whether you are an active
participant.
The deductible amount of your contribution is determined by taking your
threshold AGI level plus $10,000 and subtracting from it your AGI -- determined
prior to taking your itemized deductions. [N.B. If you are single, your
threshold AGI level is $25,000. The threshold level if you are married and file
a joint tax return is $40,000, and if you are married but file a separate tax
return, the threshold level is $0.00. If your AGI is less than $10,000 above the
threshold level, you will still be able to make a deductible contribution but it
may be limited in amount -- but never less than $200.] Multiply the resulting
number by 0.2 (or 0.4 if you are making spousal contributions) to give you your
personal deduction limit. You must round up the resulting number to the next
highest $10.00 if the number is not a multiple of 10.
ROLLOVER CONTRIBUTIONS
An IRA may be used to make a "rollover" contribution of assets received by you
from a qualified employee benefit plan in which you previously participated.
Anyone who receives a lump sum payment of accumulated benefits in a qualified
employee benefit plan can preserve tax sheltered treatment of these assets by
investing them in an IRA within 60 days. In order to avoid tax withholding, the
rollover should be made as a "direct rollover," and should be coordinated
through your employer. In this manner, assets transferred from another
retirement program are kept invested, tax consequences stemming from the payment
are deferred until distributions are made from your IRA account, and you have
the option to "rollover" the assets later to a tax-qualified program of a
subsequent employer, a retirement annuity or another IRA. You can rollover the
entire amount of your distribution from a qualified employee benefit plan (less
any non-deductible contributions you made to the plan) to your IRA or you can
rollover only a portion of the distribution. If you do not rollover the entire
distribution, however, the portion of the distribution not included in the
rollover will be taxed as ordinary income.
The rollover contribution should be segregated from an IRA account into which
current contributions are made if you wish to preserve the option to rollover
such amount at a later time to a tax-qualified program of a subsequent employer.
Anyone desiring to make such a segregation of a "rollover" contribution should
open two separate IRA accounts. Rollover contributions may be made in the form
of securities or other assets with the Trustee's approval.
An IRA rollover also occurs in the case where assets from one IRA to which you
have made current contributions are withdrawn by you and within 60 days are
reinvested into another IRA. A rollover can be made only once every 365 days.
Such rollover assets need not be segregated from an IRA account into which
current contributions are being made.
EXCESS CONTRIBUTIONS
If you contribute more to the Plan than the law allows (as explained under
"Contributions"), you may withdraw the excess without the 6% penalty (described
below) if you do so by the due date for filing your Federal income tax return
(with extensions). You must also withdraw the earnings on the excess and pay
taxes and a 10% penalty on the amount of earnings. Excess contributions in a
taxable year can be corrected by withdrawing the excess contribution in any
later year provided that a tax deduction has not been allowed for the excess
contribution. Additionally, an excess contribution in one taxable year (for
which no tax deduction was taken) will be deductible in a subsequent taxable
year if, and to the extent that, the taxpayer contributes less than the maximum
deductible amount in that later year. Excess contributions that are not
withdrawn or utilized as a current contribution during the year will be subject
to a non-deductible excise tax of 6% for each taxable year in which they remain
uncorrected.
SEP-IRA CONTRIBUTIONS
If you participate in your employer's Simplified Employee Pension Plan
(SEP-IRA), your employer can make a contribution of 15% of your salary (up to
$160,000, as indexed). For Federal income tax purposes, these contributions are
deductible by your employer and are excluded from your income.
TRANSFERS OF ASSETS
You can transfer all or any portion of your IRA to or from any other IRA at any
time provided the proceeds are made payable and sent directly to the Successor
Trustee or Successor Custodian.
INVESTMENTS AND EARNINGS
Your contributions will be used to purchase shares of Funds selected on your
Account Application. Any dividend or capital gains distributions on the Funds'
shares will be invested in additional Funds' shares automatically. After age 59
1/2, you have the option of receiving your dividends and capital gains in cash.
These additional shares will represent your earnings from the account. The
assets available for distribution when you reach age 59 1/2, die, or become
disabled will be the market value of the shares your contributions and earnings
have purchased over the years. Due to the fluctuating value of the Funds'
investments, it is not possible to make a projection of expected growth, and
growth cannot be guaranteed. Investment information can be found in each Fund's
prospectus.
The law requires that the shares in your account be held by a custodian that is
a bank or other organization approved by the IRS. The Custodian of the Plan
meets this requirement. You will be entitled to vote the shares in your account.
DISTRIBUTIONS
You may withdraw assets from your account at any time after age 59 1/2, and
before 70 1/2, without any restrictions. Penalties may apply in certain other
circumstances. (See Account Restrictions and Penalties, below). You must begin
to withdraw assets from your account no later than April 1 following the year in
which you attain age 70 1/2, (or the year you create a rollover IRA, if later).
Your assets may, at your option, be distributed to you in the following ways:
(1) a lump sum payment of your entire account, in cash or Fund shares; (2)
installment payments in cash over a period certain not extending beyond your
life expectancy; (3) installment payments in cash over a period certain not
extending beyond the joint life and last survivor expectancy of you and your
beneficiary; or (4) in the form of an annuity contract.
If you die before distribution of your IRA begins, then the entire balance must
be distributed in cash or Fund shares to your beneficiary by December 31 of the
year which contains the fifth anniversary of your death, or in installment
payments over a period certain not exceeding your beneficiary's life expectancy,
or in the form of an annuity contract for a similar period. Installment payments
must begin either by December 31 of the year following your death or, if your
beneficiary is your surviving spouse, not later than the date you would have
attained age 70 1/2. A surviving spouse beneficiary also may elect to treat the
IRA as his or her own IRA. If you die after distribution of your IRA begins but
before it is completed, the remaining balance must be distributed to your
beneficiary under a method which provides for payment at least as rapidly as
under the method of distribution in use before your death.
You must begin to withdraw assets from your account no later than April 1
following the year you reach age 70 1/2. If you do not, or if you withdraw less
than the minimum amount described earlier under "Distributions," you will incur
an excise tax equal to 50% of the amount you should have withdrawn but did not.
The Secretary of the Treasury has the power to waive this 50% tax penalty if the
excess accumulation is due to reasonable cause and reasonable steps are being
taken to correct the excess. A non-deductible 50% excise tax will be imposed on
the difference between the minimum amount which should have been paid out in any
year based on the form of payment selected and the amount actually paid out in
that year. The tax is to be paid by the individual to whom the minimum payments
should have been made.
You will pay income taxes when your account is distributed. If the amount of
distributions you receive in any one year from your IRA and other retirement
plan exceeds $160,000 (as indexed), you will be subject to a 15% penalty on the
amount distributed in excess of $160,000. (IRC Sec 4980A -- This 15% penalty tax
is suspended for distributions received in 1997, 1998 and 1999.) Depending upon
your particular circumstances, you may find it advantageous to withdraw your
account in installments over a number of years. If you die before receiving all
of the assets in your account, the remainder of the account is included in the
assets of your estate for Federal estate tax purposes. In addition, if the
benefits in your IRA and other retirement plans exceed certain threshold
amounts, your estate may be subject to a 15% excise tax on amounts in excess of
the threshold amounts.
The tax laws provide that payments received from your IRA plan are subject to
Federal income tax withholding unless you elect not to have withholding apply.
Such election must be made in writing to the Custodian at the time you submit
your authorization for distribution.
DESIGNATING A BENEFICIARY
You may designate a beneficiary and change beneficiaries from time to time. If
you do not designate a beneficiary, your estate will receive the balance in your
account. Designating a beneficiary and changing beneficiaries is not considered
the making of a taxable gift.
FEES
The Custodian charges $5.00 when you establish your plan, $10.00 per year per
account as a maintenance fee, and $5.00 when an account is closed (including
exchanges). The Custodian reserves the right to increase these charges at any
time upon 30 days' advance notice. Capital Growth Management may partake in a
portion of the annual maintenance fee. The Custodian will send you a statement
of account annually informing you of the exact amount of contributions,
earnings, distributions, and year-end value. The Custodian will also send a
statement to the Internal Revenue Service as required by law.
ACCOUNT RESTRICTIONS AND PENALTIES
If you withdraw assets from your account before age 59 1/2, the distributions
will not only be included in your gross income, but also you will pay a
non-deductible excise tax equal to 10% of the amount withdrawn. An exception to
the 10% excise tax rule is made in the following five instances: (1) if assets
are withdrawn from your account upon your becoming disabled; (2) if assets are
withdrawn from your account for purposes of a rollover transfer; (3) if assets
are withdrawn from your account as part of a series of substantially equal
periodic payments for your life or life expectancy; (4) if assets are withdrawn
from your account for medical expenses to the extent that the distributions do
not exceed the amount allowed as a deduction, currently 7.5%,or (5) if assets
are withdrawn from your account because you are unemployed and have received
unemployment compensation for 12 consecutive weeks and because you use the
proceeds to pay for health insurance.
There are very severe consequences if you use your Plan assets as security for a
loan or borrow any money from or through your IRA account, or engage in other
transactions prohibited by Section 4975(c) of the Internal Revenue Code. Not
only would your account lose its tax-exempt status, but you would be required to
include the entire value of the account's assets in your gross income for the
year in which the prohibited transaction occurred and to pay a 10% penalty, as
well.
If you receive a premature distribution, make an excess contribution which is
not corrected in the time allowed, fail to withdraw the minimum amount required
to be withdrawn upon attainment of age 70 1/2, or receive an excess
distribution, you must file Form 5329 (return of excise tax) with the IRS along
with your annual tax return, Form 1040. In addition, if you make a
non-deductible contribution to your IRA in any year, you must file Form 8606 to
report the amount of the non-deductible contribution.
HOW TO PARTICIPATE
You may establish your own account simply by completing the Account Application
and mailing it to The CGM Funds with your first contribution. If you need any
assistance in completing the Account Application, please telephone CGM at (800)
345-4048.
PLEASE NOTE: The foregoing is not a complete or definitive explanation of the
Plan or of the provisions of applicable law. Please do not complete the Account
Application without reading the Plan and the Fund prospectus which must always
accompany the Plan. Consult your financial or tax advisor if you are uncertain
whether a CGM Funds IRA is an appropriate program for your investment needs.
<PAGE>
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PLAN DOCUMENT
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THE CGM FUNDS INDIVIDUAL
RETIREMENT ACCOUNT (THE "PLAN")
Form 5305-A under Section 408(a) of the Internal Revenue Code.
The Depositor whose name appears on the Application is establishing an
Individual Retirement Account under Section 408(a) to provide for his or her
retirement and for the support of his or her beneficiaries after death.
The Custodian named on the Application has given the Depositor the disclosure
statement required under Regulations Section 1.408-6.
The Depositor has assigned the Custodial Account the sum indicated on the
Application.
The Depositor and the Custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a Simplified
Employee Pension Plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5), 402
(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution
to a Simplified Employee Pension Plan described in Section 408 (k).
ARTICLE II
The Depositor's interest in the balance in the Custodial Account is
nonforfeitable.
ARTICLE III
1. No part of the Custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of Section 408(a)(5)).
2. No part of the Custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section 408
(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the Custodial Account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are herein incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the Custodial Account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/ 2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the Custodial Account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is the
Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial Account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance
with paragraph 4(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) and
Regulations Sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and related
regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Application.
ARTICLE VIII
1. PLEASE REFER TO THE CGM IRA APPLICATION WHICH IS INCORPORATED INTO THIS
AGREEMENT AS THIS PARAGRAPH OF ARTICLE VIII.
2. DEFINITIONS The following definitions shall apply to terms used in this
Article VIII:
(a) "Account" or "Custodial Account" means the custodial account established
hereunder for the benefit of the Depositor.
(b) "Agreement" means the CGM IRA Custodial Agreement, including the
information and provisions set forth in any Account Application that
goes with this Agreement. This Agreement, including the Account
Application and any designation of Beneficiary filed with the Custodian,
may be proved either by an original copy or by a reproduced copy
thereof, including, without limitation, a copy reproduced by
photocopying, facsimile transmission, or electronic imaging.
(c) "Application" or "Account Application" shall mean CGM IRA Account
Application by which this Agreement, as may be amended from time to
time, is established between the Depositor and the Custodian. The
statements contained therein shall be incorporated into this Agreement.
(d) "Beneficiary" means the person or persons (including without limitation
an individual, a trust, an estate, an association or a corporation)
designated as such by the Depositor on a signed form acceptable to and
filed with the Custodian pursuant to Article VIII, Section 5.(a) of this
Agreement.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Company" shall mean Capital Growth Management Limited Partnership
("CGM"), or any successor or affiliate thereof to which CGM may, from
time to time, delegate or assign any or all of its rights or
responsibilities under this Agreement.
(g) "Custodian" shall mean State Street Bank and Trust Company of Boston,
Massachusetts, or its successors, as specified in the Account
Application.
(h) "Depositor" means the person named in the Account Application.
(i) "Fund" shall mean any corporation, partnership, trust or other entity
registered under the Investment Company Act of 1940 for which CGM, or
its successors or affiliates, serves as investment adviser, and which
CGM designates in writing to the Custodian as an eligible investment
under this Custodial Agreement.
(j) "Fund Shares" or "Shares" shall mean shares of stock, trust
certificates, or other evidences of interest (including fractional
shares) in any Fund.
(k) "Money Market Shares" shall mean any Shares that are issued by a Fund
that is a money market mutual fund.
3. INVESTMENT OF CONTRIBUTIONS
(a) Investment Options. The Depositor has exclusive responsibility for and
control over the investment of the assets of his or her IRA.
Contributions to the Account may be invested only in Fund Shares. The
Depositor may direct the Custodian to invest assets in Shares of one or
more Funds in such percentage as the Depositor shall specify on the
Account Application or thereafter in writing to the Custodian from time
to time, provided that minimum investment amounts are met.
(b) Investment Instructions. Contributions will be invested in accordance
with the Depositor's written instructions on the Application, and with
subsequent instructions given by the Depositor (or, following the death
of the Depositor, his or her Beneficiary) to the Custodian in a manner
acceptable to the Custodian. By giving such instructions to the
Custodian, such persons will be deemed to have acknowledged receipt of
the then-current prospectus for any Fund in which the Depositor directs
the Custodian to invest assets in his or her Custodial Account. All
charges incidental to carrying out such instructions shall be charged
and collected in accordance with Article VIII, Section 6(e). All Fund
Shares in the Custodial Account shall be held in the name of the
Custodian for the benefit of the Depositor.
(c) Investment Changes and Reinvestment. The Depositor may change any
portion of his or her investment in a Fund to another Fund by requesting
the change in the manner the Custodian requires, and subject to the
provisions of the then-current Fund prospectus.
Prior to the date the Depositor attains age 59 1/2, all income,
dividends and capital gains distributions from a Fund shall be
reinvested in additional shares of that Fund. On or after the date the
Depositor attains age 59 1/2, he or she may elect to receive all income
dividends and/or capital gains distributions from a Fund in cash. Such
cash payments will constitute a taxable distribution of assets.
(d) Investment Minimums. Each Fund may impose a minimum investment limit on
initial and subsequent investments. The Company reserves the right to
change those investment minimums at any time without prior notice. The
Custodian will invest all contributions promptly after their receipt, as
set forth in the prospectus of the Fund in which shares are being
purchased. The Custodian will mail a statement confirming each
investment to the Depositor at the address of record on the Custodial
Account.
(e) Unclear Investment Instructions. If the Custodian or the Company
receives instructions from the Depositor that are in their opinion not
clear, the Custodian or the Company may request additional instructions
from the Depositor (or the Depositor's Beneficiary, executor or
administrator). Pending receipt of such instructions, any cash assets
may be invested by the Custodian in Money Market Shares. Neither the
Custodian nor the Company shall be liable to anyone for any loss
resulting from the delay in investing such cash or in implementing such
instructions.
4. CONTRIBUTIONS
(a) Nature and Timing of Contributions. All contributions by the Depositor
to the Custodial Account must be in cash, except for initial
contributions of rollovers that may be made in the form of Fund shares
if permitted by the Company and the Custodian. The Custodian will
designate contributions (other than rollover contributions) as being
made for the current tax year unless the Depositor designates, in a
manner acceptable to the Custodian, that the contribution is being made
for the preceding taxable year. Contributions designated for the
preceding taxable year must be made by the deadline for filing the
Depositor's income tax return (not including extensions).
(b) Rollover Contributions. The Custodian will accept for the Custodial
Account all rollover contributions that consist of cash and may accept
Fund Shares if permitted by the Company. The Depositor shall designate
each rollover contribution as such to the Custodian, and by such
designation shall confirm to the Custodian that a proposed rollover
contribution qualifies as a rollover contribution within the meaning of
Sections 402(a)(5), 402(a)(6), 402(a)(7), 402(c), 403(a)(4), 403(b)(8),
and/or 408(d)(3) of the Code.
(c) Excess Contributions. If the Depositor exceeds the amount that may be
contributed to his or her Custodial Account for any year the Custodian
will, upon a proper written request from the Depositor, prior to his or
her tax filing deadline, return the excess and any attributable earnings
to the Depositor. If the request is received after the Depositor's
filing deadline, the Depositor may elect to have the contribution
treated as if it were made for a later year.
5. DISTRIBUTIONS
(a) Beneficiary Designation. A Depositor may designate a Beneficiary or
Beneficiaries at any time, and such designation may be changed or
revoked at any time, by written designation signed by the Depositor on a
form acceptable to, and filed with the Custodian; provided, however,
that such designation, or change, or revocation of a prior designation,
shall not be effective unless it is received and accepted by the
Custodian no later than thirty (30) days after the death of the
Depositor, and provided further that the latest such designation or
change or revocation shall control. If at the time of the Depositor's
death there is no properly designated Beneficiary of the Depositor in
existence, the Depositor's Beneficiary shall be his or her surviving
spouse or, if none, his or her estate. Unless otherwise specified in the
Depositor's designation of Beneficiary, if a Beneficiary dies before
receiving his or her interest in the Custodial Account, the
Beneficiary's remaining interest in the Custodial Account shall be paid
to the Beneficiary's estate.
A Depositor may designate as Beneficiary of his or her Account a trust
for the benefit of his or her surviving spouse that is intended to
satisfy the conditions of Sections 2056(b)(7) or 2056A of the Code (a
"Spousal Trust"). In that event, if the Depositor is survived by his or
her spouse, the following provisions shall apply to the account, from
and after the death of the Depositor's surviving spouse: (1) all of the
income of the Account shall be paid to the spousal trust annually or at
more frequent intervals, and (2) no person shall have the power to
appoint any part of the account to any person other than the spousal
trust. To the extent permitted by Section 401(a)(9) of the Code, as
determined by the trustee(s) of the spousal trust, the surviving spouse
of a Depositor who has designated a spousal trust as his or her
beneficiary may be treated as his or her "designated beneficiary" for
purposes of the distribution requirements of that Code section. The
Custodian shall have no responsibility to determine whether such
treatment is appropriate.
(b) Form of Distribution. All requests for distribution shall be in writing
on a form provided by or acceptable to the Custodian. The method of
distribution must be specified in writing. The tax identification number
must be provided to the Custodian and certified appropriately before a
distribution will be made. The Depositor is responsible for making the
distribution requests to the Custodian sufficiently in advance of the
date on which any requested or required distribution is to be made to
ensure that the distribution will be made on or before that date.
The Depositor must provide to the Custodian any application,
certificates, tax waivers, signature guarantees, and other documents
(including proof of legal representative's authority) that the Custodian
requires. The Custodian will not be liable for complying with a
distribution request that appears on its face to be genuine, nor will
the Custodian be liable for refusing to comply with a distribution
request that the Custodian is not satisfied is genuine.
If a distribution request is not made in the correct form, the Custodian
is not responsible and will not be liable to the Depositor for any
losses while the Custodian awaits the distribution request to be made in
the proper form. The Depositor also agrees to fully indemnify the
Custodian for any losses that may result from the Custodian's failing to
act upon an improperly made distribution request.
The Custodian is not obligated to make any distribution, including a
required minimum distribution as specified in Article IV above, absent a
specific written direction from the Depositor (or the Depositor's,
Beneficiary, executor, or administrator) to do so.
Any distributions shall be subject to all applicable tax and other laws
and regulations including possible early withdrawal penalties and
withholding requirements.
The Custodian is empowered to make distribution absent instructions from
the Depositor if directed to do so pursuant to a court order of any kind
and the Custodian shall in such event incur no liability to anyone for
acting in accordance with such court order.
(c) Distribution Upon Death. If the Depositor dies before receiving all of
the proceeds in his or her IRA, payments will be made to the designated
Beneficiary(ies). If a Beneficiary payment election described in Article
IV, Section 4(b) of this Agreement is not made by December 31 of the
year after the year of death the following rules will apply. If the
Beneficiary is the spouse of the Depositor, the payment described in
Article IV, Section 4(b)(ii) will be deemed elected (that is, payments
over the life or life expectancy of the Depositor's spouse). If the
Beneficiaries are or include anyone other than the Depositor's spouse,
the payment method described in Article IV, Section 4(b)(i) will be
deemed elected (i.e. the 5-year rule).
(d) Required Minimum Distributions. The Depositor has the responsibility to
ensure that he or she will begin to receive distributions from the
Custodial Account on or before the required beginning date (i.e. April 1
following the year in which the Depositor reaches age 70 1/2) and
continue to receive distributions by December 31 each year. The
Depositor also has the sole responsibility to initiate distributions
from the Custodial Account and sole responsibility to ensure that all
distributions are made in accordance with the applicable provisions of
the Internal Revenue Code. If the Depositor fails to make an election by
the required beginning date, the Custodian shall have no obligation to
cause a distribution to be paid to the Depositor. The Custodian will not
be liable for any penalties or taxes related to the Depositor's failure
to take a distribution or to the Custodian's payment as a result of such
failure.
(e) Calculation of Life Expectancy. For distributions requested pursuant to
Article IV, life expectancy and joint life and last survivor expectancy
are calculated based on information provided by the Depositor, (or the
Depositor's, Beneficiary, executor, or administrator) using the Expected
Return Multiples in Section 1.72-9 of the Income Tax Regulations. The
Custodian shall not incur any liability for errors in such calculations
as a result of its reliance on information provided by the Depositor (or
the Depositor's Beneficiary, executor, or administrator).
IF THE DEPOSITOR DOES NOT ELECT TO HAVE THE CUSTODIAN RECALCULATE LIFE
EXPECTANCY BY THE REQUIRED BEGINNING DATE, THE CUSTODIAN WILL NOT
RECALCULATE THE LIFE EXPECTANCY. THIS ELECTION OR DEEMED ELECTION TO
RECALCULATE OR NOT RECALCULATE IS IRREVOCABLE.
(f) Distributions to a Minor. If a distribution is payable to a person known
by the Custodian to be a minor or otherwise under a legal disability,
the Custodian may, in its absolute discretion, make all or any part of
the distribution to (a) a parent of such person, (b) the guardian,
committee, or other legal representative, whenever appointed, of such
person, (c) a custodial account established under a Uniform Gifts to
Minors Act, Uniform Transfers to Minors Act or similar act, (d) any
person having control or custody of such person, or (e) to such person
directly. The Depositor (or the Depositor's Beneficiary, executor or
administrator) may direct the Custodian to make any distributions from
the Custodial Account directly to any person, corporation or other
entity, including, but not limited to, the fiduciary of a retirement
plan account maintained on behalf of the Depositor.
(g) Asset Transfers to Spouse Upon Divorce. All or any portion of the
Depositor's interest in the Custodial Account may be transferred to a
spouse or former spouse pursuant to a decree of divorce or separate
maintenance or a written instrument incident to such a decree as
provided in Section 408 of the Code, in which event the transferred
portion shall be held as a separate IRA for the benefit of such spouse
or former spouse.
(h) Transferring Assets to and from the Account. Assets held on behalf of
the Depositor in another IRA may be transferred by the trustee or
custodian thereof directly to the Custodian, in a form and manner
acceptable to the Custodian, to be held in the Custodial Account for the
Depositor under this Agreement. The Custodian will not be responsible
for any losses the Depositor may incur as a result of the timing of any
transfer from another trustee or custodian that are due to circumstances
reasonably beyond the control of the Custodian.
Assets held on behalf of the Depositor in the Account may be transferred
directly to the trustee or custodian of another IRA established for the
Depositor, if so directed by the Depositor in a form and manner
acceptable to the Custodian; provided, that it shall be the Depositor's
responsibility to ensure that any minimum distribution required by
Section 401(a)(9) of the Code is made prior to giving the Custodian such
transfer instructions. The Custodian will assume no responsibility for
the tax consequences of any transfer.
6. THE CUSTODIAN
(a) Instructions and Notices. All written notices or communication required
to be given by the Custodian to the Depositor shall be deemed to have
been given when sent by mail to the last known address of the Depositor
in the records of the Custodian. It is the responsibility of the
Depositor to notify the Custodian of any changes in address. All written
instructions, notices, or communications required to be given by the
Depositor to the Custodian shall be mailed or delivered to the Custodian
at the mailing address specified in the Prospectus, and no such
instruction, notice, or communication shall be effective until the
Custodian's actual receipt thereof.
The Custodian, may at its discretion, when so permitted by the Fund
prospectus, accept telephonic instructions, as if they were written
instructions. Any such telephonic instruction may be proved by audio
recorded tape.
(b) Reliance. The Custodian may conclusively rely upon and will be protected
from acting on any written order from or authorized by the Depositor, or
any other notice, request, consent, certificate or other instrument,
paper, or other communication that the Custodian believes to be genuine
and issued in proper form with proper authority, as long as the
Custodian acts in good faith in taking or omitting to take any action in
reliance upon the communication. Neither the Custodian nor the Company
shall not have any duty to question the directions of a Depositor (or
the Depositor's Beneficiary, executor or administrator) in the
investment, transfer or distribution of his or her Custodial Account or
to advise him or her regarding the purchase, retention, or sale of
assets credited to the Custodial Account or regarding distributions from
the Account. Neither the Custodian nor the Company shall not be liable
for any loss that results from the Depositor's (or the Depositor's
Beneficiary, executor, or administrator) exercise of control (whether by
his or her action or inaction) over the Custodial Account.
(c) Reports; Tax Withholding. As soon as practicable after the close of each
taxable year, and whenever required by the Code, the Custodian shall
deliver to the Depositor a written record reflecting receipts,
distributions and other transactions effected in the Custodial Account
during such period and the fair market value of the assets and
liabilities of the Custodial Account as of the close of such period.
Unless the Depositor sends the Custodian written objection to a report
within sixty (60) days of receipt, the Depositor shall be deemed to have
approved such report, and the Custodian and the Company shall be forever
released and discharged from all liability and accountability to anyone
with respect to their acts, transactions, duties and obligations or
responsibilities as shown on, or reflected by, such report.
The Custodian may reduce the amount of any distribution by the amount of
any required tax withholding unless specified otherwise.
(d) Exclusive Benefit. At no time shall it be possible for any part of the
assets of the Custodial Account to be used for, or diverted to, purposes
other than for the exclusive benefit of the Depositor or the Depositor's
beneficiaries except as specifically provided in this Agreement.
(e) Account Fees and Expenses. The Custodian is entitled to receive the fees
for establishing and maintaining the Custodial Account set forth in the
Disclosure Statement. The Custodian may change its fee schedule from
time to time upon thirty (30) days' advance written notice to the
Depositor. The Custodian has the right to charge the Custodial Account,
including the right to liquidate Fund Shares or to charge the Depositor,
for the Custodian's fees, as well as for any income, gift, estate, and
inheritance taxes (including any transfer taxes incurred in connection
with the Custodial Account assets, and for all other administrative
expenses of the Custodian for performing its duties, including any fees
for legal services provided to the Custodian.
(f) Voting with Respect to Securities (Mailing of Prospectuses, Proxies,
etc.). The Custodian shall mail to the Depositor all prospectuses and
proxies that may come into the Custodian's possession by reason of its
holding Fund Shares in the Custodial Account. A Depositor may direct the
Custodian as to the manner in which any Fund Shares held in the
Custodial Account shall be voted with respect to any matters as to which
the Custodian as holder of record is entitled to vote, coming before any
meeting of shareholders of the Fund that issued such Fund Shares. All
such directions shall be in writing on a form approved by the Custodian
and signed by the Depositor, and delivered to the Custodian within the
time prescribed by it. The Custodian shall vote only those Shares with
respect to which it has received timely written directions from the
Depositor; provided, however, that the Custodian may without such
direction vote shares "present" to the extent that such a vote is needed
to establish a quorum.
(g) Limitations on Custodial Liability and Indemnification. The Depositor
and the Custodian intend that the Custodian shall have and exercise no
discretion, authority, or responsibility as to any investment in
connection with the Custodial Account and the Custodian shall not be
responsible in any way for the purpose, propriety, or tax treatment of
any contribution, or of any distribution, or any other action or
nonaction taken pursuant to the Depositor's direction or that of the
Depositor's Beneficiary, executor, or administrator. The Depositor who
directs the investment of his or her Account shall bear sole
responsibility for the suitability of any directed investment and for
any adverse consequences arising from such an investment, including,
without limitation, the inability of the Custodian to value or to sell
an illiquid investment, or the generation of unrelated business taxable
income with respect to an investment. To the fullest extent permitted by
law, the Depositor (or the Depositor's Beneficiary, executor, or
administrator, as appropriate) shall at all times fully indemnify and
save harmless the Custodian, the Company and their agents, affiliates,
successors, assigns and their officers, directors, and employees, from
any and all liability arising from the Depositor's investment direction
under this Custodial Account and from any other liability whatsoever
that may arise in connection with this Agreement except liability
arising under applicable law or liability arising from gross negligence
or willful misconduct on the part of the indemnified person. Although
the Custodian shall have no responsibility to give effect to a direction
from anyone other than the Depositor (or the Depositor's Beneficiary,
executor, or administrator), the Custodian may, in its discretion,
establish procedures pursuant to which the Depositor may delegate to a
third party any or all of the Depositor's powers and duties hereunder;
provided, however, that in no event may anyone other than the
Depositor's executor execute the application by which this Agreement is
adopted or the form by which the Beneficiary is appointed, and provided,
further, that any such third party to whom the Depositor has so
delegated powers and duties shall be treated as the Depositor for
purposes of applying the preceding sentences of this paragraph and
provisions of Article VIII, Section 3(a).
(h) Resignation or Removal of Custodian. The Company may remove the
Custodian at any time, and the Custodian may resign at any time, upon
thirty (30) days' written notice to the Depositor. Upon the removal or
resignation of the Custodian, the Company may, but shall not be required
to, appoint a successor custodian under this Custodial Agreement;
provided that any successor custodian shall satisfy the requirements of
Section 408(a)(2) of the Code. Upon any such successor's acceptance of
appointment, the Custodian shall transfer the assets of the Custodial
Account, together with the copies of relevant books and records, to such
successor custodian; provided, however, that the Custodian is authorized
to reserve such sum of money or property as it may deem advisable for
payment of any liabilities constituting a charge on or against the
assets of the Custodial Account, or on or against the Custodian or the
Company. The Custodian shall not be liable for the acts or omissions of
any successor to it. If no successor is appointed by the Company, the
Custodial Account shall be terminated and the assets of the Account,
reduced by the amount of any unpaid fees or expenses, will be
distributed to the Depositor.
7. AMENDMENT AND TERMINATION
(a) Amendment. The Depositor and Custodian authorize and direct the Company
to amend this Agreement in any respect at any time (including
retroactively), so that it may conform with applicable provisions of the
Internal Revenue Code, or with any other applicable law as in effect
from time to time. Any amendment made by the Company to comply with the
Code and related regulations does not require the consent of the
Depositor. Such other changes to this Agreement may be made as the
Company deems advisable. Any such amendment shall be effected by
delivery to the Custodian and mailing a copy of such amendment or a
restatement of the Custodial Agreement including any such amendment to
the Depositor at his or her last known address as shown in the records
of the Custodian. The Depositor shall be deemed to consent to any such
amendment(s) if he or she fails to object thereto by written notice
received by the Custodian within thirty (30) calendar days from the date
the Company mails a copy of such amendment(s) or restatement to the
Depositor.
(b) Termination. The Depositor may terminate the Custodial Account at any
time upon notice to the Custodian in a manner and form acceptable to the
Custodian. Upon such termination, the Custodian shall transfer the
assets of the Custodial Account, reduced by the amount of any unpaid
fees or expenses, to the custodian or trustee of another individual
retirement account (within the meaning of Section 408 of the Code) or
other retirement plan designated by the Depositor, as described in
Article VIII, Section 5(h). The Custodian shall not be liable for losses
arising from the acts, omissions, delays or other inaction of any such
transferee custodian or trustee. If notice of the Depositor's intention
to terminate the Custodial Account is received by the Custodian and the
Depositor had not designated a transferee custodian or trustee for the
assets in the Account, then the Account, reduced by any unpaid fees or
expenses, will be distributed to the Depositor.
8. MISCELLANEOUS
(a) Governing Law. This Agreement, and the duties and obligations of the
Company and the Custodian under the Agreement, shall be construed,
administered and enforced according to the laws of the Commonwealth of
Massachusetts, except as superseded by federal law or statute.
(b) When Effective. This Agreement shall not become effective until
acceptance of the Application by or on behalf of the Custodian as its
principal office, as evidenced by a written notice to the Depositor.
<PAGE>
THE CGM FUNDS * P.O. BOX 449 * BOSTON, MA 02117 * 800-345-4048
<PAGE>
<TABLE>
============================================================================================================================
CGM DIRECT ROLLOVER FORM FOR NEW ACCOUNTS
============================================================================================================================
PLEASE USE THIS FORM WHEN ROLLING ASSETS FROM A
QUALIFIED RETIREMENT PLAN OR 403(b) PLAN DIRECTLY TO A CGM IRA
- ----------------------------------------------------------------------------------------------------------------------------
YOUR NAME AND ADDRESS
- ----------------------------------------------------------------------------------------------------------------------------
<C> <C>
_______________________________________________________________ [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
_______________________________________________________________
Address
_______________________________________________________________ (__________) _________________________________________
City State Zip Code Daytime Phone Number
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Type of IRA (please check one box): [ ] Regular IRA [ ] Rollover IRA
o Enclose $5.00 plan establishment fee. Make check payable to State Street Bank and Trust Company.
o Please type or print the name of the fund(s) you wish to invest in:
FUND NAME $ AMOUNT / % AMOUNT
_______________________________________________________________ ______________________________________________________
_______________________________________________________________ ______________________________________________________
- ----------------------------------------------------------------------------------------------------------------------------
PLEASE COMPLETE AND SIGN THESE INSTRUCTIONS
- ----------------------------------------------------------------------------------------------------------------------------
IMPORTANT: To ensure timely processing of your rollover, please call your current Custodian or Trustee and verify the
correct address of their transfer department and any transfer requirements, such as a signature guarantee.
IF YOU ARE 70 1/2 OR OLDER PLEASE REFER TO THE REVERSE SIDE OF THIS FORM.
_______________________________________________________________ (__________) _________________________________________
Name of Current Custodian/ Trustee Custodian's Phone Number
_______________________________________________________________ ______________________________________________________
Address IRA Account Number (With Current Custodian)
_______________________________________________________________
City State Zip Code
o Please accept this as your authorization to: [ ] Transfer All OR [ ] Transfer $ or % __________ to a CGM IRA
o The rollover should be processed: [ ] Immediately OR [ ] Upon Maturity of My Assets
- ----------------------------------------------------------------------------------------------------------------------------
I request that the above-named Custodian or Trustee liquidate Signature Guarantee (If Required by Current Custodian)
and rollover my plan assets as cash to State Street Bank and
Trust Company, Custodian of my CGM IRA. Name of Firm: ________________________________________
_______________________________________________________________ BY: __________________________________________________
YOUR SIGNATURE DATE Authorized Individual
- ----------------------------------------------------------------------------------------------------------------------------
CUSTODIAN: MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O CGM FUNDS, P.O. BOX 8511, BOSTON, MA 02266-8511
(Please include the Participant's name and Social Security Number on your check.)
- ----------------------------------------------------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN
State Street Bank and Trust Company accepts the assets being rolled over and agrees to serve as the Custodian of the IRA
Account established on behalf of the above named individual.
/s/ Douglass L. Coyne
____________________________________________________________________________________________________________________________
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
- ----------------------------------------------------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
============================================================================================================================
IRADRNEW 97
</TABLE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE 70 1/2 OR OLDER
If this direct rollover is being made during or after a year in which you turn
age 70 1/2, you must take Required Minimum Distributions (RMD) based on your
life expectancy or the life expectancy of you and your beneficiary. Once
elected, the method of calculating distributions (recalculated or
non-recalculated) cannot be changed. It is your responsibility to ensure that
you are taking the appropriate RMD. Failure to do so may result in a penalty tax
of 50% of the amount not taken. Please call 1-800-345-4048 if you have any
questions about RMD's.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO DIRECTLY ROLLOVER ASSETS FROM A QUALIFIED OR 403(b) PLAN TO CGM
- --------------------------------------------------------------------------------
1. Complete and sign the IRA application.
2. Complete and sign the IRA Direct Rollover Form.
3. Enclose check for $5.00 made payable to State Street Bank and Trust Company.
4. Mail items 1-3 to CGM Funds, P.O. Box 449, Boston, MA 02117 in the return
envelope provided.
5. Upon receipt of your Application, Direct Rollover Form and check, CGM will
establish your IRA. We will send a letter of acceptance and your
authorization to rollover assets to your current IRA Custodian and provide
you with a copy of the letter.
6. After the rollover IRA proceeds have been received by CGM, a statement
confirming the transaction will be mailed to you.
- --------------------------------------------------------------------------------
QUESTIONS? CALL 800-345-4048
<PAGE>
<TABLE>
============================================================================================================================
CGM IRA TRANSFER FORM FOR NEW ACCOUNTS
=============================================================================================================================
PLEASE USE THIS FORM WHEN MOVING ASSETS DIRECTLY FROM ONE IRA TO ANOTHER IRA.
- ----------------------------------------------------------------------------------------------------------------------------
YOUR NAME AND ADDRESS
- ----------------------------------------------------------------------------------------------------------------------------
<C> <C>
_______________________________________________________________ [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
_______________________________________________________________
Address
_______________________________________________________________ (__________) _________________________________________
City State Zip Code Daytime Phone Number
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Type of IRA (please check one box): [ ] Regular IRA [ ] Rollover IRA
o Enclose $5.00 plan establishment fee. Make check payable to State Street Bank and Trust Company.
o Please type or print the name of the fund(s) you wish to invest in:
FUND NAME $ AMOUNT / % AMOUNT
_______________________________________________________________ ______________________________________________________
_______________________________________________________________ ______________________________________________________
- ----------------------------------------------------------------------------------------------------------------------------
PLEASE COMPLETE AND SIGN THESE INSTRUCTIONS
- ----------------------------------------------------------------------------------------------------------------------------
IMPORTANT: To ensure timely processing of your rollover, please call your current Custodian or Trustee and verify the
correct address of their transfer department and any transfer requirements, such as a signature guarantee.
IF YOU ARE 70 1/2 OR OLDER PLEASE REFER TO THE REVERSE SIDE OF THIS FORM.
_______________________________________________________________ (__________) _________________________________________
Name of Current Custodian/ Trustee Custodian's Phone Number
_______________________________________________________________ ______________________________________________________
Address IRA Account Number (With Current Custodian)
_______________________________________________________________
City State Zip Code
o Please accept this as your authorization to: [ ] Transfer All OR [ ] Transfer $ or % __________ to a CGM IRA
o The rollover should be processed: [ ] Immediately OR [ ] Upon Maturity of My Assets
- ----------------------------------------------------------------------------------------------------------------------------
I request that the above-named Custodian or Trustee liquidate Signature Guarantee (If Required by Current Custodian)
and transfer my IRA assets as cash to State Street Bank and
Trust Company, Custodian of my CGM IRA. Name of Firm: ________________________________________
_______________________________________________________________ BY: __________________________________________________
YOUR SIGNATURE DATE Authorized Individual
- ----------------------------------------------------------------------------------------------------------------------------
CUSTODIAN: MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O CGM FUNDS, P.O. BOX 8511, BOSTON, MA 02266-8511
(Please include the Participant's name and Social Security Number on your check.)
- ----------------------------------------------------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN
State Street Bank and Trust Company accepts the assets being transferred and agrees to serve as the Custodian of the IRA
Account established on behalf of the above named individual.
/s/ Douglass L. Coyne
____________________________________________________________________________________________________________________________
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
- ----------------------------------------------------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
============================================================================================================================
IRATRANNEW 97
</TABLE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE 70 1/2 OR OLDER.
If this transfer is being made during or after a year in which you turn age 70
1/2, you must take Required Minimum Distributions (RMD) based on your life
expectancy or the life expectancy of you and your beneficiary. Once elected, the
method of calculating distributions (recalculated or non-recalculated) cannot be
changed. It is your responsibility to ensure that you are taking the appropriate
RMD. Failure to do so may result in a penalty tax of 50% of the amount not
taken. Please call 1-800-345-4048 if you have any questions about RMD's.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO TRANSFER ASSETS TO CGM
- --------------------------------------------------------------------------------
1. Complete and sign the IRA application.
2. Complete and sign the IRA Transfer Form.
3. Enclose check for $5.00 made payable to State Street Bank and Trust Company.
4. Mail items 1-3 to CGM Funds, P.O. Box 449, Boston, MA 02117 in the return
envelope provided.
5. Upon receipt of your Application, Transfer Form and check, CGM will
establish your IRA. We will send a letter of acceptance and your
authorization to transfer assets to your current IRA Custodian and provide
you with a copy of the letter.
6. After the transferred IRA proceeds have been received by CGM, a statement
confirming the transaction will be mailed to you.
- --------------------------------------------------------------------------------
QUESTIONS? CALL 800-345-4048
<PAGE>
================================================================================
CGM IRA ACCOUNT APPLICATION
================================================================================
- --------------------------------------------------------------------------------
1. ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
Name ___________________________________________________________________________
Social Security # [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Address ________________________________________________________________________
________________________________________________________________________________
Date of Birth __________________________________________________________________
Daytime Telephone Number (_____) _______________________________________________
- --------------------------------------------------------------------------------
2. IRA ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
Check the type of IRA that you want. If more than one option applies, specify
the investment amount for each option.*
[ ] CONTRIBUTORY IRA - maximum - $2,000 for tax year 19_____.
[ ] TRANSFER IRA: If you are transferring assets from another IRA to CGM,
complete this form and the CGM Transfer Form.
[ ] IRA TO IRA ROLLOVER: If you have received all or a part of the proceeds
from an IRA within 60 days, you can rollover any portion of the amount to
CGM. Please complete this form.
[ ] DIRECT ROLLOVER from a qualified pension, profit sharing, 401(k), or 403(b)
plan sent to CGM by my employer. Please complete this form and the Direct
Rollover Form.
[ ] Indirect Rollover from a qualified pension, profit sharing, 401(k), or
403(b) plan from which I have received the proceeds. Please complete this
form.
* IF YOU WANT TO ESTABLISH A SEP-IRA, PLEASE CALL 800-345-4048 FOR THE
APPROPRIATE FORMS.
- --------------------------------------------------------------------------------
3. INVESTMENT SELECTION ($1,000 MINIMUM PER FUND)
- --------------------------------------------------------------------------------
$ ___________ CGM Mutual Fund
$ ___________ CGM Realty Fund
$ ___________ CGM Fixed Income Fund
$ ___________ CGM Capital Development Fund - see Section 9.
Existing account number:________________________.
$ ___________ New EnglandCash Management Trust
[ ] Money Market Series [ ] U.S. Govt. Series
$ ___5.00____ INITIAL APPLICATION FEE
(Required for all new plans)
$ ___________ AMOUNT OF CHECK ENCLOSED
MAKE ALL CHECKS PAYABLE TO THE SPECIFIC FUND IN WHICH YOU ARE INVESTING. IF YOU
SELECT MORE THAN ONE FUND, PLEASE SUBMIT A CHECK FOR EACH FUND. NO THIRD PARTY
CHECKS (CHECKS ENDORSED OVER TO CGM FROM AN INDIVIDUAL OR INSTITUTION) WILL BE
ACCEPTED.
- --------------------------------------------------------------------------------
4. TELEPHONE EXCHANGE PRIVILEGES
- --------------------------------------------------------------------------------
[ ] Yes [ ] No
This service enables you to exchange monies ($1,000 minimum) by telephone among
accounts with the same registration in the CGM Funds or New England Cash
Management Trust. (CGM Capital Development Fund is closed. Please see Section 9
for full details.) By completing this section, you authorize the Fund and its
agents to accept and act upon telephone instructions from you and acknowledge
receipt of the current prospectus of the Fund into which the exchange is made.
- --------------------------------------------------------------------------------
5. AUTOMATIC INVESTMENT PLAN - OPTIONAL
- --------------------------------------------------------------------------------
Once you have met the $1,000 minimum, you may have us debit $50 or more each
month from your bank account to apply to your IRA account. Please check this box
[ ] and complete Section 10 on the reverse side.
- --------------------------------------------------------------------------------
6. BENEFICIARY DESIGNATION
- --------------------------------------------------------------------------------
This Beneficiary Designation is to be used to indicate the person or persons to
whom the IRA assets should be turned over to in the event of your death. If you
are not survived by a validly designated Beneficiary, your benefits will be paid
to your estate in the event of your death. IMPORTANT: If you do not designate a
Beneficiary or if the Beneficiary designated is not a person, you cannot base
your calculations for distributions on joint life expectancy.
The Beneficiaries named herein and the manner of distribution may be changed
or revoked at any time by filing a new designation in writing with the
Custodian. This designation, and any changes or revocation, will only be
effective upon receipt by the Custodian. PLEASE RETAIN A COPY FOR YOUR RECORDS.
Upon my death, distribute my CGMIRA in equal shares to the following
Principal Beneficiary(ies) who survive me or, if none survives me, in equal
shares to the following Secondary Beneficiaries who survive me. (Attach an
additional page if necessary.)
Principal Beneficiary(ies):
________________________________________________________________________________
Name Birthdate Relationship
________________________________________________________________________________
Address
Secondary Beneficiary(ies):
________________________________________________________________________________
Name Birthdate Relationship
________________________________________________________________________________
Address
CONSENT OF SPOUSE
(If you live in a community property state, complete if spouse is not sole
primary beneficiary): I consent to the above Beneficiary Designation. By signing
this consent, I intend to change the portion (if any) of this IRA which is
community property into the separate property of my spouse. I specifically give
to my spouse any interest I have in the funds deposited in this account.
________________________________________________________________________________
Signature of Spouse Date
- --------------------------------------------------------------------------------
7. SIGNATURE
- --------------------------------------------------------------------------------
By signing below, I certify that I agree to the provisions on the reverse side
listed in Section 8.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE:
X ______________________________________________________________________________
Signature Date
- --------------------------------------------------------------------------------
Please note that there is an annual $10 maintenance fee per account which will
be billed to you each year. (OVER)
================================================================================
IRAAPP 97
<PAGE>
- --------------------------------------------------------------------------------
8. PROVISIONS
- --------------------------------------------------------------------------------
By signing this application establishing an IRA, I (i) appoint State Street Bank
and Trust Company, or its successors, as Custodian of the Account, (ii) state
that I have received, read, accept, and specifically incorporate the Custodial
Agreement and Disclosure Statement by reference to this application, (iii)
acknowledge receipt of the current prospectus of the mutual fund(s) selected,
(iv) consent to the Custodian's fee, (v) agree to promptly give instructions to
the Custodian necessary to enable the Custodian to carry out its duties under
the Plan, (vi) affirm that my participation is completely voluntary, and (vii)
certify under penalties of perjury that the social security number provided is
correct. I hereby adopt The CGM Individual Retirement Account (IRA) upon the
terms and conditions thereof.
o If I have elected the "TELEPHONE EXCHANGE" service, I understand that the
Fund may terminate or modify this privilege at any time. The Fund will employ
reasonable procedures to confirm that instructions received by telephone are
genuine, such as requesting personal identification information that appears
on your account application and recording the telephone conversation. You
will bear the risk of loss due to unauthorized or fraudulent instructions
regarding your account, although the Fund may be liable if reasonable
procedures are not employed.
o If I have enrolled in the "AUTOMATIC INVESTMENT PLAN" in Section 10, I
authorize the Fund and its agents to initiate Automated Clearing House (ACH)
debits against the designated account at a bank or other financial
institution. I understand that:
- Fund shares purchased by Automatic Investment Plan must be owned for 15
days before they may be redeemed.
- I may terminate my Automatic Investment Plan by sending written notice to
CGM Funds c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by calling
800-345-4048 no later than 10 days prior to my next scheduled debit date.
- The CGM Funds may immediately terminate my Plan in the event that any item
is unpaid by my financial institution.
- The Fund may terminate or modify this privilege at any time.
- --------------------------------------------------------------------------------
9. WHO CAN PURCHASE SHARES OF CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
Only shareholders of the Fund as of September 24, 1993 who remain shareholders
thereafter may purchase additional shares of the Fund. The Fund reserves the
right to reject any purchase order. This policy supersedes all previous
eligibility requirements. Fund shares are not generally available to other
persons except in special circumstances that have been approved by, or under the
authority of, the board of trustees of the Fund. The special circumstances
currently approved by the board of trustees of the Fund are limited to the offer
and sale of shares of the Fund to the following additional persons: trustees of
the Fund, employees of the Investment Manager and counsel to the Fund and the
Investment Manager.
- --------------------------------------------------------------------------------
10. AUTOMATIC INVESTMENT PLAN (AIP)
- --------------------------------------------------------------------------------
You can have us debit $50 or more on the same day each month from your bank
account and have it applied to your IRA account. (Please allow 10 business days
for the AIP Plan to start.)
To elect this option, please: o ATTACH A CHECK MARKED "VOID" FROM THE BANK
ACCOUNT YOU WILL BE USING.
o FILL IN THE INFORMATION REQUESTED BELOW.
Please invest $___________on or about [ ] 5th day of each month or [ ] 20th day
of each month (5th will be selected if no box is checked)
As a convenience to me, you are hereby requested and authorized to pay and
charge to my account Automated Clearing House (ACH) debits drawn on my account
by and payable to the order of The CGM Funds. This authority is to remain in
effect until revoked by me in writing and, until you actually receive such
notice, I agree you will be fully protected in honoring any such debits.
________________________________________________________________________________
Name of Bank Bank Account Number
________________________________________________________________________________
Name of Depositor(s) as Shown on Bank Records
X X
________________________________________________________________________________
Signature of Participant Signature (if Joint Bank Account)
- --------------------------------------------------------------------------------
11. ACCEPTANCE BY CUSTODIAN
- --------------------------------------------------------------------------------
Accepted by State Street Bank and Trust Company, Custodian
/s/ Douglass L. Coyne
________________________________________________________________________________
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
A statement will be sent to you confirming the establishment of your account and
will serve as State Street Bank's acceptance.
Please note that you will be charged an annual maintenance fee of $10 for each
fund account in your IRA.
QUESTIONS? CALL 800-345-4048
SEND APPLICATION TO: CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE CGM FUNDS(R)
- -------------------------------------------------------------------------------
SIMPLIFIED
- -------------------------------------------------------------------------------
EMPLOYEE
- -------------------------------------------------------------------------------
PENSION
- -------------------------------------------------------------------------------
PLAN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[Logo] ------------------------------------------------------------------------
-------------------------------------------------------------------------
<PAGE>
[LOGO]
THE CGM FUNDS SEP-IRA
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page 4 Employer's Checklist for Setting Up a New SEP-IRA
Page 5 Eligibility Form
Page 6 Adoption Agreement Instructions
Page 7 Adoption Agreement
Page 9 SEP-IRA Application and Beneficiary Form
Page 11 SEP-IRA Transfer Form
Page 13 SEP Summary Form for Employees
Page 14 Contribution Worksheets
Page 17 Basic Plan Document
Page 19 IRS Opinion Letter
<PAGE>
Employer's Checklist for Setting Up a New SEP-IRA
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[1] DETERMINE WHETHER YOU ARE ELIGIBLE TO ESTABLISH A SEP-IRA
x Review the Basic Plan Document on page 17 with your attorney or tax
adviser.
x Complete the Eligibility Form on page 5.
- -------------------------------------------------------------------------------
[2] PLEASE COMPLETE THESE FORMS
x Complete the Adoption Agreement on page 7 and make an extra copy for
your files. See Adoption Agreement Instructions on page 6.
x Ask each participant to complete a copy of the SEP-IRA Application and
Beneficiary Form on page 9 (and also the Transfer Form on page 11 if
assets are being transferred from another SEP Plan). You may photocopy
extra copies of both forms, if necessary.
x Complete the SEP Summary for Employees Form on page 13 and distribute a
copy to each participant along with the Employee Information Booklet
and the CGM Funds Individual Retirement Account Booklet. (Please call
us at 800-345-4048 to let us know how many of each booklet you will
need for your employees.) Retain a copy of the SEP Summary for
Employees Form for your files.
- -------------------------------------------------------------------------------
[3] RETURN THESE ITEMS TO: CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117
x Eligibility Form (page 5)
x Adoption Agreement (page 7)
x SEP-IRA Application Form for each participant (page 9)
x SEP-IRA Transfer Form for each participant who is transferring assets
to CGM (page 11)
x Investment check payable to "State Street Bank and Trust Company"
x Application fee check for $5 payable to "State Street Bank and Trust
Company." You may include the $5 application fee in your investment
check.
- -------------------------------------------------------------------------------
[4] PLEASE NOTE
The minimum initial investment is $1000 per account. There is a $5
application fee for each participant; and a $10 annual maintenance fee
will be charged per mutual fund account.
Future contributions made by the employer into each participant's account
must meet the minimum additional investment of $50 per account. Also, all
such contributions must be designated as "employer contributions."
Employees may not make SEP-IRA contributions. All contributions must be
made by the employer on behalf of the employee.
You must distribute copies of the prospectuses for The CGM Funds to your
employees before you make contributions on their behalf. Please call
800-345-4048 if you need additional copies of the prospectuses or have
questions about your SEP-IRA.
===============================================================================
<PAGE>
ELIGIBILITY FORM
- -------------------------------------------------------------------------------
The following questions are designed to help employers, together with their
attorneys and tax advisers, determine whether they are eligible to adopt a
prototype SEP-IRA plan. Please answer the following questions and sign below.
YES NO
[ ] [ ] Are you the owner of a business or the person authorized by a business
to establish a SEP-IRA plan?
If the answer is "NO", please STOP. You are NOT ELIGIBLE to establish
this plan.
[ ] [ ] Has your business ever maintained a defined benefit plan which is now
terminated?
If the answer is "YES", please STOP. You are NOT ELIGIBLE to establish
this plan.
If you answer "YES" to any of the questions below, you may have to
include leased employees and/or employees of other business(es) in
your SEP-IRA Plan. Please consult your tax adviser to determine what
additional action, if any, you must take.
[ ] [ ] Is the business a member of a controlled group of corporations,
businesses or trades, (whether or not incorporated) within the meaning
of IRC Section 414(b) or 414(c)?
[ ] [ ] Is the business a member of an affiliated service group within the
meaning of IRC Section 414(m)?
[ ] [ ] Does the business use the services of leased employees within the
meaning of IRC Section 414(n)?
SIGNATURE:
I certify that I am an authorized representative of the employer and that the
employer is eligible to establish this SEP-IRA Plan. In determining my
eligibility to adopt this plan, I relied solely upon the advice of my own
advisers, and I agree not to hold Capital Growth Management Limited Partnership,
CGM Trust, CGM Capital Development Fund or State Street Bank and Trust Company
responsible for any liabilities that I may suffer as a result of being found
ineligible to establish this SEP-IRA Plan.
- -------------------------------------------------------------------------------
Name of Employer (Please print or type)
X
- -------------------------------------------------------------------------------
Signature of Employer Date Executed
===============================================================================
<PAGE>
INSTRUCTIONS FOR ESTABLISHING THE STANDARD SIMPLIFIED EMPLOYEE PENSION PLAN
- -------------------------------------------------------------------------------
These instructions are designed to help you, the employer, along with your
attorney and/or tax advisor, establish your SEP plan. The instructions are meant
to be used only as a general guide and are not intended as a substitute for
qualified legal or tax advice.
ADOPTION AGREEMENT
If you wish to have us, the financial organization sponsoring this prototype
plan, help you fill out the Adoption Agreement, we will do so. However, we
recommend that you obtain the advice of your legal or tax advisor before you
sign the Adoption Agreement.
This Adoption Agreement is a one-page form that needs to be completed and signed
by the Employer. We recommend that you, as Employer, retain a photocopy of the
completed Adoption Agreement with your permanent records.
- --------------------------------------------------------------------------------
SECTION 1. EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
Fill in the requested information.
- --------------------------------------------------------------------------------
SECTION 2. EFFECTIVE DATES
- --------------------------------------------------------------------------------
This SEP plan is either a new plan (an initial adoption) or an amendment and
restatement of an existing SEP plan.
If this is a new SEP plan, check Option A and fill in the effective date. The
effective date is usually the first day of the plan year in which this Adoption
Agreement is signed. For example, if an employer maintains a plan on a calendar
year basis and this Adoption Agreement is signed on September 24, 1995, the
effective date would be January 1, 1995.
If the reason you are adopting this plan is to amend and replace an existing SEP
plan, check Option B. The existing SEP plan which will be replaced is called a
"prior plan." You will need to know the effective date of the prior plan. The
best way to determine its effective date is to refer to the prior plan Adoption
Agreement. The effective date of this amendment and restatement is usually the
first day of the plan year in which the Adoption Agreement is signed.
- --------------------------------------------------------------------------------
SECTION 3. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
NOTE: SECTION 3 SHOULD BE COMPLETED EVEN IF YOU DO NOT HAVE EMPLOYEES.
Within limits, you, as the employer, can specify the number of years your
employees must work for you and the age they must attain before they are
eligible to participate in this plan. Note that the eligibility requirements
which you set up for the plan also apply to you.
Suppose, for example, you establish a service requirement of three of the
immediately preceding five years and an age requirement of 21. In that case,
only those employees (including yourself) who have worked for you for three of
the immediately preceding five years and are at least 21 years old are eligible
to participate in this plan.
PART A. YEARS OF ELIGIBILITY SERVICE REQUIREMENT
Fill in the number of years of service (0, 1, 2 or 3). This number must be
either 0, 1, 2 or 3.
PART B. AGE REQUIREMENT
Fill in the age an employee must attain (no more than 21) to be eligible to
participate in the plan.
PART C. CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE
1. Generally you are permitted to exclude employees covered by the terms of a
collective bargaining agreement (e.g., a union agreement) where retirement
benefits were bargained for and those employees who are nonresident aliens
with no U.S. income. If you wish to exclude those employees, check the first
box under Section 3, Part C.
2. You are permitted to exclude those employees who have received less than
$300 (indexed for cost of living increases) of compensation during the plan
year. If you want to exclude those employees, check the second box under
Section 3, Part C.
- -------------------------------------------------------------------------------
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
- -------------------------------------------------------------------------------
PART A. CONTRIBUTION FORMULA
Because a SEP plan allows for flexible contributions, the amount of the
contribution will be determined from year to year. There are no blanks to be
completed in Part A.
PART B. ALLOCATION FORMULA
Once the contribution amount has been decided for a plan year, it must be
allocated among the participants in the plan. The contribution can be allocated
using either a pro rata formula or an integrated formula. Check either Option 1
or 2.
OPTION 1. PRO RATA FORMULA
Check this option if you wish to have the contribution allocated to all
qualifying participants based on their compensation for the plan year.
OPTION 2. INTEGRATED FORMULA
Check this option if the plan is to be integrated. Generally, integration
is a method of giving some participants in the plan an extra contribution
allocation. Because of the complexity of integration, you should consult
your tax advisor regarding this issue.
- -------------------------------------------------------------------------------
SECTION 5. EMPLOYEE SIGNATURE
- -------------------------------------------------------------------------------
An authorized representative of the employer must sign and date the Adoption
Agreement. In addition, the prototype sponsor must provide its name, address and
telephone number.
(C)1995 Universal Pensions, Inc., Brainerd, MN 56401
===============================================================================
<PAGE>
THE CGM FUNDS SIMPLIFIED EMPLOYEE PENSION PLAN ADOPTION AGREEMENT
[FENCER LOGO]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 1. EMPLOYER INFORMATION
- -------------------------------------------------------------------------------
Name of Employer _____________________________________________________________
Address ______________________________________________________________________
_______________________________________________________________________________
Telephone ____________________________________________________________________
Federal Tax Identification Number ____________________________________________
Income Tax Year End ___________________________________________________________
(month) (day)
Plan Year End ________________________________________________________________
(month) (day)
- -------------------------------------------------------------------------------
SECTION 2. EFFECTIVE DATES
- -------------------------------------------------------------------------------
Check and complete Option A or B
OPTION A.
[ ] This is the initial adoption of a Simplified Employee Pension plan by the
Employer.
The Effective Date of this Plan is ___________________________, 19__.
NOTE: The effective date is usually the first day of the Plan Year in which
this Adoption Agreement is signed.
OPTION B.
[ ] This is an amendment and restatement of an existing Simplified Employee
Pension plan (a Prior Plan).
The Prior Plan was initially effective on ________________________, 19__.
The Effective Date of this amendment and restatement is ____________, 19__.
NOTE: The effective date is usually the first day of the Plan Year in which
this Adoption Agreement is signed.
- -------------------------------------------------------------------------------
SECTION 3. ELIGIBILITY REQUIREMENTS
- -------------------------------------------------------------------------------
Complete Parts A, B and C
PART A. SERVICE REQUIREMENT
An Employee will be eligible to become a Participant in the Plan after having
performed Service for the Employer during at least ________________________
(enter 0, 1, 2 or 3) of the immediately preceding 5 Plan Years.
NOTE: If left blank, the Service Requirement will be deemed to be 0.
PART B. AGE REQUIREMENT
An Employee will be eligible to become a Participant in the Plan after attaining
age _______________________________ (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement for
eligibility.
PART C. CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE
All Employees shall be eligible to become a Participant in the Plan, except the
following (if checked):
[ ] Certain Employees covered by a collective bargaining agreement and
nonresident aliens, as described in Section 3.02 of the Plan.
[ ] Those Employees who have received less than $300 (indexed for cost of
living increases in accordance with Section 408(k)(8) of the Code) of
Compensation from the Employer during the Plan Year.
- -------------------------------------------------------------------------------
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
- -------------------------------------------------------------------------------
PART A. CONTRIBUTION FORMULA
For each Plan Year the Employer will contribute an amount to be determined from
year to year.
PART B. ALLOCATION FORMULA (Check Option 1 or 2)
OPTION 1. PRO RATA FORMULA.
[ ] The Employer Contribution for each Plan Year shall be allocated to the IRA
of each Participant in the same proportion as such Participant's
Compensation (not in excess of $200,000, indexed for cost of living
increases in accordance with Section 408(k)(8) of the Code) for the Plan
Year bears to the total Compensation of all Participants for such year. The
amount allocated to each Participant's IRA shall be limited to the lesser
of 15 percent of the first $200,000 (indexed) of the Participant's
Compensation or $30,000.
- -------------------------------------------------------------------------------
NOTE: See the Basic Plan Document, Section 2.03, seventh paragraph for OBRA '93
changes in the compensation limit.
- -------------------------------------------------------------------------------
OPTION 2. INTEGRATED FORMULA.
[ ] Employer Contributions shall be allocated in the manner described in
Section 4.01(B) of the Plan.
For purposes of the integrated formula, the integration level shall be
(Choose one):
OPTION 1. [ ] The Taxable Wage Base (TWB)
OPTION 2. [ ] ___% of the TWB level shall be the Taxable Wage Base.
NOTE: If no box is checked, the integration level shall be the Taxable Wage
Base.
- -------------------------------------------------------------------------------
SECTION 5. EMPLOYER SIGNATURE
- -------------------------------------------------------------------------------
X
- -------------------------------------------------------------------------------
Signature for Employer Date Signed
- -------------------------------------------------------------------------------
(Type Name)
Capital Growth Management Limited Partnership
- -------------------------------------------------------------------------------
Name of Prototype Sponsor
222 Berkeley Street, Suite 1013, Boston, MA 02116
- -------------------------------------------------------------------------------
Address
(617) 859-7714 or (800) 345-4048
- -------------------------------------------------------------------------------
Telephone Number
Note to Employer: Before signing this Adoption Agreement, you should obtain the
advice of a qualified attorney and tax advisor regarding its completion and the
legal and tax implications of adopting this Plan.
(C)1995 Universal Pensions, Inc., Brainerd, MN 56401
===============================================================================
<PAGE>
===============================================================================
THE CGM FUNDS SEP-IRA ACCOUNT APPLICATION
===============================================================================
- -------------------------------------------------------------------------------
1. ACCOUNT INFORMATION
- -------------------------------------------------------------------------------
Name _________________________________________________________________________
Social Security # [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Address ______________________________________________________________________
_______________________________________________________________________________
Date of Birth ________________________________________________________________
Employer/Occupation __________________________________________________________
Daytime Telephone Number (____)________________________________________________
- -------------------------------------------------------------------------------
2. INITIAL CONTRIBUTION INFORMATION (MINIMUM $1000)
- -------------------------------------------------------------------------------
The enclosed check represents:
(If more than one option is selected below, please specify the contribution
amount for each option.)
[ ] SEP-IRA Contribution made by Employer for above participant.
$_________________ current year $ _____________________prior year
[ ] Rollover contribution from another IRA or SEP-IRA.
$ ______________________
[ ] Transfer of assets from another SEP-IRA. COMPLETE SEP-IRA
TRANSFER FORM AND THE REST OF THIS FORM. $ ____________________
- -------------------------------------------------------------------------------
3. INVESTMENT SELECTION
- -------------------------------------------------------------------------------
$________________ CGM Mutual Fund
$________________ CGM Realty Fund
(CGM Realty Fund is not available in South Dakota.)
$________________ CGM Fixed Income Fund
$________________ CGM Capital Development Fund
(CGM Capital Development Fund is closed. Please see Section 9,
"Who Can Purchase Shares of CGM Capital Development Fund", on
the back of this application. If you are an eligible investor,
check this box | | and fill in your existing CGM Capital
Development Fund account number:___________________________.)
$________________ New England Cash Management Trust
[ ] Money Market Series [ ] U.S. Govt. Series
$ 5.00 INITIAL APPLICATION FEE
_________________ (Required for all accounts)
$________________ AMOUNT OF CHECK ENCLOSED
MAKE ALL CHECKS PAYABLE TO STATE STREET BANK AND TRUST COMPANY.
PLEASE NOTE: CGM American Tax Free Fund is not available under this SEP-IRA Plan
because it may not be an appropriate investment for retirement plans and similar
accounts.
- -------------------------------------------------------------------------------
4. TELEPHONE EXCHANGE PRIVILEGES
- -------------------------------------------------------------------------------
[ ] Yes [ ] No
This service enables you to exchange monies ($1,000 minimum) by telephone among
accounts with the same registration in the CGM Funds or New England Money Market
Funds. CGM Capital Development Fund is closed. Please see Section 9 for full
details. CGM Realty Fund is not available in South Dakota. By completing this
section, you authorize the Fund and its agents to accept and act upon telephone
instructions from you and acknowledge receipt of the current prospectus of the
Fund into which the exchange is made.
- -------------------------------------------------------------------------------
5. AUTOMATIC INVESTMENT PLAN - OPTIONAL
- -------------------------------------------------------------------------------
Employers may have us debit $50 or more each month from their bank account to
apply to their SEP-IRA account. If you are an Employer and if you wish to set up
an Automatic Investment Plan for you or your Plan Participants, please check
this box [ ] and complete Section 10 on the reverse side.
- -------------------------------------------------------------------------------
6. BENEFICIARY DESIGNATION
- -------------------------------------------------------------------------------
This Beneficiary Designation is to be used to indicate the person or persons to
whom the SEP-IRA assets should be turned over in the event of your death. If you
are not survived by a validly designated Beneficiary, your benefits will be paid
to your estate in the event of your death. IMPORTANT: If you do not designate a
Beneficiary or if the Beneficiary designated is not a person, you cannot base
your calculations for distributions on joint life expectancy.
The Beneficiaries named herein and the manner of distribution may be
changed or revoked at any time by filing a new designation in writing with the
Trustee. This designation, and any changes or revocation, will only be effective
upon receipt by the Trustee. PLEASE RETAIN A COPY FOR YOUR RECORDS.
Upon my death, distribute my CGM Simplified Employee Pension Plan Account
(SEP-IRA) in equal shares to the following Principal Beneficiaries who survive
me or, if none survives me, in equal shares to the following Secondary
Beneficiaries who survive me:
Principal Beneficiary(ies):
_______________________________________________________________________________
Name Relationship
_______________________________________________________________________________
Address
Secondary Beneficiary(ies):
_______________________________________________________________________________
Name Relationship
_______________________________________________________________________________
Address
CONSENT OF SPOUSE
(To be used in community property states when spouse is not sole principal
beneficiary): I consent to the above Beneficiary Designation. By signing this
consent, I intend to change the portion (if any) of this SEP-IRA individual
retirement account which is community property into the separate property of my
spouse. I specifically give to my spouse any interest I have in the funds
deposited in this account.
- -------------------------------------------------------------------------------
Signature of Spouse Date
- -------------------------------------------------------------------------------
7. SIGNATURE
- -------------------------------------------------------------------------------
By signing below, I certify that I agree to the provisions on the reverse side
listed in Section 8.
- -------------------------------------------------------------------------------
PLEASE SIGN HERE:
x _______________________________________________________________________
Signature Date
- -------------------------------------------------------------------------------
Please note that there is an annual $10 maintenance fee per account which will
be billed to you each year.
(OVER)
- -------------------------------------------------------------------------------
SEPAPP95
<PAGE>
8. PROVISIONS
- -------------------------------------------------------------------------------
By signing this application establishing an individual retirement account under
my Employer's Simplified Employee Pension Plan (SEP-IRA), I (i) appoint State
Street Bank and Trust Company, or its successors, as Trustee of the Account,
(ii) state that I have received, read, accept, and specifically incorporate the
Trust and Disclosure Statement by reference to this application, (iii)
acknowledge receipt of the current prospectus of the mutual fund(s) selected,
(iv) consent to the Trustee's fee, (v) agree to promptly give instructions to
the Trustee necessary to enable the Trustee to carry out its duties under the
Trust, (vi) represent that whenever information as to any taxable year is
required to be filed with the Internal Revenue Service by the Trustee unless
filed by me, I will file such information with the Internal Revenue Service,
(vii) affirm that my participation is completely voluntary, and (viii) confirm
that my employer has made no specific endorsement of the choice of investments
available under this plan and (ix) certify under penalties of perjury that the
social security number provided is correct. I hereby adopt The CGM Individual
Retirement Account (SEP-IRA) upon the terms and conditions thereof.
[ ] If I have elected the "TELEPHONE EXCHANGE" service, I understand that the
Fund may terminate or modify this privilege at any time. The Fund will
employ reasonable procedures to confirm that instructions received by
telephone are genuine, such as requesting personal identification
information that appears on your account application and recording the
telephone conversation. You will bear the risk of loss due to unauthorized
or fraudulent instructions regarding your account, although the Fund may be
liable if reasonable procedures are not employed.
[ ] FOR EMPLOYERS ONLY: If I have enrolled in the "AUTOMATIC INVESTMENT PLAN"
in Section 10, I authorize the Fund and its agents to initiate Automated
Clearing House (ACH) debits against the designated account at a bank or
other financial institution. I understand that:
- Fund shares purchased by Automatic Investment Plan must be owned for 10
days before they may be redeemed.
- I may terminate my Automatic Investment Plan by sending written notice to
CGM Funds c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, 15 days prior to
my next scheduled debit date.
- The CGM Funds may immediately terminate my Plan in the event that any item
is unpaid by my financial institution.
- The Fund may terminate or modify this privilege at any time.
- -------------------------------------------------------------------------------
9. WHO CAN PURCHASE SHARES OF CGM CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
Only shareholders of the Fund as of September 24, 1993 who remain shareholders
thereafter may purchase additional shares of the Fund. The Fund reserves the
right to reject any purchase order. This policy supersedes all previous
eligibility requirements. Fund shares are not generally available to other
persons except in special circumstances that have been approved by, or under the
authority of, the board of trustees of the Fund. The special circumstances
currently approved by the board of trustees of the Fund are limited to the offer
and sale of shares of the Fund to the following additional persons: trustees of
the Fund, employees of the Investment Manager and counsel to the Fund and the
Investment Manager.
- -------------------------------------------------------------------------------
10. AUTOMATIC INVESTMENT PLAN (AIP) - AVAILABLE ONLY TO EMPLOYERS
- -------------------------------------------------------------------------------
If you are an Employer, you can have us debit $50 or more on the same
day each month from your bank account and have it applied to your SEP-IRA
account or the SEP-IRA accounts of your Plan Participants. (Please allow 10
business days for AIP Plan to start.)
To elect this option, please: [ ] ATTACH A CHECK MARKED "VOID" FROM THE BANK
ACCOUNT YOU WILL BE USING.
[ ] FILL IN THE INFORMATION REQUESTED BELOW.
Please invest $________ on or about | | 5th day of each month or | | 20th day of
each month (5th will be selected if no box is checked).
Please allocate the above investment amount as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PARTICIPANT'S NAME SOCIAL SECURITY NUMBER SPECIFIC CGM FUND NAME MONTHLY INVESTMENT AMOUNT
- -------------------------------------------------------------------------------------------------------
$
- -------------------------------------------------------------------------------------------------------
$
- -------------------------------------------------------------------------------------------------------
$
- -------------------------------------------------------------------------------------------------------
$
- -------------------------------------------------------------------------------------------------------
$
- -------------------------------------------------------------------------------------------------------
$ _________________________
</TABLE>
TOTAL MONTHLY INVESTMENT
As a convenience to me, you are hereby requested and authorized to pay and
charge to my account Automated Clearing House (ACM) debits drawn on my account
by and payable to the order of The CGM Funds. This authority is to remain in
effect until revoked by me in writing and, until you actually receive such
notice, I agree you will be fully protected in honoring any such debits.
_______________________________________________________________________________
Name of Bank Bank Account Number
_______________________________________________________________________________
Name of Depositor(s) as Shown on Bank Records
X X
_______________________________________________________________________________
Signature of Employer Signature (if Joint Bank Account)
SEND APPLICATION TO: CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
===============================================================================
<PAGE>
PLEASE USE THIS FORM WHEN MOVING ASSETS
DIRECTLY FROM ONE IRA TO ANOTHER IRA
- -------------------------------------------------------------------------------
THE CGM FUNDS SEP-IRA TRANSFER FORM
- -------------------------------------------------------------------------------
IMPORTANT: CGM will send a formal letter of instruction along with this SEP-IRA
Transfer form to your current Trustee or Custodian. To ensure timely processing
of your transfer, please call your current Trustee or Custodian and verify the
current address of their transfer department and any transfer requirements, such
as a signature guarantee. IF YOU ARE AGE 70 1/2 OR OLDER, YOU MUST COMPLETE THE
BACK OF THIS FORM.
TO: ( )
______________________________________________________________________________
Name of Current Trustee or Custodian Telephone Number
______________________________________________________________________________
Address City State Zip Code
RE:
______________________________________________________________________________
Name of Investment Account Number
[ ] I have established an Individual Retirement Account under a SEP-IRA Plan
with the CGM Funds and have appointed State Street Bank and Trust Company
as the Successor Trustee.
[ ] Please accept this as your authorization to (check one):
| | Liquidate and transfer $ or %_________ of my IRA assets held by you in
the above account.
| | Liquidate and transfer all of my IRA assets held by you in the above
account.
[ ] Please process this transaction as follows, effective (check one):
| | Immediately | | Upon maturity of my assets
[ ] MAKE CHECK PAYABLE TO THE SPECIFIC CGM FUND IN WHICH YOU ARE INVESTING.
State Street Bank and Trust Company, Trustee for the SEP-IRA of:
____________________________________________________________________
Participant Name Social Security Number
____________________________________________________________________
CGM Fund CGM Account Number*
*(If existing SEP-IRA account with CGM, indicate your CGM account
number. If new, write "new" and complete SEP-IRA Account Application.)
[ ] Send check to: CGM Funds, c/o State Street Bank and Trust Company, P.O. Box
8511, Boston, MA 02266-8511
_____________________________________________
PLEASE SIGN HERE:
X
- -------------------------------------------
YOUR SIGNATURE DATE
_____________________________________________ _________________________
Your Street Address
Signature Guarantee (if required by current Trustee) _________________________
City State Zip Code
Name of Firm: ______________________________________
By: ________________________________________________ (___)____________________
Authorized Individual Your Daytime Phone Number
_______________________________________________________________________________
STATE STREET BANK AND TRUST COMPANY HEREBY ACCEPTS FUNDS WHICH YOU HOLD.
______________________________________________________________________________
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
_______________________________________________________________________________
(OVER)
SEPIRATRAN95
________________________________________________________________________________
<PAGE>
_______________________________________________________________________________
PLEASE COMPLETE THIS SECTION IF YOU ARE 70 1/2 OR OLDER.
If this transfer is being made during or after the year in which you turn age
70-1/2, your required minimum distribution for the current year must be made
from the distributing IRA prior to the transfer. Please check with your current
IRA Trustee or Custodian for more information about minimum distributions.
Please complete the following information concerning your distributions:
1. Date of Birth of the Designated Beneficiary being used to calculate minimum
required distributions with respect to the transferor plan: ___________________
____________________________. (If there is more than one Designated Beneficiary,
you must use the birthdate of the oldest Beneficiary.)
2. Life expectancy of the Participant: (Choose one) [ ] is being recalculated
[ ] is not being recalculated.
3. Life expectancies of the Participant and/or Spouse Beneficiary:
(Choose one) [ ] are being recalculated [ ] are not being recalculated.
________________________________________________________________________________
RETURN THIS FORM TO: THE CGM FUNDS o P.O. BOX 449 o BOSTON, MA 02117-0449
<PAGE>
[LOGO]
THE CGM FUNDS SEP SUMMARY FOR EMPLOYEES
- --------------------------------------------------------------------------------
Please read together with your Employee Information Booklet.
- --------------------------------------------------------------------------------
ESTABLISHMENT OF SEP PLAN
- --------------------------------------------------------------------------------
Your employer has adopted a type of employee benefit plan known as a Simplified
Employee Pension (SEP) Plan. In order to become a participant in the Plan, you
must meet the Plan's eligibility requirements specified below. Once you become a
participant, you are entitled to receive a certain share of the amounts your
employer contributes to the Plan. All contributions will be deposited into a
SEP-IRA for you. Contributions made to the Plan for you are yours to keep. These
features of the Plan are explained further in the Employee Information Booklet.
(Employers: Please call the CGM Funds at 800-345-4048 to let us know how many
booklets you will need for your employees.)
The actual Plan is a complex legal document that has been written in a manner
required by the Internal Revenue Service. This document is called a SEP Summary
for Employees. It is designed to explain and summarize the important features of
the Plan. If you have any questions or need additional information about the
Plan, consult_____________________________________
(Name of Employer Representative)
You may examine the Plan itself at a reasonable time by making arrangements with
the above mentioned representative of your employer.
- --------------------------------------------------------------------------------
ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
EMPLOYER CONTRIBUTIONS: Your employer is not required to make contributions to
the Plan. However, if a contribution is made, your SEP-IRA will receive a share
of that contribution if you are an "eligible" employee and if you have met the
age and service requirements set forth below.
ELIGIBLE EMPLOYEES: Under the SEP Plan, all employees can participate except the
classifications of employees checked below:
[ ] Those employees covered by the terms of a collective bargaining agreement
(a union agreement) where retirement benefits were negotiated and those
employees who are nonresident aliens.
[ ] Those employees who did not earn at least $300 from the employer during
the year. (This $300 figure is increased by the IRS each year based on
changes in the cost of living.)
AGE REQUIREMENT: You must be at least ______ years old.
SERVICE REQUIREMENT: You must have worked for your employer in at least ______
(must be 0, 1, 2 or 3) of the immediately preceding 5 years.
- --------------------------------------------------------------------------------
CONTRIBUTION FORMULA
- --------------------------------------------------------------------------------
Any employer contribution will be allocated to your SEP-IRA in accordance
with the formula selected below (check one):
[ ] PRO RATA FORMULA. Each eligible employee will receive a pro rata portion of
the employer contribution equal to the ratio of his or her compensation to
the total compensation of all eligible employees. Thus, the contribution
will be the same percentage of compensation for all employees.
[ ] INTEGRATED FORMULA. Integration allows contribution percentages among
eligible employees to vary. Details about integration are provided in your
Employee Information Booklet. The integration level is (check one):
[ ] The Taxable Wage Base (TWB)
[ ] ____% of the TWB
- --------------------------------------------------------------------------------
SEP-IRA WITH PLAN SPONSOR
- --------------------------------------------------------------------------------
Under this SEP Plan, you must maintain your SEP-IRA at the following financial
organization subject to the following terms: THE CGM FUNDS, 222 BERKELEY STREET,
BOSTON, MA 02116.
MINIMUM MINIMUM
INITIAL SUBSEQUENT
INVESTMENT OPTIONS INVESTMENT INVESTMENT
- --------------------------------------------------------------------------------
CGM Mutual Fund $1,000 $50
CGM Capital Development Fund* $1,000 $50
CGM Fixed Income Fund $1,000 $50
CGM Realty Fund $1,000 $50
(Not available in South Dakota)
New England Cash Management Trust $1,000 $50
Money Market Series
New England Cash Management Trust $1,000 $50
US Government Series
- --------------------------------------------------------------------------------
*Only shareholders of the CGM Capital Development Fund as of September 24, 1993
who have remained shareholders continuously since that date may purchase
additional shares of the Fund. Please see The CGM Fund SEP-IRA Account
Application (Section 9) for full details.
Before your Employer makes an investment on your behalf, please read the
prospectus(es) for the CGM Fund(s) in which your contribution will be invested.
Please refer to the Disclosure Statement and other documentation given to you by
the above named financial organization for the other terms and conditions which
apply to your SEP-IRA.
(C)1995 Universal Pensions, Inc., Brainerd, MN 56401
- --------------------------------------------------------------------------------
<PAGE>
WORKSHEET A For Employers
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SHEET OFFERS GUIDANCE IN CALCULATING YOUR SEP-IRA CONTRIBUTION. PLEASE SEEK
PROFESSIONAL TAX ADVICE TO VALIDATE YOUR COMPUTATIONS.
- --------------------------------------------------------------------------------
HOW TO CALCULATE SEP CONTRIBUTIONS FOR A SELF-EMPLOYED PERSON
Individuals with self-employed income must base their contributions on "net
earnings", rather than W-2 compensation, and special rules apply when figuring
the maximum deduction for these contributions. Please see formula and example
below for a full explanation.
DEFINITIONS
SELF-EMPLOYED INDIVIDUAL: A self-employed individual is an employee for SEP
purposes. He or she is also the employer. Even if the self-employed individual
is the only eligible employee, he or she can have a SEP-IRA.
COMPENSATION: For self-employed individuals, compensation refers to net
earnings.
NET EARNINGS: For SEP purposes, your net earnings from your business refers to
your income less business expenses, reduced by a deduction for one-half of
your self-employment tax, less your SEP-IRA contribution. (In this case,
"expenses" include SEP plan contributions you make on behalf of any eligible
employees, but exclude the contribution you, as a self-employed person, would
make on your own behalf.)
FORMULA
As mentioned above, the deduction allowed for a contribution must be taken
into account when determining the earned income of a self-employed person.
Because your deduction amount and your net earnings are each dependent on the
other, this adjustment presents a problem.
To solve this problem, you make the adjustment to net earnings indirectly by
reducing the contribution rate called for in the plan. Use the following
worksheet and your income tax forms to find this reduced contribution rate and
your maximum deduction. Make no reduction to the contribution rate for any
common-law employees.
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1. Start with the contribution rate (%) you have
selected for all employees. And show that rate as a decimal... ______________
2. Add 1 to the rate ............................................ ______________
3. Divide line (1) by line (2)................................... ______________
4. Show your net earnings (not reduced for contributions to
your SEP-IRA) from Schedule C, C-EZ or F (Form 1040) or
Schedule K-1 (Form 1065)...................................... $_____________
5. Enter deduction for self-employment tax (Line 25, Form 1040).. $_____________
6. Adjusted net earnings (subtract line 5 from line 4) .......... $_____________
7. Multiply line 3 by the lesser of $150,000* or the adjusted
net earnings on line 6. This is the maximum deduction for
contributions to a self-employed person's SEP-IRA............. $_____________
- --------------------------------------------------------------------------------
*The maximum compensation you may base your contribution on for 1995 is $150,000
Please refer to the example on the next page.
5/95 WORKA95
<PAGE>
WORKSHEET A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SHEET OFFERS GUIDANCE IN CALCULATING YOUR SEP-IRA CONTRIBUTION. PLEASE
SEEK PROFESSIONAL TAX ADVICE TO VALIDATE YOUR COMPUTATIONS.
- --------------------------------------------------------------------------------
EXAMPLE
You are a sole proprietor and have employees. This year you have decided to
contribute 15% of compensation for you and your employees. Your net earnings
from your business (not taking into account a deduction for contributions to
your own SEP-IRA) are $140.000.
Using the worksheet, you figure your maximum deduction for contributions to your
own SEP-IRA as follows:
- --------------------------------------------------------------------------------
1. Contribution rate selected (15%) shown as a decimal............ .15
______________
2. Add 1 to the rate.............................................. 1.15
______________
3. Divide line (1) by line (2) ................................... .130435
______________
4. Show your net earnings (not reduced for contributions
to your SEP-IRA) from Schedule C, C-EZ or F (Form 1040)
or Schedule K-1 (Form 1065)....................................$140,000
______________
5. Enter deduction for self-employment tax (Line 25, Form 1040)...$ 10,000
______________
6. Adjusted net earnings (subtract line 5 from line 4) ...........$130,000
______________
7. Multiply line 3 by the lesser of $150,000* or the adjusted
net earnings on line 6. This is the amount of your SEP-IRA
contribution...................................................$ 16,956
______________
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*The maximum compensation you may base your contribution on for 1995 is $150,000
- --------------------------------------------------------------------------------
For more information about SEP-IRAs, you may call the IRS at 800-829-3676 and
ask for Publication 560 "Retirement Plans for the Self-Employed" or Publication
590 "Individual Retirement Arrangements." Chapter 8 of Publication 590 covers
Simplified Employee Pensions. (SEPS).
- --------------------------------------------------------------------------------
5/95 WORKA95
- --------------------------------------------------------------------------------
<PAGE>
WORKSHEET B For Employees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SHEET OFFERS GUIDANCE IN CALCULATING YOUR SEP-IRA CONTRIBUTION. PLEASE SEEK
PROFESSIONAL TAX ADVICE TO VALIDATE YOUR COMPUTATIONS.
- --------------------------------------------------------------------------------
HOW TO CALCULATE SEP CONTRIBUTIONS FOR YOUR COMMON-LAW EMPLOYEES
The SEP rules permit you, as the employer, to contribute each year to each
eligible employee's SEP-IRA. You can contribute 0% to 15% of the common-law
employee's compensation. The maximum compensation you may base your
contribution on for 1995 is $150,000. These contributions are funded by you.
The contribution rate designated can vary from year to year. However, within a
given year, the same rate must be applied to all plan participants, including
yourself, if you selected pro rata as your allocation formula. Should you have
selected the integrated formula as your allocation method, please seek
competent tax advice as the method is more involved than can be explained in
this worksheet.
DEFINITIONS
Common-law employees are those employees who have no financial interest in
your business.
Compensation for these employees is the amount recorded on
their W-2 form.
FORMULA
The formula for computing the SEP-IRA contribution using pro-rata allocation
for a common-law employee is as follows:
- --------------------------------------------------------------------------------
1. Decide the percentage (%) of compensation you wish to
contribute for yourself and your employees. Show that
rate as a decimal......................................... ________________
2. Show the common-law employee's compensation............... $________________
3. Multiply line (1) by line (2). This is the maximum
deduction for contributions to a common-law employee's
SEP-IRA................................................... $________________
- --------------------------------------------------------------------------------
EXAMPLE
Barry is a common-law employee. His compensation for 1995 is $20,000. Barry's
employer has decided to contribute 15% of compensation for each employee.
Therefore, he may contribute $3,000 to Barry's SEP-IRA.
- --------------------------------------------------------------------------------
1. Contribution rate selected (15%) shown as a decimal....... .15
________________
2. Compensation of common-law employee....................... $ 20,000
________________
3. Multiply line (1) by line (2).
$20,000 x .15 = ......................................... $ 3,000
________________
- --------------------------------------------------------------------------------
$3,000 is the amount that the employer may contribute to Barry's SEP-IRA.
5/95 WORKB95
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<PAGE>
[LOGO]
THE CGM FUNDS SIMPLIFIED EMPLOYEE PENSION PLAN
BASIC PLAN DOCUMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN
- --------------------------------------------------------------------------------
1.01 PURPOSE The purpose of this Plan is to provide, in accordance with its
provisions, a Simplified Employee Pension Plan providing benefits upon
retirement for the individuals who are eligible to participate hereunder.
1.02 INTENT TO QUALIFY It is the intent of the Employer that this Plan shall be
for the exclusive benefit of its Employees and shall qualify for approval under
Section 408(k) of the Internal Revenue Code, as amended from time to time (or
corresponding provisions of any subsequent Federal law at that time in effect).
In case of any ambiguity, it shall be interpreted to accomplish such result. It
is further intended that it comply with the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) as amended from time to time.
1.03 WHO MAY ADOPT An employer who has ever maintained a defined benefit plan
which is now terminated may not participate in this prototype Simplified
Employee Pension Plan. If, subsequent to adopting this Plan, any defined benefit
plan of the Employer terminates, the Employer will no longer participate in this
prototype plan and will be considered to have an individually designed plan.
1.04 USE WITH IRA This prototype Simplified Employee Pension Plan must be used
with an Internal Revenue Service model IRA (Form 5305 or Form 5305-A) or an
Internal Revenue Service approved master or prototype IRA.
- --------------------------------------------------------------------------------
SECTION 2. DEFINITIONS
- --------------------------------------------------------------------------------
2.01 ADOPTION AGREEMENT Means the document executed by the Employer through
which it adopts the Plan and thereby agrees to be bound by all terms and
conditions of the Plan.
2.02 CODE Means the Internal Revenue Code of 1986 as amended.
2.03 COMPENSATION For the purposes of the $300 limit of Section 408(k)(2)(C) of
the Code shall be defined as Section 414(q)(7) Compensation.
For all other purposes, Compensation shall mean all of a Participant's wages as
defined in Section 3401(a) of the Code for the purposes of income tax
withholding at the source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code).
For any Self-Employed Individual covered under the Plan, Compensation will mean
Earned Income.
Compensation shall include only that Compensation which is actually paid or made
available to the Participant during the Plan Year.
Compensation shall include any amount which is contributed by the Employer
pursuant to a salary reduction agreement and which is not includible in the
gross income of the Employee under Sections 125, 402(a)(8), 402(h) or 403(b) of
the Code.
The annual Compensation of each Participant taken into account under the Plan
for any year shall not exceed $200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under Section 415(d) of the
Code, except the dollar increase in effect on January 1 of any calendar year is
effective for years beginning in such calendar year and the first adjustment to
the $200,000 limitation is effected on January 1, 1990. If a Plan determines
Compensation on a period of time that contains fewer than 12 calendar months,
then the annual Compensation limit is an amount equal to the annual Compensation
limit for the calendar year in which the compensation period begins multiplied
by the ratio obtained by dividing the number of full months in the period by 12.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
Compensation limit. The OBRA '93 annual Compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual Compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this Plan
to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93
annual Compensation limit set forth in this provision.
2.04 EARNED INCOME Means the net earnings from self employment in the trade or
business with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net earnings
will be determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions by
the Employer to a qualified plan or to a Simplified Employee Pension Plan to the
extent deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction allowed to the
Employer by Section 164(F) of the Code for taxable years beginning after
December 31, 1989.
2.05 EFFECTIVE DATE Means the date the Plan becomes effective as indicated in
the Adoption Agreement.
2.06 EMPLOYEE Means any person who is a natural person employed by the Employer
as a common-law employee and if the Employer is a sole proprietorship or
partnership, any Self-Employed Individual who performs services with respect to
the trade or business of the Employer. Further, any employee of any other
employer required to be aggregated under Section 414(b), (c), (m), or (o) of the
Code and any leased employee required to be treated as an employee of the
Employer under Section 414(n) of the Code shall also be considered an Employee.
2.07 EMPLOYER Means any corporation, partnership or sole proprietorship named in
the Adoption Agreement and any successor who by merger, consolidation, purchase
or otherwise assumes the obligations of the Plan. A partnership is considered to
be the Employer of each of the partners and a sole proprietorship is considered
to be the Employer of the sole proprietor
2.08 EMPLOYER CONTRIBUTION Means the amount contributed by the Employer to this
Plan
2.09 IRA Means the designated Individual Retirement Account or Individual
Retirement Annuity, which satisfies the requirements of Section 408 of the Code,
and which is maintained with the Prototype Sponsor by a Participant.
2.10 PARTICIPANT Means any Employee who has met the participation requirements
of Section 3.01 and who is or may become eligible to receive an Employer
Contribution.
2.11 PLAN Means this plan document plus the corresponding Adoption Agreement as
completed and signed by the Employer.
2.12 PLAN YEAR Means the 12 consecutive month period which coincides with
Employer's taxable year or such other 12 consecutive month period as is
designated in the Adoption Agreement.
2.13 PRIOR PLAN Means a plan which was amended or replaced by adoption of this
plan document, as indicated in the Adoption Agreement.
2.14 PROTOTYPE SPONSOR Means the entity specified in the Adoption Agreement
which sponsors this prototype Plan.
2.15 SELF-EMPLOYED INDIVIDUAL Means an individual who has Earned Income for a
Plan Year from the trade or business for which the Plan is established; also, an
individual who would have had Earned Income but for the fact that the trade or
business had no net profits for the Plan Year.
2.16 SERVICE Means the performance of duties by an Employee for the Employer,
for any period of time, however short, for which the Employee is paid or
entitled to payment. When the Employer maintains the Plan of a predecessor
employer, an Employee's Service will include his service for such predecessor
employer.
2.17 TAXABLE WAGE BASE Means the maximum amount of earnings which may be
considered wages for a year under Section 3121 (a)(l) of the Code in effect as
of the beginning of the Plan Year.
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<PAGE>
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SECTION 3. ELIGIBILIGY AND PARTICIPATION
- --------------------------------------------------------------------------------
3.01 ELIGIBILITY REQUIREMENTS Except for those Employees excluded pursuant to
Section 3.02, each Employee of the Employer who fulfills the eligibility
requirements specified in the Adoption Agreement shall, as a condition for
further employment, become a Participant. Each Participant must establish an IRA
with the Prototype Sponsor to which Employer Contributions under this Plan will
be made.
3.02 EXCLUSION OF CERTAIN EMPLOYEES If the Employer has so indicated in the
Adoption Agreement, the following Employees shall not be eligible to become a
Participant in the Plan: (1) Those Employees included in a unit of Employees
covered by the terms of a collective bargaining agreement, provided retirement
benefits were the subject of good faith bargaining; and (2) those Employees who
are nonresident aliens, who have received no earned income from the Employer
which constitutes earned income from sources within the United States.
3.03 ADMITTANCE AS A PARTICIPANT
A. PRIOR PLAN If this Plan is an amendment or continuation of a Prior Plan,
each Employee of the Employer who immediately before the Effective Date was
a participant in said Prior Plan shall be a Participant in this Plan as of
said date.
B. NOTIFICATION OF ELIGIBILITY The Employer shall notify each Employee who
becomes a Participant of his status as a Participant in the Plan and of his
duty to establish an IRA with the Prototype Sponsor to which Employer
Contributions may be made.
C. ESTABLISHMENT OF AN IRA If a Participant fails to establish an IRA for
whatever reason, the Employer may execute any necessary documents to
establish an IRA with the Prototype Sponsor on behalf of the Participant.
3.04 DETERMINATIONS UNDER THIS SECTION The Employer shall determine the
eligibility of each Employee to be a Participant. This determination shall be
conclusive and binding upon all persons except as otherwise provided herein or
by law.
3.05 LIMITATION RESPECTING EMPLOYMENT Neither the fact of the establishment of
the Plan nor the fact that a common-law employee has become a Participant shall
give to that common-law employee any right to continued employment; nor shall
either fact limit the right of the Employer to discharge or to deal otherwise
with a common-law employee without regard to the effect such treatment may have
upon the Employee's rights under the Plan.
- -------------------------------------------------------------------------------
SECTION 4. CONTRIBUTIONS AND ALLOCATIONS
- -------------------------------------------------------------------------------
4.01 EMPLOYER CONTRIBUTIONS
A. ALLOCATION FORMULA Employer Contributions shall be allocated in accordance
with the allocation formula selected in the Adoption Agreement. Each Employee
who has satisfied the eligibility requirements pursuant to Section 3.01
(thereby becoming a Participant) will share in such allocation.
Employer Contributions made for a Plan Year on behalf of any Participant
shall not exceed the lesser of 15% of Compensation or the limitation in
effect under Code Section 415(c)(1)(A) (indexed for cost of living increases
in accordance with Code Section 415(d)).
B. INTEGRATED ALLOCATION FORMULA If the Employer has selected the integrated
allocation formula in the Adoption Agreement, then Employer Contributions for
the Plan Year will be allocated to Participants' IRAs as follows:
STEP 1 Employer Contributions will be allocated to each Participant's IRA in
the ratio that each Participant's total Compensation bears to all
Participants' total Compensation, but not in excess of 3% of each
Participant's Compensation.
STEP 2 Any Employer Contributions remaining after the allocation in Step 1
will be allocated to each Participant's IRA in the ratio that each
Participant's Compensation for the Plan Year in excess of the integration
level bears to the Compensation of all Participants in excess of the
integration level, but not in excess of 3%.
STEP 3 Any Employer Contributions remaining after the allocation in Step 2
will be allocated to each Participant's IRA in the ratio that the sum of each
Participant's total Compensation and Compensation in excess of the
integration level bears to the sum of all Participants' total Compensation
and Compensation in excess of the integration level, but not in excess of the
maximum disparity rate described in the table below.
STEP 4 Any Employer Contributions remaining after the allocation in Step 3
will be allocated to each Participant's IRA in the ratio that each
Participant's total Compensation for the Plan Year bears to all Participants'
total Compensation for that Plan Year.
The integration level shall be equal to the Taxable Wage Base or such lesser
amount elected by the Employer in the Adoption Agreement.
INTEGRATION LEVEL MAXIMUM DISPARITY RATE
_________________ _______________________
Taxable Wage Base (TWB) 2.7%
More than $0 but not more than X* 2.7%
More than X* of TWB but not more than 80% of TWB 1.3%
More than 80% of TWB but not more than TWB 2.4%
*X mean the greater of $10,000 or 20% of TWB.
C. TIMING OF EMPLOYER CONTRIBUTION Employer Contributions, if any, made on
behalf of Participants for a Plan Year shall be allocated and deposited to
the IRA of each Participant no later than the due date for filing the
Employer's tax return (including extensions).
4.02 VESTING, WITHDRAWAL RIGHTS TO CONTRIBUTIONS All Employer Contributions made
under the Plan on behalf of Employees shall be fully vested and nonforfeitable
at all times. Each Employee shall have an unrestricted right to withdraw at any
time all or a portion of the Employer Contributions made on his behalf. However,
withdrawals taken are subject to the same taxation and penalty provisions of the
Code which are applicable to IRA distributions.
4.03 SIMPLIFIED EMPLOYER REPORTS The Employer shall furnish reports, relating to
contributions made under the Plan, in the time and manner and containing the
information prescribed by the Secretary of the Treasury, to Participants. Such
reports shall be furnished at least annually and shall disclose the amount of
the contribution made under the Plan to the Participant's IRA.
- --------------------------------------------------------------------------------
SECTION 5. AMENDMENT OR TERMINATION OF PLAN
- --------------------------------------------------------------------------------
5.01 AMENDMENT BY EMPLOYER The Employer reserves the right to amend the
elections made or not made on the Adoption Agreement by executing a new Adoption
Agreement and delivering a copy of the same to the Prototype Sponsor. The
Employer shall not have the right to amend any nonelective provision of the
Adoption Agreement nor the right to amend provisions of this plan document. If
the employer adopts an amendment to the Adoption Agreement or plan document in
violation of the preceding sentence, the Plan will be deemed to be an
individually designed plan and may no longer participate in this prototype Plan.
5.02 AMENDMENT BY PROTOTYPE SPONSOR By adopting this Plan, the Employer
delegates to the Prototype Sponsor the power to amend or replace the Adoption
Agreement or the Plan to conform them to the provisions of any law, regulations
or administrative rulings pertaining to Simplified Employee Pensions and to make
such other changes to the Plan, which, in the judgment of the Prototype Sponsor,
are necessary or appropriate. The Employer shall be deemed to have consented to
all such amendments; provided however, that no changes may be made without the
consent of the Employer if the effect would be to substantially change the costs
or benefits under the Plan. The Prototype Sponsor shall not have the obligation
to exercise or not to exercise the power delegated to it nor shall the Prototype
Sponsor incur liability of any nature for any act done or failed to be done by
the Prototype Sponsor in good faith in the exercise or nonexercise of the power
delegated hereunder.
5.03 LIMITATIONS ON POWER TO AMEND No amendment by either the Employer or the
Prototype Sponsor shall reduce or otherwise adversely affect any benefits of a
Participant or Beneficiary acquired prior to such amendment unless it is
required to maintain compliance with any law, regulation or administrative
ruling pertaining to Simplified Employee Pensions.
5.04 TERMINATION While the Employer expects to continue the Plan indefinitely,
the Employer shall not be under any obligation or liability to continue
contributions or to maintain the Plan for any given length of time. The Employer
may terminate this Plan at any time by appropriate action of its managing body.
This Plan shall terminate on the occurrence of any of the following events:
A. Delivery to the Prototype Sponsor of a notice of termination executed by the
Employer specifying the effective date of the Plan's termination.
B. Adjudication of the Employer as bankrupt or the liquidation or dissolution of
the Employer.
5.05 NOTICE OF AMENDMENT, TERMINATION Any amendment or termination shall be
communicated by the Employer to all appropriate parties as required by law.
Amendments made by the Prototype Sponsor shall be furnished to the Employer and
communicated by the Employer to all appropriate parties as required by law. Any
filings required by the Internal Revenue Service or any other regulatory body
relating to the amendment or termination of the Plan shall be made by the
Employer.
5.06 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER A successor of the Employer may
continue the Plan and be substituted in the place of the present Employer. The
successor and present Employer (or if deceased, the executor of the estate of a
deceased Self-Employed Individual who was the Employer) must execute a written
instrument authorizing such substitution and the successor must complete and
sign a new Adoption Agreement.
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<PAGE>
27
INTERNAL REVENUE SERVICE Department of the Treasury
Prototype SEP 001
FFN: 50495842700-001 Case: 9580029 Washington, DC 20224
EIN: 04-3076053
Letter Serial No: D410091a
Person to Contact: MS. ARRINGTON
CAPITAL GROWTH MANAGEMENT
Telephone Number: (202) 622-8173
222 BERKELEY STREET SUITE 1013
Refer Reply to: CP:E:EP:Q:P3
BOSTON, MA 02116
Date: 03/22/95
Dear Applicant:
In our opinion, the form of your Simplified Employee Pension (SEP) arrangement
is acceptable under section 408(k) of the Internal Revenue Code. This SEP
arrangement is approved for use only in conjunction with an Individual
Retirement Arrangement (IRA) which meets the requirements of Code section 408
and has received a favorable opinion letter, or a model IRA (Forms 5305 and
5305-A).
Employers who adopt this approved plan will be considered to have a retirement
savings program that satisfies the requirements of Code section 408 provided
that it is used in conjunction with an approved IRA. Please provide a copy of
this letter to each adopting employer.
Code section 408(l) and related regulations require that employers who adopt
this SEP arrangement furnish employees in writing certain information about this
SEP arrangement and annual reports of savings program transactions.
Your program may have to be amended to include or revise provisions in order to
comply with future changes in the law or regulations.
If you have any questions concerning IRS processing of this case, call us at the
above telephone number. Please refer to the Letter Serial Number and File Folder
Number shown in the heading of this letter. Please provide those adopting this
plan with your phone number, and advise them to contact your office if they have
any questions about the operation of this plan.
You should keep this letter as a permanent record. Please notify us if you
terminate the form of this plan.
Sincerely yours,
John Swieca
Chief, Employee Plans Technical Branch
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<PAGE>
[logo]
CGM Capital Development Fund
CGM Mutual Fund
CGM Fixed Income Fund
CGM American Tax Free Fund
CGM Realty Fund
Post Office Box 449
Boston, Massachusetts 02117
800-345-4048
PLEASE NOTE: CGM American Tax Free Fund is not available under this SEP-IRA Plan
because it may not be an appropriate investment for retirement plans and similar
accounts.
(C) 1995 Universal Pensions, Inc., Brainerd, MN 56401 SEPIRABOOK95
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT: PLEASE SAVE WITH YOUR PERMANENT RECORDS.
- --------------------------------------------------------------------------------
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CGM 403(b)(7) TAX-SHELTERED CUSTODIAL ACCOUNT AGREEMENT
- --------------------------------------------------------------------------------
This Agreement allows you to establish a tax-sheltered custodial account
authorized under Section 403(b)(7) of the Internal Revenue Code. By electing to
reduce your compensation and have your Employer contribute to your tax-sheltered
custodial account, you will not be taxed on the amounts contributed or earnings
attributable to such amounts until the funds are withdrawn from your account.
SECTION ONE: DEFINITIONS
The following words and phrases when used in this Agreement with initial capital
letters shall have the meanings set forth below.
1.01 ACCOUNT - Means the tax-sheltered custodial Account established pursuant to
this Agreement for the benefit of the Participant and when the context so
implies refers to the assets, if any, then held by the Custodian hereunder.
1.02 AGREEMENT - Means this 403(b)(7) Tax-Sheltered Custodial Account Agreement.
1.03 BENEFICIARY - Means the person or persons designated by the Participant in
accordance with Section 4.04 to receive any distributions from the Account
upon the Participant's death.
1.04 Code - Means the Internal Revenue Code of 1986, as amended from time to
time.
1.05 CUSTODIAN - Means State Street Bank and Trust Company or any successor
thereto which qualifies to serve as Custodian in the manner prescribed by
Section 401(f)(2) of the Code.
1.06 EMPLOYER - Means the entity so designated on this Agreement. The Employer
must be an entity described in Section 501(c)(3) of the Code which is
exempt from tax under Section 501(a) of the Code, an educational
organization described in Section 170(b)(1)(A)(ii) of the Code or any other
entity eligible under Section 403(b) of the Code to make contributions to
tax-sheltered custodial accounts.
1.07 PARTICIPANT - Means any person who is regularly employed by the Employer
who elects to participate in this Agreement by completing and signing a
Salary Deferral Agreement or such other form as may be acceptable to the
Employer.
1.08 SALARY DEFERRAL AGREEMENT - Means the Salary Reduction Agreement signed by
the Employee and delivered to the Employer whereby the Employer authorizes
a reduction of salary to be contributed by the Employer to the Employee's
Account established hereunder.
1.09 SPONSOR - Means Capital Growth Management Limited Partnership.
SECTION TWO: CONTRIBUTIONS
2.01 Salary Deferral Agreement - The Custodian may accept contributions from the
Employer on behalf of a Participant made pursuant to a Salary Deferral
Agreement. A Participant shall designate the amount or percentage of such
Participant's compensation which is to be deferred in the Salary Deferral
Agreement. Such amount or percentage shall be effective until otherwise
modified in writing by the Participant. A Participant may amend or
terminate his or her Salary Deferral Agreement at such times as may be
permitted by the Employer, however, the Participant may not change his or
her elections more than once per tax year.
2.02 MAXIMUM CONTRIBUTION LIMITS - In no event shall the contributions to the
Account for a tax year on behalf of a Participant exceed the maximum
allowable deferrals permitted under current law or regulation.
(a)The maximum salary deferral made during a tax year on behalf of a
Participant, when aggregated with other salary deferral amounts
made through the Employer (or controlled group of Employers under
IRC 414(b), (c), (m) or (o)), shall not exceed the lesser of the
maximum permitted amount for a Participant under Sections 403(b)(2)
and 415(c) of the Code for that year.
(b)The maximum of all salary deferrals made during the Participant's
tax year shall not exceed the limitations set forth in Section
402(g) of the Code.
(c)The maximum salary deferrals may be based on a valid election by
the Participant to use available special increase options.
Neither the Custodian nor Employer shall be under any obligation to
determine whether contributions made pursuant to this Agreement on behalf
of the Participant exceed the limits prescribed under the Code.
2.03 TRANSFER TO CUSTODIAL ACCOUNT - The Participant may transfer (or arrange
for the transfer of) assets from another annuity contract or custodial
account described in Section 403(b) of the Code to this Account. The
transfer shall be accepted by the Custodian if the Participant certifies
that the transaction satisfies all current requirements for such a
transaction. The Custodian may request the Participant to provide such
information it deems necessary prior to accepting the transfer. The
Custodian shall not be responsible for determining whether any transfer is
proper.
SECTION THREE: INVESTMENT OF CONTRIBUTIONS
3.01 SHARES OF REGULATED INVESTMENT COMPANIES - All Contributions by a
Participant to his or her Account shall be invested by the Custodian
pursuant to written instructions concerning the investment delivered by the
Participant to the Custodian prior to or at the time the contribution is
made to the Account. The Custodian shall, within a reasonable time
following receipt of written instructions from the Participant, invest such
contributions in full or fractional shares of certain regulated investment
companies.
<PAGE>
For purposes of this Agreement, "regulated investment companies" means any
of the following: CGM Mutual Fund, CGM Capital Development Fund (if the
Participant is an eligible investor), CGM Fixed Income Fund, CGM Realty
Fund, New England Money Market Funds and/or any other taxable funds
sponsored by Capital Growth Management.
If the investment instructions provided by the Participant to the Custodian
are nor received by the Custodian, or are, in the opinion of the Custodian,
ambiguous, the Custodian may hold or return all or a portion of the
contribution uninvested without liability for loss of income or
appreciation, without liability for interest, dividends or any other gain
whatsoever, pending receipt of proper instructions or clarification. The
Custodian shall advise the Participant of the form and manner in which
investment instructions must be given.
3.02 PARTICIPANT CHANGE OF INVESTMENT - Subject to rules and procedure adopted
by the Custodian, a Participant may, at his or her election, direct the
Custodian to redeem any or all regulated investment company shares held by
the Custodian pursuant to this Agreement and to reinvest the proceeds in
such other regulated investment company shares as directed. Transactions of
this character must conform with the provisions of the current prospectus
for the regulated investment company shares subject to purchase.
3.03 DIVIDENDS AND DISTRIBUTIONS - Dividends and other distributions received by
the Custodian on shares of any regulated investment company held in the
Account shall be reinvested in additional shares of the regulated
investment company from which the dividend or other distribution
originates, unless the Participant directs the Custodian to act otherwise.
Should a Participant have the choice of receiving a distribution of shares
(as defined in Section 4.01) from a regulated investment company in
additional shares, cash or other property, the Custodian shall nonetheless
elect to receive such distribution in additional shares.
3.04 REGISTERED OWNER, VOTING RIGHTS - All regulated investment company shares
acquired by the Custodian pursuant to this Agreement shall be registered in
the name of the Custodian or its nominee. The Custodian shall deliver or
cause to be executed and delivered to the Participant all notices,
prospectuses, financial statements, proxies and related proxy information
The Custodian shall vote the shares in accordance with instructions from
the Participant.
3.05 SALES CHARGES - All sales charges, transfer fees, investment fees or other
administrative charges associated with the purchase of, transfer of or sale
of regulated investment company shares shall be charged to the Account of
the Participant.
SECTION FOUR: DISTRIBUTIONS
4.01 LIMITATIONS ON DISTRIBUTIONS - Subject to the limitations described in this
Agreement, a Participant may request a distribution from the Account. A
Participant's Account may not be distributed prior to the Participant's:
(a) attainment of age 59 1/2,
(b) incurring a disability within the meaning of Section 72(m)(7) of
the Code,
(c) death,
(d) encountering a financial hardships, or
(e) separation from service.
No distribution shall be made to a Participant (or Beneficiary(ies), if
applicable) until he or she completes such written forms and provides such
additional information and documentation as the Custodian, in its sole
discretion, may deem necessary. If the value of the Account immediately
preceding the 1989 Plan Year is ascertainable, such pre- 1989 amounts are
not subject to the limitations of Section 4.01.
4.02 FINANCIAL HARDSHIP - For purposes of this Agreement, "financial hardship"
shall include a financial need incurred by the Participant due to illness,
temporary disability, purchase of a home, or educational expenses of the
Participant or any member of his or her immediate family, or any other
immediate and heavy financial need of the Participant; provided, however,
no financial hardship shall exceed or otherwise not conform to the
requirements of Section 403(b)(7) of the Code. No distributions due to
financial hardship shall exceed the amount determined to be required to
meet the immediate financial need created by the hardship which cannot be
otherwise reasonably accommodated from the resources of the Participant.
Any distribution made due to a Participant's financial hardship shall be
made to such Participant in a single sum payment in cash pursuant to
written instructions in a form acceptable to the Custodian, and delivered
to the Custodian as may be provided in Section 403(b)(7) of the Code.
Hardship distributions may consist only of the amounts contributed pursuant
to a Participant's Salary Deferral Agreement.
4.03 FORM OF DISTRIBUTION - Distributions for other than a financial hardship
shall be made in any one or more or any combination of the following forms:
(a)single lump sum payment;
(b)monthly, quarterly, semiannual or annual payments over a period
elected by the Participant not to extend beyond the Participant's
life expectancy; or
(c)in monthly, quarterly, semiannual or annual payments over a period
selected by the Participant not to exceed the joint life and last
survivor expectancy of the Participant and his or her
Beneficiary(ies).
At any time prior to commencement of distribution, the Participant may make
or change the foregoing distribution forms by delivering a written notice
to the Custodian.
Notwithstanding any other provision to the contrary, the Custodian may make
an immediate single sum distribution to the Participant or Beneficiary(ies)
(if applicable) if the value of the Account does not exceed $3,500.
At the discretion of the Custodian, other forms of distribution, if allowed
under applicable provisions of the Code, may be allowed.
<PAGE>
In the event a Participant does not elect any of the methods of
distribution described above on or before such Participant's 70 1/2
birthday, the Participant shall be deemed to have elected distribution made
on his or her 70 1/2 birthday in the form of periodic payments over the
single life expectancy of the participant using the declining years method
of determining the Participant's life expectancy multiple; provided,
however, the Custodian shall have no liability to the Participant for any
tax penalty or other damages which may result from any inadvertent failure
by the Custodian to make such a distribution.
Notwithstanding anything in this Agreement to the contrary, distributions
shall conform to the minimum distribution requirements of Section 401(a)(9)
of the Code and the regulations thereunder, including Treasury Regulations
Sections 1.401(a)(9)-2 and 1.403(b)-2.
If the value of the Account prior to 1987 is determinable, the pre-1987
amount need not be subject to a required minimum distribution until the
calendar year the Participant attains age 75, or such later date as may be
allowed by law or regulation.
4.04 DESIGNATION OF BENEFICIARY - Each Participant may designate, upon a form
provided by the Custodian, any person or persons (including an entity other
than a natural person) as primary or contingent Beneficiary to receive all
or a specified portion of the Participant's Account in the event of the
Participant's death. A Participant may change or revoke such Beneficiary
designation from time to time by completing and delivering the proper form
to the Custodian.
4.05 DISTRIBUTION UPON DEATH OF PARTICIPANT - If a Participant dies before his
or her entire interest in the Account is distributed to him or her, or if
distribution has commenced to the Participant and his or her surviving
spouse and such surviving spouse dies before the entire interest is
distributed to such spouse, the entire interest or remaining undistributed
balance of such interest shall be distributed in the form of a single sum
cash payment, or other form of payment as permitted under current
applicable code or regulations to the Beneficiary(ies), if any, as
designated by the Participant or his or her spouse as the case may be. In
the event no such Beneficiary has been designated, the Participant's estate
shall receive the balance of the Account.
4.06 DISTRIBUTION OF EXCESS AMOUNTS - The Custodian may make distribution of any
excess to the Participant.
4.07 ELIGIBLE ROLLOVER DISTRIBUTIONS - At the election of a Participant (or the
surviving spouse Beneficiary of a deceased Participant) the Custodian
shall pay any eligible rollover distribution to an individual retirement
plan described in Section 408 of the Code or another annuity contract or
custodial account described in Section 403(b) of the Code in a direct
rollover for that Participant (or Beneficiary). The term "eligible rollover
distribution" shall have the meaning set forth in Sections 402(c)(2) and
(4) of the Code and Q&A-3 through Q&A-8 of Treasury Regulations Section
1.402(c)-2T.
The Participant (or surviving spouse Beneficiary) who desires a direct
rollover must specify the individual retirement plan or 403(b) plan to
which the eligible rollover distribution is to be paid and satisfy such
other reasonable requirements as the Custodian may impose.
SECTION FIVE: ADMINISTRATION
5.01 DUTIES OF THE CUSTODIAN - The Custodian shall have the following
obligations and responsibilities.
(a)To hold contributions to the Account it receives, invest such
contributions pursuant to the Participant's instructions and
distribute Account assets pursuant to this Agreement;
(b)To register any property held by the Custodian in its own name, or
in nominal bearer form that will pass delivery;
(c)To maintain records of all relevant information as may be
necessary for the proper administration of the Account;
(d)To allocate earnings, if any, realized from such contributions and
such other data or information as may be necessary;
(e)To file such returns, reports and other information with the
Internal Revenue Service and other government agencies as may be
required of the Custodian under applicable laws and regulations.
5.02 REPORTS - As soon as practicable after December 31st of each calendar year,
and whenever required by regulations under the Code, the Custodian shall
deliver to the Participant a written report of the Custodian's transactions
relating to the Account during the period from the last previous accounting
and shall file such other reports as may be required under the Code.
On receipt of the Custodian's report referenced in the preceding paragraph,
a Participant shall have a period of 60 days following receipt to deliver a
written objection to the Custodian concerning information provided in the
report. In the event the Participant neglects to file such written
objection, the report shall be deemed approved and in such case, the
Custodian shall be forever released and discharged with respect to all
matters and things included therein.
5.03 CUSTODIAN NOT RESPONSIBLE FOR CERTAIN ACTIONS - Notwithstanding the
foregoing, the Custodian shall have no responsibility for determining the
amount of or collecting contributions to the Account made pursuant to this
Agreement; determining the amount, character or timing of any distribution
to a Participant under this Agreement; determining a Participant's maximum
contribution amount; maintaining or defending any legal action in
connection with this Agreement, unless agreed upon by the Custodian,
Employer and Participant.
5.04 INDEMNIFICATION OF CUSTODIAN - The Employer and Participant shall, to the
extent permitted under law, indemnify and hold the Custodian harmless from
and against any liability which may occur in the administration of the
Account unless arising from the Custodian's breach of its responsibilities
under this Agreement. By execution of this Agreement, it is the specific
intention of the parties that no fiduciary duties be conferred upon the
Custodian nor shall any be implied from this Agreement or the acts of this
Custodian.
<PAGE>
5.05 CUSTODIAN'S FEES AND EXPENSES - The Custodian may charge fees in connection
with the Account. In addition, the Custodian has the right to be reimbursed
for any taxes or expenses incurred by or on behalf of the Account. All such
fees, taxes or expenses may be charged against the Account or, at the
option of the Custodian, may be paid directly by the Participant or
Employer. The Custodian reserves the right to change its fee schedule, or
add new fees, at any time upon 30 days prior written notice to the
Participant.
SECTION SIX: AMENDMENT AND TERMINATION
6.01 AMENDMENT OF AGREEMENT - This Agreement may be amended by an agreement in
writing between the Employee and Custodian. In addition, by execution of
this Agreement, the Employer and the Participant delegate to the Custodian
all authority to amend this Agreement by written notification from the
Custodian to the Participant as to any term hereof, at any time (including
retroactively) except that no amendment shall be made which may operate to
disqualify the Account under Section 403(b)(7) of the Code. The effective
date of any amendment hereto shall be the date specified in said amendment
or, 30 days subsequent to the time notification of amendment is delivered
by the Custodian to the Participant.
6.02 TERMINATION BY PARTICIPANT - The Participant reserves the right to
terminate further contributions to his or her Account pursuant to this
Agreement by executing and delivering to the Custodian an executed copy of
an agreement terminating said contributions. The Participant further
reserves the right to terminate his or her adoption of this Agreement in
the event that he or she shall be unable to secure a favorable ruling from
the Internal Revenue Service with respect to the Agreement. In the event of
such termination, the Custodian shall distribute the Account to the
Participant.
6.03 RESIGNATION OR REMOVAL OF CUSTODIAN - The Custodian may resign as Custodian
of any Participant's Account upon 30 days written notice to the
Participant. The Participant may remove a Custodian upon 30 days prior
written notice. Upon such resignation or removal, a successor Custodian
shall be named. Upon designation of a successor Custodian, the Custodian
shall transfer the assets held pursuant to the terms of this Agreement to
the successor Custodian. The Custodian may retain a portion of the assets
to the extent necessary to cover reasonable administrative fees and
expenses.
Where the Custodian is serving as a nonbank custodian pursuant to section
1.401-12(n) of the Treasury Regulations, the Participant will appoint a
successor custodian upon notification by the Commissioner of Internal
Revenue that such substitution is required because the Custodian has failed
to comply with the requirements of Section 1.401-12(n) or is not keeping
such records or making such returns or rendering such statements as
required by forms or regulations.
SECTION SEVEN: MISCELLANEOUS
7.01 APPLICABLE LAW - This Agreement is established with the intention that it
qualify as a tax-sheltered custodial account under Section 403(b)(7) of the
Code and that contributions to the same be treated accordingly. To the
extent not preempted by Federal law, this Agreement shall be construed,
administered and enforced in accordance with the laws of the Custodian's
state of incorporation.
If any provision of this Agreement shall for any reason be deemed invalid
or unenforceable, the remaining provisions shall, nevertheless, continue in
full force and effect and shall not be invalidated.
7.02 NONALIENATION - The assets of a Participant in his or her account shall be
nonforfeitable at all times and shall not be subject to alienation,
assignment, trustee process, garnishment, attachment, execution or levy of
any kind, nor shall such assets be subject to the claims of the
Participant's creditors.
7.03 TERMS OF EMPLOYMENT - Neither the fact of the implementation of this
Agreement nor the fact that a common law employee has become a Participant
shall give to such employee any right to continued employment; nor shall
either fact limit the right of the Employer to discharge or to deal
otherwise with an employee without regard to the effect such treatment may
have upon the employee's rights as a Participant under this Agreement.
7.04 NOTICES - Any notice or other communication which the Custodian may give to
a Participant shall be deemed given when sent by first class mail to the
Participant's last known address on the Custodian's records. Any notice or
other communication to the Custodian shall not become effective until the
Custodian actually receives it.
7.05 EMPLOYER CONTRIBUTIONS - The Employer may make contributions to the Account
on behalf of the Participant. The Custodian is not obligated to operate the
Account in accordance with any plan executed by the Employer unless the
Custodian so agrees and the Employer notifies the Custodian and provides to
the Custodian a copy of the Plan Document.
7.06 MATTERS RELATING TO DIVORCE - Upon receipt of a domestic relations order,
the Custodian may retain an independent third party to determine whether
the order is a Qualified Domestic Relations Order pursuant to Section
414(p) of the Code. The Custodian may charge to the Account any and all
expenses associated with the determination.
<PAGE>
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403(b)(7) SALARY DEFERRAL AGREEMENT AND INVESTMENT SELECTION
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPE THE INFORMATION REQUESTED BELOW AND FILE THIS FORM
WITH YOUR EMPLOYER. SAVE A COPY FOR YOUR RECORDS.
- --------------------------------------------------------------------------------
PARTICIPANT INFORMATION
- --------------------------------------------------------------------------------
Name____________________________________________________________________________
Home Address____________________________________________________________________
City____________________________________ State________________ Zip _____________
Daytime Phone No. (_____)_______________ Soc. Sec. No. _________________________
- --------------------------------------------------------------------------------
EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
Name of Employer _______________________________________________________________
Address_________________________________________________________________________
NAME OF CUSTODIAN: State Street Bank and Trust Company
ADDRESS: P.O. Box 8511, Boston, MA 02266-8511
I, the undersigned Participant, hereby agree to defer the following amount or
percentage of my pay into a 403(b)(7) Tax-Sheltered Custodial Account each pay
period by way of payroll deduction: (check and complete only one)
[ ] $_____ (specify dollar amount)
[ ] _____ % (specify percentage of pay)
I agree that my pay will be reduced by the amount or percentage I have indicated
above and that my employer will contribute these dollars to my 403(b)(7)
Tax-Sheltered Custodial Account.
- --------------------------------------------------------------------------------
INVESTMENT SELECTION
- --------------------------------------------------------------------------------
I elect to have the Salary Deferral contributions, made on my behalf under this
agreement, invested as follows:
_______________________________________________________ _____________________ %
_______________________________________________________ _____________________ %
_______________________________________________________ _____________________ %
_______________________________________________________ _____________________ %
Total: 100%
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SIGNATURES
- --------------------------------------------------------------------------------
This agreement shall be effective for the pay period which begins on____________
Date
_______________________________________ _________________________________
Signature of Participant Authorized Signature for Employer
_______________________________________ _________________________________
Date Title
403(b)(7) SAL. DEF. AGMT.
<PAGE>
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QUESTION AND ANSWERS ABOUT 403(b)(7)S
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
Q. WHAT IS THE CGM 403(B)(7) TAX SHELTERED CUSTODIAL ACCOUNT?
A. The CGM 403(b)(7) Custodial Account is a voluntary savings plan that allows
you to set aside pre-tax money for retirement. Contributions are made by salary
reduction, and earnings are tax-deferred until you withdraw them.
Q. WHO IS ELIGIBLE?
A. Employees of public schools, colleges and universities, and those working for
home health care, hospital, church and nonprofit organizations recognized as
tax-exempt under Section 501(c)(3) of the Internal Revenue Code.
Q. HOW DOES IT WORK?
A. You decide each year what amount to set aside in your 403(b)(7) Custodial
Account, up to the annual IRS contribution limit. Then, you and your employer
complete a Salary Deferral Agreement, which indicates your contribution amount
and how often contributions will be made. (Monthly contributions are most
common.) Your employer then forwards your contribution to your CGM account for
investment.
Q. WHAT ARE MY INVESTMENT OPTIONS?
A. CGM offers four no-load mutual funds as investment choices. They are designed
to meet the needs of the long term investor.
o CGM MUTUAL FUND. A balanced fund investing in common stocks and bonds.
o CGM REALTY FUND. A diversified fund investing primarily in equity securities
of companies in the real estate industry (CGM Realty Fund is not available in
certain states, as described in the CGM Realty Fund prospectus.)
o CGM FIXED INCOME FUND. A total return bond fund that can invest in a variety
of bonds.
o CGM CAPITAL DEVELOPMENT FUND. A growth fund currently closed to new
investors.
We also offer two money market funds, sponsored by our affiliate, New England
Funds.
o NEW ENGLAND CASH MANAGEMENT - MONEY MARKET SERIES
o NEW ENGLAND CASH MANAGEMENT - U.S. GOVERNMENT SERIES
Your personal investment adviser can help you choose the combination of funds
that will best fit your investment goals. Before you invest or send money,
please read a current prospectus for the fund(s) selected for investment.
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CONTRIBUTIONS
- --------------------------------------------------------------------------------
Q. HOW MUCH CAN I CONTRIBUTE TO MY PLAN THROUGH SALARY REDUCTION?
A. In order to determine the maximum amount that you can contribute, please
refer to the enclosed IRS Publication 571.
Q. ONCE MY SALARY REDUCTION HAS STARTED, CAN I CHANGE THE AMOUNT?
A. Yes. Your salary reduction amount may be changed by filing a new Salary
Deferral Agreement with your employer. You may make only one change per calendar
year.
Q. CAN I STOP MY CONTRIBUTIONS?
A. Yes. You can ask your employer to stop contributing to the plan at the end of
any payroll period. You can participate in the plan again at the beginning of
the next calendar year by filing a new Salary Deferral Agreement with your
employer.
Q. WILL MY SALARY REDUCTION REDUCE MY EARNINGS FOR SOCIAL SECURITY PURPOSES?
A. No. Your gross income before 403(b)(7) contributions is used for Social
Security tax calculations.
Q. IF 403(b)(7) ASSETS HAVE BEEN DISTRIBUTED TO ME, MAY I ROLL OVER THOSE ASSETS
INTO A CGM IRA?
A. Yes. If you are rolling over 403(b)(7) assets from another company, simply
invest the distributed amount into your CGM IRA within 60 days. To establish
your CGM IRA, send us the CGM IRA Account Application with your check (made
payable to State Street Bank and Trust Company). If you already have a CGM IRA
to accept the rollover money, you need only send us instructions (explaining
that you are rolling over your 403(b)(7) assets into your CGM IRA). Be sure to
reference your CGM IRA account number in your letter. You may wish to keep your
rolled-over 403(b)(7) assets in a separate IRA account for tax reasons. If so,
please send us a CGM IRA Account Application with your rollover check and
instruct us to establish a separate IRA account.
Q. CAN I TRANSFER AN EXISTING 403(b)(7) ACCOUNT INTO A CGM 403(b)(7) CUSTODIAL
ACCOUNT?
A. Yes. You can easily transfer the assets of your existing plan into your new
or existing CGM 403(b)(7) account. Please refer to the enclosed Checklist for
specific instructions.
403(b)(7) Q & A94
<PAGE>
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QUESTION AND ANSWERS ABOUT 403(b)(7)s
- --------------------------------------------------------------------------------
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WITHDRAWALS
- --------------------------------------------------------------------------------
Q. HOW CAN I WITHDRAW FROM MY ACCOUNT BEFORE AGE 59 1/2 WITHOUT PENALTY?
A. You may withdraw from your account without penalty if you leave your job and
start a distribution plan based on your life expectancy, or the life expectancy
of you and your named beneficiary(ies). You may also withdraw without penalty if
you become disabled. Transfers of assets to another 403(b)(7) may be done at any
time. The IRS allows early withdrawals from your account for financial hardship,
but these withdrawals are subject to an IRS penalty of 10%.
Q. CAN I BORROW FROM MY CGM 403(b)(7) CUSTODIAL ACCOUNT?
A. No. the CGM 403(b)(7) Tax Sheltered Custodial Account does not permit loans.
Q. IF I LEAVE MY PRESENT EMPLOYER, WHAT HAPPENS TO MY 403(B)(7) CUSTODIAL
ACCOUNT?
A. Should you go to work for another "403(b)(7) eligible" employer, you can
transfer your 403(b)(7) account. If your new employer is not "403(b)(7)
eligible", then you may roll over your assets into a CGM IRA or another IRA in
order to retain their tax-sheltered status.
Q. WHEN CAN I ROLL OVER MY 403(b)(7) ASSETS INTO AN IRA?
A. You can roll over your 403(b)(7) assets into an IRA if you have separated
from service with your employer, attained age 59 1/2 or have become disabled. A
rollover of your entire account or just part of your account is permitted,
subject to certain restrictions. Ask you tax adviser for more details on the
rollover rules.
Q. WHAT HAPPENS TO MY CGM 403(b)(7) ASSETS WHEN I TERMINATE SERVICE WITH MY
EMPLOYER?
A. You may begin taking distributions from your account at age 59 1/2, and you
must begin distributions by age 70 1/2. The distribution options are described
fully in the enclosed 403(b)(7) Custodial Account Agreement.
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IF YOU HAVE MORE QUESTIONS...
- --------------------------------------------------------------------------------
Q. WHO CAN ANSWER FURTHER QUESTIONS ABOUT MY CGM 403(b)(7) CUSTODIAL ACCOUNT?
A. It is important for you to read and understand the enclosed "403(b)(7)
Tax-Sheltered Custodial Account Agreement." That document constitutes the formal
legal arrangement for your CGM 403(b)(7) Plan, and you are bound by its
provisions and terms once you sign the CGM 403(b)(7) Account Application and
Salary Deferral Agreement. It is also essential that you receive and review a
prospectus for each mutual fund in which you invest. IRS Publication 571 also
provides useful information about 403(b)(7)s, and we are enclosing a copy of it
for your reference. We recommend that you consult your tax adviser or attorney
prior to establishing your plan.
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ALL THE FORMS YOU NEED TO SET UP YOUR 403(b)(7) PLAN ARE INCLUDED IN THIS KIT.
IF YOU NEED ANY HELP COMPLETING THEM, PLEASE CALL US AT 800-345-4048.
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<PAGE>
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CGM 403(b)(7) TRANSFER FORM
- --------------------------------------------------------------------------------
IMPORTANT: To ensure timely processing of your transfer, please follow these
four steps:
o Phone your present 403(b) Custodian and verify the address of their Transfer
Department.
o Ask your present Custodian whether they require a signature guarantee on this
form.
o Complete the front of this form and mail it to: The CGM Funds, P.O. Box 449,
Boston, MA 02117
o If you are age 70 1/2 or older, ask your current Custodian to complete
Section A on the reverse side.
- --------------------------------------------------------------------------------
TO:
- --------------------------------------------------------------------------------
Name of Present Custodian
- --------------------------------------------------------------------------------
Street Address City State Zip Code
- --------------------------------------------------------------------------------
Name of Investment Account Number
- --------------------------------------------------------------------------------
I HAVE ESTABLISHED A 403(b)(7) TAX-SHELTERED CUSTODIAL ACCOUNT WITH THE CGM
FUNDS, AND HAVE APPOINTED STATE STREET BANK AND TRUST COMPANY, AS SUCCESSOR
CUSTODIAN. PLEASE ACCEPT THIS AS YOUR AUTHORIZATION AND INSTRUCTION TO LIQUIDATE
FROM MY 403(b) TSA ACCOUNT REFERENCED ABOVE (CHECK ONE):
[ ] $____________________ [ ] ALL ASSETS [ ] ALL ASSETS UPON MATURITY
PLEASE MAKE THE PROCEEDS CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, CUSTODIAN FOR THE 403(b)(7) ACCOUNT OF
- --------------------------------------------------------------------------------
Participant Name Social Security Number
- --------------------------------------------------------------------------------
Employer Name Employer's Phone Number
- --------------------------------------------------------------------------------
Name of Mutual Fund Account Number (if new, write "new")
MAIL CHECK TO: STATE STREET BANK AND TRUST COMPANY, P.O. BOX 8511, BOSTON, MA
02266
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE SIGN HERE:
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Your Signature Date Your Daytime Phone Number
- --------------------------------------------------------------------------------
Your Address
- --------------------------------------------------------------------------------
Signature Guarantee (if required) Name of Firm By: Authorized Individual
- --------------------------------------------------------------------------------
403(b)(7) TRANSFER
<PAGE>
- --------------------------------------------------------------------------------
SECTION A: (CERTIFICATION BY PRESENT CUSTODIAN)
IF YOU ARE AGE 70 1/2 OR OLDER, THIS SECTION MUST BE COMPLETED BY YOUR PRESENT
CUSTODIAN BEFORE YOU SUBMIT THIS FORM TO THE CGM FUNDS.
1. PURSUANT TO IRS REGULATIONS, THE TRANSFEROR TRUSTEE/CUSTODIAN CERTIFIES
THAT THIS TRANSFER WILL NOT INCLUDE ANY MINIMUM AMOUNTS REQUIRED TO BE
DISTRIBUTED TO THE ABOVE-NAMED CUSTOMER WITH RESPECT TO ANY APPLICABLE
DISTRIBUTION CALENDAR YEAR.
2. DATE OF BIRTH OF THE DESIGNATED (MEASURING) BENEFICIARY BEING USED TO
CALCULATE MINIMUM REQUIRED DISTRIBUTIONS WITH RESPECT TO THE TRANSFEROR
PLAN IS:
___________/___________/____________ .
3. LIFE EXPECTANCY OF THE PARTICIPANT WAS BEING
RECALCULATED: [ ] YES [ ] NO
4. LIFE EXPECTANCIES OF THE PARTICIPANT AND/OR SPOUSE
BENEFICIARY WERE BEING RECALCULATED: [ ] YES [ ] NO
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE OF PRESENT TRUSTEE/CUSTODIAN DATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTION B: (ACCEPTANCE BY SUCCESSOR CUSTODIAN)
THIS SECTION WILL BE COMPLETED BY YOUR SUCCESSOR CUSTODIAN, STATE STREET BANK
AND TRUST COMPANY. THE FORM WILL THEN BE FORWARDED BY STATE STREET BANK TO YOUR
PRESENT CUSTODIAN TO INITIATE AND AUTHORIZE YOUR 403(b) TRANSFER OF ASSETS.
STATE STREET BANK AND TRUST COMPANY HEREBY ACCEPTS FUNDS WHICH YOU HOLD.
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
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<PAGE>
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THE CGM FUNDS 403(b)(7) TAX-SHELTERED CUSTODIAL AGREEMENT ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. PARTICIPANT INFORMATION (PLEASE COMPLETE)
- --------------------------------------------------------------------------------
Name ___________________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
Social Security #_______________________________________________________________
Date of Birth __________________________________________________________________
Daytime Telephone Number _______________________________________________________
- --------------------------------------------------------------------------------
2. EMPLOYER INFORMATION (PLEASE COMPLETE)
- --------------------------------------------------------------------------------
Employer's Name ________________________________________________________________
Employer's Address _____________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
3. INITIAL APPLICATION FEE (PLEASE SEND $5.00 CHECK)
- --------------------------------------------------------------------------------
[ ] I am attaching a check for $5.00 payable to State Street Bank and Trust
Company.
- --------------------------------------------------------------------------------
4. CONTRIBUTIONS ($1,000 MINIMUM INITIAL PURCHASE)
- --------------------------------------------------------------------------------
Contribution monies for my 403(b)(7) account will come to you from: (Please
check all that apply)
[ ] Employer Contributions (salary reductions). I have completed the 403(b)(7)
Salary Deferral Agreement and Investment Selection and have submitted it to
my Employer.
[ ] Transfer of Assets from another 403(b)(7) account. I have completed the
Transfer of Assets form and am attaching it to this application.
[ ] Rollover from an IRA whose assets previously had been invested in a 403(b)
or 403(b)(7) Plan.
- --------------------------------------------------------------------------------
SEND APPLICATION TO:
THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0499
403(b)(7) APP94
- --------------------------------------------------------------------------------
5. INVESTMENTS (PLEASE CHECK ALL BOXES THAT APPLY)
- --------------------------------------------------------------------------------
Contribution monies for my 403(b)(7) account will be invested in the following
mutual fund(s):
[ ] ____% CGM Mutual Fund
[ ] ____% CGM Realty Fund (CGM Realty Fund is not available in certain states,
as described in the CGM Realty Fund prospectus.)
[ ] ____% CGM Fixed Income Fund
[ ] ____% CGM Capital Development Fund
(CGM Capital Development Fund is closed. Please see Section 10 on the reverse
side. If you are an eligible investor, please fill in your existing CGM
Capital Development Fund account number: ___________________________ .)
[ ] ____% New England Cash Management Trust (Money Market Series)
[ ] ____% New England Management Trust (U.S. Government Series)
- --------------------------------------------------------------------------------
6. TELEPHONE EXCHANGE PRIVILEGES
- --------------------------------------------------------------------------------
[ ] Yes [ ] No
This service enables you to exchange monies ($1,000 minimum) by telephone among
accounts with the same registration in the CGM Funds or New England Money Market
Funds. CGM Capital Development Fund is closed. Please see Section 10 for full
details. CGM Realty Fund is not available in certain states, as described in
that Fund's prospectus. By completing this section, you authorize the Fund and
its agents to accept and act upon telephone instructions from you and
acknowledge receipt of the current prospectus of the Fund into which the
exchange is made.
- --------------------------------------------------------------------------------
7. SIGNATURES (BOTH YOU AND YOUR EMPLOYER MUST SIGN)
- --------------------------------------------------------------------------------
By this application, my employer and I direct the Custodian to open a separate
Custodial Investment Account for my benefit according to the CGM 403(b)(7)
Tax-Sheltered Custodial Account Agreement, and agree to the provisions contained
in the Agreement and to the provisions listed in Section 11 of this form. I
acknowledge that I have received a current prospectus for the fund(s) selected
for investment, and that I have completed the Beneficiary Information in Section
8 on the reverse side.
X_______________________________________________________________________________
Signature of Participant Date
X_______________________________________________________________________________
Signature of Employer Date
Douglass L. Coyne
X_______________________________________________________________________________
Accepted by State Street Bank and Trust Company
(A statement will be sent to you confirming the above transactions and will
serve as notification of State Street Bank's acceptance. Please note that there
is a $10.00 annual maintenance fee per mutual fund account.)
(OVER)
<PAGE>
- --------------------------------------------------------------------------------
8. DESIGNATION OF BENEFICIARIES (PLEASE COMPLETE)
- --------------------------------------------------------------------------------
I designate the individual(s) named below as my primary and contingent
Beneficiary(ies) of this Tax-Sheltered Custodial Account Agreement (TSA). I
revoke all prior TSA Beneficiary designations, if any, made by me with respect
to this TSA. I understand that I may change or add Beneficiaries at any time by
completing and delivering the proper form to the Custodian.
If any primary or contingent Beneficiary dies before me, his or her interest and
the interest of his or her heirs shall terminate completely, and the percentage
share of any remaining Beneficiary(ies) shall be increased on a pro rata basis.
PRIMARY BENEFICIARY(IES):
________________________________________________________________________________
Name
________________________________________________________________________________
Address
________________________________________________________________________________
________________________________________________________________________________
% Share Social Security Number Relationship
CONTINGENT BENEFICIARY(IES):
________________________________________________________________________________
Name
________________________________________________________________________________
Address
________________________________________________________________________________
________________________________________________________________________________
% Share Social Security Number Relationship
- --------------------------------------------------------------------------------
9. SPOUSAL CONSENT (PLEASE NOTE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SECTION SHOULD BE REVIEWED IF EITHER THE CUSTODIAL ACCOUNT OR THE
RESIDENCE OF THE PARTICIPANT IS LOCATED IN A COMMUNITY OR MARITAL PROPERTY
STATE AND THE PARTICIPANT IS MARRIED. DUE TO THE IMPORTANT TAX CONSEQUENCES OF
GIVING UP ONE'S COMMUNITY OR PROPERTY INTEREST, INDIVIDUALS SIGNING THIS
SECTION SHOULD CONSULT WITH A COMPETENT TAX OR LEGAL ADVISOR.
- --------------------------------------------------------------------------------
I am the spouse of the above-named Participant. I acknowledge that I have
received a fair and reasonable disclosure of my spouse's property and financial
obligations. Due to the important tax consequences of giving up my interest in
this TSA, I have been advised to see a tax professional.
I hereby give the Participant any interest I have in the funds or property
deposited in this TSA and consent to the beneficiary designation(s) indicated
above. I assume full responsibility for any adverse consequences that may
result. No tax or legal advice was given to me by the Custodian.
X_______________________________________________________________________________
Signature of Spouse Date
- --------------------------------------------------------------------------------
10. WHO CAN PURCHASE SHARES OF CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
Only shareholders of the CGM Capital Development Fund as of September 24, 1993
who remain shareholders thereafter may purchase additional shares of the Fund.
The Fund reserves the right to reject any purchase order. This policy supersedes
all previous eligibility requirements. Fund shares are not generally available
to other persons except in special circumstances that have been approved by, or
under the authority of, the board of trustees of the Fund. The special
circumstances currently approved by the board of trustees of the Fund are
limited to the offer and sale of shares of the Fund to the following additional
persons: trustees of the Fund, employees of the Investment Manager and counsel
to the Fund and the Investment Manager.
- --------------------------------------------------------------------------------
11. PROVISIONS (PLEASE READ BEFORE SIGNING)
- --------------------------------------------------------------------------------
I am the Participant named above and I state that I have read the 403(b)(7)
Tax-Sheltered Custodial Account Agreement (TSA) and understand and agree to its
terms and provisions. I hereby establish an Account pursuant to that Agreement
and appoint State Street Bank and Trust Company, or its successors, as Custodian
of the Account. I assume complete responsibility for: (a) determining that I am
eligible for a TSA each year I make a contribution; (b) insuring that all
contributions I make are within the limits set forth by the tax laws; and (c)
the tax consequences of any contributions (including rollover or transfer
contributions) and distributions. I expressly certify that I take complete
responsibility for the type of investment instrument(s) I choose to fund my TSA,
and that the Custodian is released of any liability regarding the performance of
any investment choice I make. I acknowledge receipt of a copy of this Agreement
and of the current prospectus(es) of the mutual fund(s) selected.
If I have elected the "Telephone Exchange" service, I understand that the Fund
may terminate or modify this privilege at any time. The Fund will employ
reasonable procedures to confirm that instructions received by telephone are
genuine, such as requesting personal identification information that appears on
your account application and recording the telephone conversation. You will bear
the risk of loss due to unauthorized or fraudulent instructions regarding your
account, although the Fund may be liable if reasonable procedures are not
employed.
<PAGE>
CGM MUTUAL FUND
CGM FIXED INCOME FUND
[Logo} CGM CAPITAL DEVELOPMENT FUND
Post Office Box 449
Boston, Massachusetts 02117
800-345-4048
DEAR INVESTOR:
THANK YOU FOR YOUR INTEREST IN THE CGM FUNDS QUALIFIED RETIREMENT PLAN!
ENCLOSED ARE THE PROSPECTUSES AND INFORMATION YOU REQUESTED.
THE CGM PROTOTYPE OFFERS TWO TYPES OF PLANS -- A MONEY PURCHASE PENSION PLAN
AND A PROFIT SHARING PLAN. MONEY PURCHASE PENSION PLANS REQUIRE THAT YOU MAKE
ANNUAL CONTRIBUTIONS BASED ON A PERCENTAGE DESIGNATED BY YOU IN YOUR ADOPTION
AGREEMENT, REGARDLESS OF YOUR PROFITS. PROFIT SHARING PLANS ALLOW YOU TO VARY
THE AMOUNT THAT YOU CONTRIBUTE EACH YEAR DEPENDING ON YOUR PROFITS. PLEASE
REFER TO THE BASIC PLAN DOCUMENT AND PLAN ADMINISTRATOR'S GUIDE FOR ADDITIONAL
INFORMATION.
STATE STREET BANK AND TRUST COMPANY IN BOSTON, MASSACHUSETTS, SERVES AS
TRUSTEE FOR THE CGM PLAN. THE TRUSTEE CHARGES $5 AS AN ESTABLISHMENT FEE AND
$10 PER YEAR PER ACCOUNT AS A MAINTENANCE FEE. THERE IS ALSO A $5 CHARGE FOR
EACH LUMP SUM DISTRIBUTION OR RETURN OF AN EXCESS CONTRIBUTION.
YOU'LL FIND THE STEPS FOR ESTABLISHING YOUR PLAN ON THE NEXT PAGE. WE'RE HERE
TO ANSWER YOUR QUESTIONS IF YOU NEED ANY HELP COMPLETING THE FORMS. PLEASE
CALL US AT 800-345-4048.
THE CGM FUNDS
KEOLETTER
<PAGE>
HOW TO ESTABLISH YOUR CGM RETIREMENT PLAN
- --------------------------------------------------------------------------------
SET UP STEPS FOR ALL EMPLOYERS
[X] YOU SHOULD DETERMINE WHICH PLAN OR PLANS ARE BEST SUITED TO YOUR BUSINESS.
WE RECOMMEND THAT YOU SEEK INPUT FROM YOUR TAX AND LEGAL ADVISORS BEFORE
MAKING A FINAL DECISION. WE CANNOT ADVISE YOU IN YOUR PLAN SELECTION.
[X] ONCE YOU HAVE SELECTED THE APPROPRIATE PLAN(S), YOU SHOULD COMPLETE AND
SIGN THE ADOPTION AGREEMENT WHICH CORRESPONDS TO THAT PLAN. PLEASE REFER
TO THE "INSTRUCTIONS FOR COMPLETING THE ADOPTION AGREEMENT" FOR GUIDANCE.
SEND THE ORIGINAL FORM TO CGM, AND KEEP A COPY WITH YOUR PERMANENT
RECORDS.
[X] ASK EACH PARTICIPANT TO COMPLETE AND SIGN THE DESIGNATION OF BENEFICIARY
FORM. SEND THE ORIGINAL FORM TO CGM. BOTH YOU AND THE PARTICIPANT SHOULD
KEEP A COPY.
[X] COMPLETE THE INVESTMENT ALLOCATION FORM, AND SEND IT TO CGM. KEEP A COPY
FOR YOUR FILES.
[X] SUBMIT YOUR CHECK PAYABLE TO STATE STREET BANK, FOR THE TOTAL AMOUNT OF
INVESTMENTS AS WELL AS AN ADDITIONAL $5 TO COVER THE PLAN ESTABLISHMENT
FEE.
[X] IF YOU ARE TRANSFERRING ASSETS FROM ANOTHER INSTITUTION, COMPLETE THE
TRANSFER OF ASSETS FORM, AND SEND IT TO CGM. WE WILL COORDINATE THE
TRANSFER FOR YOU.
IMPORTANT REQUIREMENTS FOR EMPLOYERS WITH EMPLOYEES
[X] YOU MUST PROVIDE EACH EMPLOYEE WITH A COPY OF THE SUMMARY PLAN DESCRIPTION
(SPD). PLEASE CALL US AT 800-345-4048 FOR A SUPPLY OF SPD BOOKLETS ONCE
YOUR PLAN IS ESTABLISHED.
[X] YOU MUST COMPLETE THE SPD GENERAL INFORMATION SHEET AND POST THE NOTICE AT
THE WORKPLACE IN AN AREA CUSTOMARILY USED FOR NOTICES TO EMPLOYEES. PLEASE
CALL US AT 800-345-4048 FOR THE SPD GENERAL INFORMATION SHEET ONCE YOUR
PLAN IS SET UP.
MAIL ALL FORMS AND CHECKS TO:
-----------------------------
THE GGM FUNDS
P.O. BOX 449
BOSTON, MA. 02116
KEOESTAB
<PAGE>
FORMS YOU WILL FIND IN THIS FOLDER
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
FORM PURPOSE ACTION
- ----------------------------------------------------------------------------------------------------
Plan Document Legal document (prototype) Employer should review the
describing the Plan. Copies Plan document and retain it
of the IRS Opinion Letters for their permanent files.
are also enclosed.
- ----------------------------------------------------------------------------------------------------
Adoption Agreement Specifies Plan provisions and Employer completes, signs,
is the means by which the returns original to CGM, and
Employer formally adopts the retains a copy in for
Plan and agrees to be bound permancnt files.
by its terms.
- ----------------------------------------------------------------------------------------------------
Investment Allocation Lists Plan participants and Employers completes and
investment selection. returns original to CGM.
- ----------------------------------------------------------------------------------------------------
Transfer of Assets Authorizes the transfer of Employer completes and
assets from another sponsor. returns to CGM, if applicable.
- ----------------------------------------------------------------------------------------------------
Beneficiary Designation Specifies beneficiary. Participant completes, keeps
a copy and sends original to
CGM. Employer also keeps a
copy.
- ----------------------------------------------------------------------------------------------------
Plan Administrator's Guide Quick reference tool for Plan Administrators and Employers
Administrators and Employers. should review and retain.
- ----------------------------------------------------------------------------------------------------
How To Establish Your Plan Outlines the steps Employer Employer should review.
should follow to set up a new
CGM Plan.
- ----------------------------------------------------------------------------------------------------
</TABLE>
KEOCONTENTS
<PAGE>
TRANSFERRING YOUR RETIREMENT PLAN ASSETS TO THE CGM FUNDS
PLEASE FILL IN THE INFORMATION REQUESTED BELOW AND RETURN THIS FORM TO THE
CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117. PLEASE READ THE IMPORTANT NOTICE
ON THE BACK OF THIS FORM.
TO: ____________________________________________________________________________
Name of Current Trustee
____________________________________________________________________________
Address of Current Trustee (Please include contact person and
phone number at Current Trustee)
RE: ____________________________________________________________________________
Name of Investment Vehicle At Current Trustee Account Number
- --------------------------------------------------------------------------------
1 We have established a retirement plan under section 401(a) of the Internal
Revenue Code and have appointed State Street Bank and Trust Co., as
Successor Trustee.
2 Please accept this as your authorization and instruction to liquidate
$____________________________________________
(Indicate dollar amount, percentage or "all")
and transfer my assets (check one): [ ] Upon receipt of this letter or
[ ] Upon maturity of my investment
3 Make checks payable to:
State Street Bank and Trust Company, Trustee for the CGM
___________________________________________________________________ Plan of
(Please indicate either Profit Sharing Plan or Money Purchase Pension Plan)
___________________________________ FBO __________________________________
(Name of Employer) (Name of Participant)
4 Please indicate the following investment allocation on the check to be
sent to State Street Bank:
__________________________________________________________________________
Fund Account #(Write "new" if you don't have a CGM a/c#) Percentage(%)
__________________________________________________________________________
Fund Account #(Write "new" if you don't have a CGM a/c#) Percentage(%)
5 MAIL CHECK TO: STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8511
BOSTON, MA 02266-8511
- --------------------------------------------------------------------------------
________________________________________________________________________________
Signature of Plan Administrator Date Daytime Phone Number
________________________________________________________________________________
Address of Plan Administrator City State Zip Code
Please do not write below this line:
- --------------------------------------------------------------------------------
State Street Bank and Trust Company hereby accepts the retirement plan assets
which you hold:
________________________________________________________________________________
Authorized Signature, State Street Bank and Trust Co. Date
KEOTRAN
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE TRANSFERRING ASSETS
FROM AN EXISTING PLAN TO CGM
- --------------------------------------------------------------------------------
BEFORE COMPLETING THE ENCLOSED SIMPLIFIED ADOPTION AGREEMENT, PLEASE COMPARE IT
WITH YOUR CURRENT PLAN DOCUMENT AND ADOPTION AGREEMENT TO MAKE CERTAIN THAT THE
PROVISIONS OF THE TWO PLANS ARE THE SAME.
FOR EXAMPLE, IF YOU NOW HAVE A PLAN THAT ALLOWS FOR DISTRIBUTIONS AS A RESULT OF
FINANCIAL HARDSHIP OR A PLAN THAT IS INTEGRATED WITH SOCIAL SECURITY, THE CGM
SIMPLIFIED ADOPTION AGREEMENT IS NOT COMPATIBLE WITH YOUR CURRENT PLAN. THERE
ARE OTHER PROVISIONS WHICH MAY PRECLUDE YOUR USE OF OUR "SIMPLIFIED" FORM. IF
YOU HAVE QUESTIONS ABOUT THE COMPATIBILITY OF YOUR CURRENT PLAN AND THE CGM
PLAN, PLEASE SPEAK WITH YOUR TAX ADVISER.
IF YOU DETERMINE THAT YOU NEED TO ADOPT A PLAN WITH BROADER PROVISIONS, PLEASE
CALL US AT 800-345-4048 AND REQUEST A STANDARDIZED ADOPTION AGREEMENT FOR YOUR
PROFIT SHARING OR MONEY PURCHASE PLAN.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ALLOCATION FORM
FOR THE CGM PROFIT SHARING AND MONEY PURCHASE PLAN
- --------------------------------------------------------------------------------
TO: The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
________________________________________________________________________________
Name of Employer's Business
________________________________________________________________________________
Employer's Address Daytime Phone Number
- --------------------------------------------------------------------------------
1. PLEASE INDICATE THE TYPE OF PLAN: [ ] Profit Sharing (PS)
[ ] Money Purchase Pension (MP)
2. ARE YOU TRANSFERRING ASSETS TO CGM FROM ANOTHER PS OR MP PLAN? [ ] Yes
[ ] No
3. ARE YOU MAKING A CONTRIBUTION? [ ] Yes
(Although contributions are not required until 3 1/2 [ ] No
months after the close of your tax year, generally
April 15, plus extensions, new plans must be
established by the end of your tax year, generally
December 31.)
4. IF YOU ARE MAKING A CONTRIBUTION, PLEASE INDICATE
WHICH TAX YEAR: _________________
(If no tax year is indicated, the Trustee will
assume current tax year)
5. EMPLOYER ELECTS THE TELEPHONE EXCHANGE OPTION AS [ ] Yes
DESCRIBED IN THE FUND'S PROSPECTUS [ ] No
(All exchanges must be authorized and placed by the
employer or plan administrator.)
6. IMPORTANT: PLEASE TELL US ABOUT THE PARTICIPANTS IN YOUR PLAN ON THE REVERSE
SIDE.
- --------------------------------------------------------------------------------
By signing this application establishing the CGM Qualified Profit Sharing and/or
Money Purchase Pension Plan (CGM Qualified Plan), I (i) appoint State Street
Bank and Trust Company, or its successors, as Trustees of the Account, (ii)
state that I have received, read, accept, and specifically incorporate the Plan
and Trust by reference to this application, (iii) acknowledge receipt of the
current prospectus of the mutual fund(s) selected, (iv) consent to the Trustee's
fee (currently $10.00 per account), and (v) agree to promptly give instructions
to the Trustee necessary to enable the Trustee to carry out its duties under the
Plan and Trust. I hereby adopt The CGM Qualified Plan upon terms and conditions
thereof.
________________________________________________________________________________
Employer's Signature Date
KEOINVEST95 (OVER)
<PAGE>
- --------------------------------------------------------------------------------
PARTICIPANT INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
PARTICIPANT'S NAME, SOCIAL SECURITY NO., INVESTMENT OPTION CONTRIBUTION
AND PLAN STATUS AMOUNT
- -------------------------------------------------------------------------------------------------------
Name:
_______________________________________ [ ] CGM Mutual Fund $ ____________
Social Security Number: (Required) [ ] CGM Realty Fund* $ ____________
_______________________________________ [ ] CGM Fixed Income Fund $ ____________
Plan Type: [ ] Profit Sharing [ ] CGM Capital Development Fund** $ ____________
[ ] Money Purchase Pension
[ ] Both Profit Sharing & New England Cash Management Trust
Money Purchase Pension [ ] Money Market Series $ ____________
Status: [ ] Owner [ ] Employee [ ] U.S Government Series $ ____________
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Name:
_______________________________________ [ ] CGM Mutual Fund $ ____________
Social Security Number: (Required) [ ] CGM Realty Fund* $ ____________
_______________________________________ [ ] CGM Fixed Income Fund $ ____________
Plan Type: [ ] Profit Sharing [ ] CGM Capital Development Fund** $ ____________
[ ] Money Purchase Pension
[ ] Both Profit Sharing & New England Cash Management Trust
Money Purchase Pension [ ] Money Market Series $ ____________
Status: [ ] Owner [ ] Employee [ ] U.S Government Series $ ____________
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Name:
_______________________________________ [ ] CGM Mutual Fund $ ____________
Social Security Number: (Required) [ ] CGM Realty Fund* $ ____________
_______________________________________ [ ] CGM Fixed Income Fund $ ____________
Plan Type: [ ] Profit Sharing [ ] CGM Capital Development Fund** $ ____________
[ ] Money Purchase Pension
[ ] Both Profit Sharing & New England Cash Management Trust
Money Purchase Pension [ ] Money Market Series $ ____________
Status: [ ] Owner [ ] Employee [ ] U.S Government Series $ ____________
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Name:
_______________________________________ [ ] CGM Mutual Fund $ ____________
Social Security Number: (Required) [ ] CGM Realty Fund* $ ____________
_______________________________________ [ ] CGM Fixed Income Fund $ ____________
Plan Type: [ ] Profit Sharing [ ] CGM Capital Development Fund** $ ____________
[ ] Money Purchase Pension
[ ] Both Profit Sharing & New England Cash Management Trust
Money Purchase Pension [ ] Money Market Series $ ____________
Status: [ ] Owner [ ] Employee [ ] U.S Government Series $ ____________
- -------------------------------------------------------------------------------------------------------
</TABLE>
* CGM Realty Fund is not available in certain states, as described in the CGM
Realty Fund prospectus.
** Only shareholders of the CGM Capital Development Fund as of September 24,
1993 who remain shareholders thereafter may purchase additional shares of the
Fund. The Fund reserves the right to reject any purchase order. This policy
supersedes all previous eligibility requirements. Fund shares are not
generally available to other persons except in special circumstances that
have been approved by, or under the authority of, the board of trustees of
the Fund. The special circumstances currently approved by the board of
trustees of the Fund are limited to the offer and sale of shares of the Fund
to the following additional persons: trustees of the Fund, employees of the
Investment Manager and counsel to the Fund and the Investment Manager. If you
are eligible, please check this box [ ] and fill in your existing CGM Capital
Development Fund account number:_____________________________________________
TOTAL CONTRIBUTIONS: $ ______________
PLAN ESTABLISHMENT FEE: $ ______________
TOTAL AMOUNT OF CHECK: $ ______________
A statement will be sent to you confirming the above transactions and will serve
as State Street Bank's acceptance.
<PAGE>
T h e C G M F u n d s
Qualified DESIGNATION OF BENEFICIARY
- --------------------------------------------------------------------------------
Retirement Plan
- --------------------------------------------------------------------------------
GENERAL
INFORMATION
NAME OF PLAN ___________________________________________________________________
NAME OF EMPLOYER _______________________________________________________________
ADDRESS ________________________________________________________________________
CITY ____________________________________________ STATE _______ ZIP_____________
COUNTY __________________________________________ PHONE ________________________
NAME OF PARTICIPANT ____________________________________________________________
ADDRESS ________________________________________________________________________
CITY ____________________________________________ STATE _______ ZIP_____________
HOME PHONE _____________ SOCIAL SECURITY NO.___________DATE OF BIRTH____________
CURRENT
MARITAL STATUS
[ ] I AM NOT MARRIED I understand that if I become married in the future, my
spouse will be my Primary Beneficiary unless I complete a
new Designation of Beneficiary form and my spouse consents
to my designation.
[ ] I AM MARRIED I understand that my spouse will be my Primary Beneficiary.
However, I understand I may designate a Primary Beneficiary
other than my spouse on the space below if my spouse signs
the section below entitled "Consent of Spouse".
DESIGNATION OF
BENEFICIARY(IES)
The following individual(s) shall be my beneficiary(ies). Please check Primary
or Contingent for each individual beneficiary.
IF NEITHER IS CHECKED, THE INDIVIDUAL WILL BE DEEMED TO BE A PRIMARY
BENEFICIARY.
If any primary or contingent beneficiary dies before me, his or her interest and
the interest of his or her heirs shall terminate completely, and the percentage
share of any remaining beneficiary(ies) shall be increased on a pro rata basis.
If no primary beneficiary(ies) survives me, the contingent beneficiary(ies)
shall acquire the designated share of my Qualified Plan balance.
PRIMARY CONTINGENT
[ ] [ ]
NAME _________________________________ SOCIAL SECURITY NO. ____________________
ADDRESS ______________________________ DATE OF BIRTH _____________ SHARE _____%
______________________________ RELATIONSHIP ___________________________
PRIMARY CONTINGENT
[ ] [ ]
NAME _________________________________ SOCIAL SECURITY NO. ____________________
ADDRESS ______________________________ DATE OF BIRTH _____________ SHARE _____%
______________________________ RELATIONSHIP ___________________________
PRIMARY CONTINGENT
[ ] [ ]
NAME _________________________________ SOCIAL SECURITY NO. ____________________
ADDRESS ______________________________ DATE OF BIRTH _____________ SHARE _____%
______________________________ RELATIONSHIP ___________________________
- --------------------------------------------------------------------------------
CONSENT OF SPOUSE
If Non-Spouse Beneficiary(ies)
are named as Primary Beneficiary
I am the spouse of the participant named above. I hereby consent to the above
designation of beneficiary. I understand that if anyone other than me is
designated as Primary Beneficiary on this form, I am waiving any rights I may
have to receive benefits under the plan when my spouse dies.
PARTlCIPANT'S SPOUSE SIGNATURE____________________________ DATE _______________
(Must be notarized. See below.)
- --------------------------------------------------------------------------------
[ ] THE PLAN ADMINISTRATOR WILL CHECK HERE IF THE FOLLOWING ELECTION DOES NOT
APPLY. SEE INSTRUCTIONS ON REVERSE SIDE.
- --------------------------------------------------------------------------------
WAIVER ELECTION
For Qualified Pre-Retirement
Survivor Annuity
MARRIED PARTICIPANT'S ELECTION TO WAIVE THE QUALIFIED PRE-RETIREMENT SURVIVOR
ANNUITY
As a married participant in my employer's qualified retirement plan, I
acknowledge that I have read the information about Qualified Pre-Retirement
Survivor Annuities on the reverse side of this form. I understand that when I
die, any amount remaining in my plan account will be paid to my surviving spouse
in the form of a Pre-Retirement Survivor Annuity. I understand that I have a
right to waive that form of payment.
I hereby elect to waive the requirement that my surviving spouse be paid any
benefits that I may have in the plan at the time of my death in the form of a
Qualified Pre-Retirement Survivor Annuity. I understand and agree that this
waiver is valid only if my spouse has consented by reading and signing the
statement below.
PARTICIPANT'S SIGNATURE_________________________________ DATE __________________
I am the spouse of the participant named above. I hereby consent to my spouse's
election not to have benefits remaining in his or her plan paid in the form of a
Qualified Pre-Retirement Survivor Annuity at his or her death. I understand that
my consent cannot be revoked unless my spouse revokes the above waiver.
PARTICIPANT'S SPOUSE SIGNATURE _________________________ DATE __________________
(Must be notarized.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WITNESS OF SPOUSE'S CONSENT
The signature of the spouse must be witnessed by a notary public. (Witness
applies to either or both elections.)
- -------------------------
WITNESS: NOTARY PUBLIC
- -------------------------
Subscribed and sworn to before me on this
________ day of __________________, 19__.
SIGNATURE _______________________________
- --------------------------------------------------------------------------------
SIGNATURES
PARTICIPANT SIGNATURE _________________________________ DATE____________________
WITNESS SIGNATURE _____________________________________ DATE____________________
KEOBENE #481 IMPORTANT: PLEASE SAVE A COPY OF THIS FORM
(4/92)L90 WITH YOUR PERMANENT RECORDS. (C) 1992 Universal Pensions, Inc.,
Brainerd, MN 56401
<PAGE>
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR WAIVER ELECTION FOR
QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITIES
- --------------------------------------------------------------------------------
EMPLOYEE: You and your spouse must complete the Waiver Election section if the
box has not been checked.
EMPLOYER: The Waiver Election is applicable to all Money Purchase Pension Plans
and Target Benefit Plans. It also applies to Profit Sharing Plans and
401(k) Plans if you did not select the REA Safe Harbor found in the
Adoption Agreement. If you did select the REA Safe Harbor provision,
place a check mark in the indicated box.
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION
- --------------------------------------------------------------------------------
ABOUT QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITIES
- --------------------------------------------------------------------------------
If you are a married participant in your employer's qualified retirement plan,
the law requires that any amount remaining in your plan account be paid to your
surviving spouse in a certain manner at your death. This manner of payment,
called a "Qualified Pre-Retirement Survivor Annuity," will provide your spouse
with a series of periodic payments over his or her life. The size of the
periodic payments will depend on the amount remaining in your plan account.
For example, assume that a participant dies with an account balance of $10,000.
If the balance is paid to the surviving spouse in the form of a qualified
pre-retirement survivor annuity, the annuity will provide the spouse with
monthly payments of $76.60. (This payment amount is an estimate based on the
Individual Annuity Mortality Tables - 71 using a 5% interest rate with payments
commencing at age 65.)
You may elect to waive the following:
1. The requirement that your surviving spouse be paid in the form of a Qualified
Pre-Retirement Survivor Annuity, and,
2. The requirement that your spouse be your beneficiary (only if applicable).
You may make either or both of the above elections beginning with the first day
after which you become a participant in the plan. Any waiver election you sign
before age 35 will become invalid the first day of the plan year in which you
attain age 35. At that time you may again waive the Qualified Pre-Retirement
Survivor Annuity and the requirement that your spouse be your beneficiary.
Your spouse must consent in writing to either waiver. You have the right to
revoke any waiver that you have made at any time before your death. Your spouse
must also consent to any subsequent changes of beneficiary.
If your vested account balance is $3,500 or less at the time of your death, the
plan administrator may make a distribution to your surviving spouse in a single
sum cash payment even if you did not waive the Qualified Pre-Retirement Survivor
Annuity.
Because a spouse has certain rights under the law, you should inform your plan
administrator immediately of any changes in your marital status. A change in
your marital status may require you to complete a new Designation of Beneficiary
form.
For more information regarding Pre-Retirement Survivor Annuities, contact your
plan administrator (employer).
<PAGE>
THE CGM FUNDS
PLAN
ADMINISTRATOR'S
GUIDE
<PAGE>
INTRODUCTION
This Guide is a quick reference tool for plan administrators using our Defined
Contribution Qualified Retirement Plan. Under all qualified retirement plans,
the plan administrator is the person directly responsible for managing the daily
operations of the plan. Under most plans, the employer sponsoring the plan
serves as the plan administrator. Depending upon your company, the employer may
perform the duties of plan administrator or they may be delegated to a
representative of the employer. For ease of reading, all references to "you" or
"employer" in this Guide include persons working on behalf of or assisting the
employer in carrying out the responsibilities of the plan administrator.
This booklet is intended to alert you to various concepts and issues which are
common to the operation of a qualified retirement plan. This Guide serves its
purpose by bringing your attention to important issues and requirements
characteristic of qualified retirement plans. It is not intended as a
comprehensive reference book for assuring compliance with all rules under the
Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code
(IRC) which govern pension plans. The Guide is not a substitute for the
competent tax and legal advice which you may require from time to time while
performing your duties as plan administrator. It will enable you, however, to
identify those situations which can occur during plan administration which may
require the assistance of tax professionals.
Your Basic Plan Document and adoption agreement specify the areas of plan
operations for which you are responsible as plan administrator. Depending upon
your relationship with your prototype plan sponsor, you may directly or
indirectly be involved in the following areas:
o Formulating plan policy consistent with plan documentation,
o Determining participation, contribution and distribution eligibility,
o Maintaining plan records,
o Preparing and filing government reports, or
o Communicating regularly with employees participating in the plan.
It is helpful to clarify areas of plan administration responsibility with your
prototype plan sponsor to assure that you perform all plan operations for which
you are responsible in a timely manner.
<PAGE>
I. PLAN OPERATIONS AND ADMINISTRATION
Now that you have adopted your qualified retirement plan, there are several
areas of plan operation and administration of which you should be aware.
A. FORMAL ADOPTION OF THE PLAN
Depending upon the legal status of your company, formal steps may be
required to adopt the plan. For example, if your company is organized as a
corporation, a resolution by the board of directors adopting the plan
should be placed on the corporate books. If your company is a partnership,
you should consult the partnership agreement to determine the steps
necessary, if any, to formally adopt your plan. If you do not have a
written partnership agreement, consult with your attorney to determine
whether your state law requires any special procedures be followed to
adopt the plan.
B. PLAN APPROVAL
If you have adopted a standardized plan and have never maintained another
qualified plan, you may rely on the favorable opinion or notification
letter issued to your prototype sponsor concerning the tax qualification
of your plan. In the event you have adopted a nonstandardized plan or have
maintained another qualified plan, however, you may wish to obtain a
determination letter from your IRS Key District Office approving the tax
qualified status of your plan. Your adoption agreement indicates whether
your plan is a standardized or a nonstandardized plan.
C. BONDING REQUIREMENTS
ERISA requires that certain persons who have direct or indirect access to
or control over plan assets be bonded by a corporate surety company unless
the employer sponsoring the plan has no common law employees. All plan
fiduciaries and others handling plan assets must be insured for acts of
fraud or dishonesty involving plan assets. Generally, the bond must equal
10% of the value of the assets administered during a plan year, although
there is a minimum coverage amount of $1,000 and a ceiling of $500,000.
<PAGE>
D. PLAN ELIGIBILITY AND PARTICIPATION
After initial enrollment in your plan has been completed, you will
periodically need to review the conditions for plan eligibility and
participation as new employees become eligible to participate in the plan.
As new employees become eligible, you should provide them with information
about the plan, including the Summary Plan Description. Refer to your
adoption agreement for plan specifics concerning minimum age and service
requirements and plan entry dates and procedures.
E. PLAN CONTRIBUTIONS
If you have adopted a profit sharing plan, each plan year you will decide
whether a contribution will be made on behalf of your employees. Profit
sharing contributions may be made from accumulated or current year
profits. To insure the tax deductibility of your profit sharing
contribution, funds must be deposited into the plan no later than the
deadline for filing your company's federal income tax return (or any
extensions) for the year.
Once made to the plan, the profit sharing contribution will be allocated
to the individual accounts of plan participants. Refer to your adoption
agreement to determine if any special allocation rules apply to your plan.
If you have adopted a money purchase plan, a contribution must be made for
each plan year in an amount equal to the contribution percentage specified
in your adoption agreement. The contribution must be deposited into the
plan prior to your company's federal income tax filing deadline (or any
extensions) to assure income tax deductibility.
You should refer to your adoption agreement to determine the vesting
schedule, if any, which applies to your plan. The vesting schedule
determines the amount of benefits to which an employee will be entitled
upon separation from service with your company.
F. TESTING FOR DISCRIMINATION
To maintain its favorable tax status, contributions made to your plan must
pass several tax qualification and nondiscrimination
<PAGE>
tests each plan year. Some tests must be met each day of the plan year
while others need be satisfied one day out of each quarter of the plan
year. In either event, the purpose of the various tests is to insure that
those employees who are "highly compensated" do not receive nor have made
available to them disproportionately more valuable benefits than those
received by or made available to nonhighly compensated employees.
The Internal Revenue Code (IRC) defines highly compensated employees in
detail. Generally, each employer will have at least one highly compensated
employee against whom the benefits received by or made available to
nonhighly compensated employees will be measured.
The various qualification and nondiscrimination tests to which your
qualified retirement plan is subject include the following:
o GENERAL NONDISCRIMINATION RULES--IRC Sec. 401(a)(4) prohibits
qualified retirement plans from discriminating in favor of highly
compensated employees. Under these rules, plan contributions and
benefits must be nondiscriminatory in amount; plan benefits,
rights and features must be available to employees in a
nondiscriminatory manner and the plan cannot be discriminatory in
operation under special circumstances. The IRC Section 401(a)(4)
proposed regulations provide special safe harbor rules to meet
these tests.
o MINIMUM PARTICIPATION RULES--IRC Sec. 401(a)(26) requires that a
minimum number of nonhighly compensated employees participate in
the plan. Generally, it is necessary that the lesser of 40% of
all employees or 50 employees be participating in the plan. This
test need only be satisfied on one day of each plan year provided
the testing date is representative of the entire plan year.
o MINIMUM COVERAGE RULES--IRC Sec. 410(b) requires that a minimum
number of nonhighly compensated employees be covered by the plan
in relation to the number of highly compensated employees covered
by the plan. Generally, a plan passes this test if at least 70%
of the nonhighly compensated employees are covered by the plan on
one day of each quarter during the plan year.
<PAGE>
o TOP-HEAVY RULES--IRC Sec. 416 provides that a plan is top-heavy
if more than 60% of all plan assets are held in the accounts of
"key employees." The IRC defines "key employees" in detail.
In the event your plan is top-heavy, special rules which must be
followed include a minimum contribution for nonkey employees and
an accelerated vesting schedule.
o ANNUAL ADDITIONS RULE--IRC Sec. 415 limits the contribution
amount which may be allocated to an employee for any plan year.
The maximum amount which may be allocated to any employee during
any plan year is limited to the lesser of 25% of the employee's
compensation or $30,000. The IRC defines "annual additions" in
detail.
o FEDERAL INCOME TAX AND EMPLOYMENT TAX--Employer profit sharing
and money purchase contributions are not subject to federal
income tax withholding, FICA or FUTA tax.
G. HANDLING PAYOUTS--ELIGIBLE ROLLOVER DISTRIBUTIONS
The Unemployment Compensation Amendments of 1992 (UCA-92), which became
effective in 1993, liberalizes the types of plan payouts that may be
rolled over to an IRA or another employer's qualified plan. Such
"rollable" distributions are called "eligible rollover distributions."
Eligible rollover distributions are all distributions from the plan except
the following:
o required minimum distributions;
o certain distributions that are part of a series of equal (or
almost equal) periodic payments that will last for the
participant's lifetime (or joint lives of the participant and
beneficiary) or for a specified period of 10 years or more;
o distributions to nonspouse beneficiaries of deceased
participants;
o distributions of after-tax employee contributions; and
o certain distributions to correct plan excess contributions.
<PAGE>
20% Withholding If Eligible Rollover Distribution Is Not Rolled Over
Eligible rollover distributions which are not directly rolled over to an
IRA or another employer plan are subject to mandatory 20% federal income
tax withholding. In other words, a participant in the plan who does not
request a direct rollover of his or her eligible rollover distribution
(that is, the participant requests a check payable to himself or herself
instead) will receive only 80% of the payment. This is because you (as the
plan administrator) are required to withhold 20% of the payment and send
it to the IRS as income tax withholding to be credited against the
participant's taxes. Note that the participant cannot waive withholding on
any eligible rollover distribution that is paid directly to the
participant.
Must Give Participant A Notice
Under UCA-92, the plan administrator must give participants who request a
payment from the plan a notice that describes their tax treatment options
regarding the payment. Generally, you must furnish this notice to the
participant at least 30 but no more than 90 days prior to the payout.
Procedure For Making A Direct Rollover
The IRS regulations under UCA-92 allow the plan administrator to establish
reasonable procedures that participants must follow to elect a direct
rollover. You may also ask participants and the provider of the receiving
IRA (or a representative of the new employer's plan) to provide reasonable
information about the IRA or plan as a condition to the direct rollover.
When issuing a check for a direct rollover, the regulations specify that
the check is to be made payable to the trustee, custodian or issuer of the
new IRA or plan. For example, if your former employee John Q. Smith elects
a direct rollover to his IRA at ABC Bank, the payee line of the check
would read "ABC Bank as the trustee of John Q. Smith's IRA."
H. OTHER DISTRIBUTION ISSUES
Your plan documents specify the forms of benefit distribution available
under the plan. Many plans require that plan benefits be distributed in
the form of an annuity unless this option is properly waived. Your
adoption agreement will indicate whether distributions from your plan may
be taken in forms other than an annuity.
<PAGE>
Under your plan, a participant or his/her beneficiary may begin receiving
a distribution of benefits upon the occurrence of the following:
o Retirement
o Death
o Disability
o Separation from service
o Plan termination or
o Sale of all corporate assets
Special distribution rules come into play when plan participants reach age
70-1/2. Similar rules also apply to distributions to beneficiaries of
deceased individuals. Generally, plan participants must begin taking
distributions when they reach their required beginning date. The required
beginning date is generally April 1 of the year following the year in
which a participant turns age 70-1/2. Once triggered, a minimum
distribution must be taken annually by December 31. In general, the amount
of the annual minimum distribution will be determined by dividing the
balance in the participant's individual account by the participant's life
expectancy or the joint life expectancy of the participant and his/her
beneficiary.
Your plan may permit in-service withdrawals of benefits to be taken from
the plan. Some plans limit in-service withdrawals to hardship
circumstances. Refer to your adoption agreement to determine if in-service
withdrawals are permitted under your plan and, if so, the circumstances
necessary to trigger an in-service withdrawal.
Under limited circumstances, a distribution of a participant's benefits
may be made pursuant or incident to a divorce or legal separation. In this
event, you must take steps to insure that any distribution relating to
child support, alimony, or marital property remains tax qualified. To
accomplish this, it will be necessary that you obtain a qualified domestic
relations order (QDRO). Your plan documents incorporate the IRC rules
governing QDROs. It is recommended that you have your legal counsel review
any domestic relations order which concerns plan assets in connection with
your plan documents to determine whether the order is a qualified domestic
relations order under the plan. Once this determination has been made, you
<PAGE>
must notify all persons affected by your decision within a reasonable
time. Any distribution of benefits made pursuant to a QDRO is nontaxable
to the participant if the alternate payee is the spouse or former spouse
of the participant.
Generally, plan assets may not be levied upon by creditors of plan
participants. A limited exception to this general rule exists for the
benefit of the Internal Revenue Service which is recognized as the tax
collector for the United States Government. The IRS may attempt to satisfy
a tax lien through levy upon plan assets. Under these circumstances, an
IRS form called a "Notice of Levy" will be served upon the financial
organization in custody of your plan assets. It will then be incumbent
upon the financial organization to follow the appropriate steps required
by law.
I. PLAN LOANS
Under certain circumstances, plan participants may be eligible to receive
loans of the plan assets. Refer to your adoption agreement to determine if
your plan offers a plan loan program.
If a plan loan program is authorized under your plan documents, a separate
loan disclosure form must be completed and distributed to employees along
with the Summary Plan Description. This disclosure will contain the
information and procedures unique to your qualified plan loan program.
Generally, all qualified plan loan programs must have the following
characteristics:
o Loans must be made available to all participants and
beneficiaries on a reasonably equivalent basis;
o Loans must not be made available to highly compensated employees,
officers or shareholders in an amount greater than the amount
available to other employees;
o Loans must be made in accordance with specific provisions
regarding loans as described in your loan disclosure;
o Loans must bear a reasonable rate of interest; and
o Loans must be adequately secured.
<PAGE>
II. SUMMARY OF DISCLOSURE AND REPORTING REQUIREMENTS
The following is a summary of the disclosure and reporting requirements
necessary for administration of your qualified retirement plan. Your attorney or
tax advisor should be consulted about questions which arise during the course of
your plan operations.
1. EMPLOYEE DISCLOSURE/REPORTING
REQUIREMENT REQUIRED DOCUMENT(S)
A. Notification to Employees Notice to Employees
of Adoption of Plan
TIMING - If the notice is personally delivered or posted, it must be
presented not less than 9 days nor more than 23 days from the date the
plan is adopted. If delivered by mail, the notice must be mailed not
less than 6 nor more than 20 days from date of filing application.
B. Notification to Employees Notice to Employees
of District Submission for
Determination Letter
TIMING - If the notice is personally delivered or posted, it must be
presented not less than 7 days nor more than 21 days prior to the date
the application for determination is filed with the IRS. If delivered by
mail, the notice must be mailed not less than 10 nor more than 24 days
prior to the date of filing application.
C. Designation of Beneficiary; Beneficiary Designation
Waiver of Pre-Retirement
Survivor Annuity (PSA)**
TIMING - The beneficiary designation should be completed when an
employee begins participation in plan.
D. Disclosure to Employees of Summary Plan Description*
Vital Plan Features (SPD)
TIMING - Distribute the summary plan description to employees and file
it with DOL within 120 days after the adoption of plan. Likewise,
distribute it to each new participant within 90 days after plan entry
and to each beneficiary within 90 days after commencement of benefits.
<PAGE>
E. Disclosure to Employees of Summary of Material
Plan Changes Modifications* (SMM)
TIMING - Distribute the summary to employees and file it with DOL within
210 days after the end of the plan year during which change was adopted.
The summary of material modifications must be distributed to each
beneficiary receiving benefits and to each plan participant.
F. Summary of Benefits Summary Annual Report*
(SAR)
TIMING - The summary annual report must be distributed to each plan
participant and beneficiary receiving benefits annually within nine
months after the close of the plan year.
G. Appealing a Claim Denial Explanation of Claim Denial
TIMING - All participants or claimants must receive a written
explanation of claim denial within the time allowed in the plan
documents.
H. Distribution Incident To A Qualified Domestic Relations
Domestic Relations Order Order (QDRO)
TIMING - Each participant must be notified promptly after receipt by the
plan administrator of a QDRO. The plan administrator must determine
whether the QDRO meets plan specifications and thereafter notify
effected parties of such decision within a reasonable time.
I. Distribution Reporting IRS Form 1099-R
Requirements
TIMING - Payors of distributions must provide each participant who
receives a distribution a Form 1099-R by January 31 of the year after
the distribution. NOTE: Prior to 1991 reporting, Form W-2P reported
partial distributions.
J. Withholding on Distributions IRS Form W-4P or Substitute
Form
TIMING - Payors of distributions must provide notice of federal income
tax withholding requirements to all recipients.
<PAGE>
Generally, the notice must be given once a year to persons receiving
periodic payments and each time a person receives a nonperiodic payment.
K. Description of Benefits Statement of Accrued Benefits
Accrued
TIMING - The statement must be furnished within 270 days after the close
of the plan year.
L. Pre-Retirement Survivor PSA Notice Form**
Annuity (PSA) Notice
TIMING - The notice must be given to each participant between the 1st
day of the plan year in which he or she attains age 32 and the last day
of the plan year in which he/she reaches age 34. If a participant enters
the plan after age 32, provide notice within 3 years after the 1st day
of the plan year in which participant enters the plan. If a participant
separates from service prior to reaching age 32, PSA must be provided
within 1 year from separation.
M. Joint and Survivor Annuity JSA Notice Form**
Notice (JSA)
TIMING - The JSA notice form must be given to each participant no more
than 90 and no less than 30 days before distributions start.
N. Notice of Tax Treatment of Any notice meeting requirements of
Distributions IRC Sec. 402(f). The IRS has written
a model notice for this purpose.
TIMING - The notice must generally be provided to the recipient no more
than 90 and no less than 30 days before distributions start.
O. Notice of Distribution Distribution Notice Form
Options
TIMING - The notice must generally be provided to the recipient no more
than 90 and no less than 30 days before distributions start.
<PAGE>
NOTE: The notices described in M, N and O are often combined on one
form.
2. IRS DISCLOSURE/REPORTING
REQUIREMENT REQUIRED DOCUMENT(S)
A. Application for Determination Adoption Agreement, IRS Form
Letter (District Submission) 5307, IRS Form 5302, IRS Form 8717,
Favorable Opinion Letter, Prior
Determination Letter
TIMING - The documents must be timely filed with the Key District IRS
Office after Notice to Interested Parties is given (See above).
B. Annual Plan Reporting IRS Form 5500-EZ for plans with more
than $100,000 in assets covering sole
proprietors and spouse or partners
and spouses; IRS Form 5500-C/R for
plans covering less than 100
participants; IRS Form 5500 for plans
with 100 or more participants; IRS
Schedule SSA must be filed with Form
5500, 5500-C/R; IRS Schedule A must
be included if plan benefits are
provided in whole or in part by an
insurance company; IRS Schedule P
must be signed by the trustee or
custodian and filed with the annual
report
TIMING - The reports must be filed with the IRS by the last day of the
7th month following the close of the plan year.
C. Distribution Reporting IRS Form 1099-R
Requirements
TIMING - Must be filed with the IRS by February 28 of year after
distribution.
<PAGE>
D. Quarterly Return of Form 941 or 941-E
Withheld Federal Income Tax
TIMING - Must generally be filed quarterly with the IRS.
3. DEPARTMENT OF LABOR DISCLOSURE/REPORTING
REQUIREMENT REQUIRED DOCUMENT(S)
A. Disclosure of Vital Plan Summary Plan Description*
Features to Employees (SPD)
TIMING - File with DOL within 120 days after the adoption of plan.
B. Disclosure of Plan Changes Summary of Material
to Employees Modifications* (SMM)
TIMING - File with DOL within 210 days after the end of the plan year
during which the change was adopted.
*The SPD, SMM, and SAR are not required if the business is wholly owned by an
individual or the individual and spouse, and the individual and/or spouse are
the only plan participants or if the plan covers only partners of the business
and/or their spouses.
**These requirements do not apply to Retirement Equity Act (REA) safe harbor
plans. Refer to your adoption agreement to determine whether your plan is a
REA safe harbor plan.
<PAGE>
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POST OFFICE BOX 449, BOSTON, MASSACHUSETTS 02117 800-345-4048
#237(1/94) (C)1994 Universal Pensions, Inc., Brainerd, MN 56401
KEOADMIN
<PAGE>
The CGM Funds
BASIC PLAN DOCUMENT
PROFIT SHARING PLAN
MONEY PURCHASE PENSION PLAN
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION ONE DEFINITIONS
1.01 Adoption Agreement.......................................... 1
1.02 Basic Plan Document......................................... 1
1.03 Break In Eligibility Service ............................... 1
1.04 Break In Vesting Service.................................... 1
1.05 Code........................................................ 1
1.06 Compensation................................................ 1
1.07 Custodian................................................... 2
1.08 Disability.................................................. 2
1.09 Earned Income............................................... 2
1.10 Effective Date.............................................. 2
1.11 Eligibility Computation Period ............................. 2
1.12 Employee.................................................... 2
1.13 Employer.................................................... 2
1.14 Employer Contribution ...................................... 2
1.15 Entry Dates ................................................ 2
1.16 ERISA....................................................... 2
1.17 Forfeiture.................................................. 2
1.18 Fund........................................................ 2
1.19 Highly Compensated Employee................................. 2
1.20 Hours Of Service............................................ 3
1.21 Individual Account ......................................... 3
1.22 Investment Fund ............................................ 3
1.23 Key Employee ............................................... 3
1.24 Leased Employee ............................................ 3
1.25 Normal Retirement Age ...................................... 3
1.26 Owner-Employee.............................................. 3
1.27 Participant................................................. 4
1.28 Plan........................................................ 4
1.29 Plan Administrator ......................................... 4
1.30 Plan Year................................................... 4
1.31 Prior Plan.................................................. 4
1.32 Prototype Sponsor........................................... 4
1.33 Self-Employed Individual ................................... 4
1.34 Separate Fund............................................... 4
1.35 Taxable Wage Base........................................... 4
1.36 Termination Of Employment................................... 4
1.37 Top-Heavy Plan.............................................. 4
1.38 Trustee..................................................... 4
1.39 Valuation Date.............................................. 4
1.40 Vested...................................................... 4
1.41 Year Of Eligibility Service ................................ 4
1.42 Year Of Vesting Service..................................... 4
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 Eligibility To Participate.................................. 5
2.02 Plan Entry.................................................. 5
2.03 Transfer To Or From Ineligible Class........................ 5
2.04 Return As A Participant After Break In Eligibility Service.. 5
2.05 Determinations Under This Section........................... 5
2.06 Terms of Employment......................................... 5
SECTION THREE CONTRIBUTIONS
3.01 Employer Contributions...................................... 5
3.02 Employee Contributions...................................... 7
3.03 Rollover Contributions...................................... 7
3.04 Transfer Contributions...................................... 7
3.05 Limitation On Allocations................................... 7
<PAGE>
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 Individual Accounts ........................................ 11
4.02 Valuation Of Fund .......................................... 11
4.03 Valuation Of Individual Accounts ........................... 11
4.04 Segregation Of Assets ...................................... 11
4.05 Statement Of Individual Accounts ........................... 11
4.06 Modification Of Method For Valuing Individual Accounts ..... 11
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 Creation Of Fund ........................................... 11
5.02 Investment Authority........................................ 11
5.03 Financial Organization Custodian Or Trustee
Without Full Trust Powers .................................. 12
5.04 Financial Organization Trustee With Full Trust Powers
And Individual Trustee ..................................... 12
5.05 Division Of Fund Into Investment Funds ..................... 13
5.06 Compensation And Expenses................................... 13
5.07 Not Obligated To Question Data ............................. 13
5.08 Liability For Withholding On Distributions.................. 13
5.09 Resignation Or Removal Of Trustee (Or Custodian) ........... 13
5.10 Degree Of Care ............................................. 14
5.11 Indemnification Of Prototype Sponsor And Trustee
(Or Custodian) ............................................. 14
5.12 Investment Managers......................................... 14
5.13 Matters Relating To Insurance .............................. 14
5.14 Direction Of Investments By Participant .................... 15
SECTION SIX VESTING AND DISTRIBUTION
6.01 Distribution To Participant ................................ 15
6.02 Form Of Distribution To A Participant....................... 17
6.03 Distributions Upon The Death Of A Participant .............. 18
6.04 Form Of Distribution To Beneficiary......................... 18
6.05 Joint And Survivor Annuity Requirements .................... 18
6.06 Distribution Requirements .................................. 21
6.07 Annuity Contracts........................................... 23
6.08 Loans To Participants ...................................... 24
6.09 Distribution In Kind ....................................... 24
6.10 Direct Rollovers of Eligible Rollover Distributions......... 24
SECTION SEVEN CLAIMS PROCEDURE
7.01 Filing A Claim For Plan Distributions ...................... 25
7.02 Denial Of Claim ............................................ 25
7.03 Remedies Available ......................................... 25
SECTION EIGHT PLAN ADMINISTRATOR
8.01 Employer Is Plan Administrator ............................. 25
8.02 Powers And Duties Of The Plan Administrator................. 25
8.03 Expenses And Compensation .................................. 26
8.04 Information From Employer .................................. 26
SECTION NINE AMENDMENT AND TERMINATION
9.01 Right Of Prototype Sponsor To Amend The Plan ............... 26
9.02 Right Of Employer To Amend The Plan......................... 26
9.03 Limitation On Power To Amend ............................... 26
9.04 Amendment Of Vesting Schedule .............................. 27
9.05 Permanency.................................................. 27
9.06 Method And Procedure For Termination ....................... 27
9.07 Continuance Of Plan By Successor Employer................... 27
9.08 Failure Of Plan Qualification............................... 27
<PAGE>
SECTION TEN MISCELLANEOUS
10.01 State Community Property Laws .............................. 27
10.02 Headings.................................................... 27
10.03 Gender And Number........................................... 27
10.04 Plan Merger Or Consolidation ............................... 27
10.05 Standard Of Fiduciary Conduct............................... 27
10.06 General Undertaking Of All Parties ......................... 27
10.07 Agreement Binds Heirs, Etc.................................. 28
10.08 Determination Of Top-Heavy Status .......................... 28
10.09 Special Limitations For Owner-Employees..................... 29
10.10 Inalienability Of Benefits.................................. 29
<PAGE>
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 03
_________________________________________________________________
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with
initial capital letters shall, for the purpose of this Plan, have
the meanings set forth below unless the context indicates that
other meanings are intended:
1.01 ADOPTION AGREEMENT
Means the document executed by the Employer through which it
adopts the Plan and Trust and thereby agrees to be bound by all
terms and conditions of the Plan and Trust.
1.02 BASIC PLAN DOCUMENT
Means this prototype Plan and Trust document.
1.03 BREAK IN ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation Period during which an Employee fails to
complete more than 500 Hours of Service (or such lesser number of
Hours of Service specified in the Adoption Agreement for
this purpose).
1.04 BREAK IN VESTING SERVICE
Means a Plan Year during which an Employee fails to complete more
than 500 Hours of Service (or such lesser number of Hours of
Service specified in the Adoption Agreement for this purpose).
1.05 CODE
Means the Internal Revenue Code of 1986 as amended from
time-to-time.
1.06 COMPENSATION
For Plan Years beginning on or after January 1, 1989, the
following definition of Compensation shall apply:
Compensation will mean Compensation as that term is defined in
Section 3.05(E)(2) of the Plan. For any Self-Employed Individual
covered under the Plan, Compensation will mean Earned Income.
Compensation shall include only that Compensation which is
actually paid to the Participant during the applicable period.
Except as provided elsewhere in this Plan, the applicable period
shall be the Plan Year unless the Employer has selected another
period in the Adoption Agreement.
Unless otherwise indicated in the Adoption Agreement,
Compensation shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is
not includible in the gross income of the Employee under Sections
125, 402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account under the
Plan for any year shall not exceed $200,000. This limitation
shall be adjusted by the Secretary at the same time and in the
same manner as under Section 415(d) of the Code, except that the
dollar increase in effect on January l of any calendar year is
effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effected on January 1,
1990. If a Plan determines Compensation on a period of time that
contains fewer than 12 calendar months, then the annual
Compensation limit is an amount equal to the annual Compensation
limit for the calendar year in which the compensation period
begins multiplied by the ratio obtained by dividing the number of
full months in the period by 12.
In determining the Compensation of a Participant for purposes of
this limitation, the rules of Section 414(q)(6) of the Code shall
apply, except in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19
before the close of the year.
If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration
level if this Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined
under this Section prior to the application of this limitation.
If Compensation for any prior Plan Year is taken into account in
determining an Employee's contributions or benefits for the
current year, the Compensation for such prior year is subject to
the applicable annual Compensation limit in effect for that prior
year. For this purpose, for years beginning before January 1,
1990, the applicable annual Compensation limit is $200,000.
Unless otherwise indicated in the Adoption Agreement, where an
Employee enters the Plan (and thus becomes a Participant) on an
Entry Date other than the first Entry Date in a Plan Year, his
Compensation will include any such earnings paid to him during
the whole of such Plan Year.
Where this Plan is being adopted as an amendment and restatement
to bring a Prior Plan into compliance with the Tax Reform Act of
1986, such Prior Plan's definition of Compensation shall apply
for Plan Years beginning before January 1, 1989.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994,
the annual Compensation of each Employee taken into account under
the Plan shall not exceed the OBRA '93 annual Compensation limit.
The OBRA `93 annual Compensation limit is $150,000, as adjusted
by the Commissioner for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in
such calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual Compensation limit will be
multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which
is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section 401(a)(17)
of the Code shall mean the OBRA '93 annual Compensation limit set
forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the OBRA '93 annual Compensation limit in
effect for that prior determination period. For this purpose, for
determination periods beginning before the first day of the first
Plan Year beginning on or after January 1, 1994, the OBRA '93
annual Compensation limit is $150,000.
<PAGE>
1.07 CUSTODIAN
Means an entity specified in the Adoption Agreement as Custodian
or any duly appointed successor as provided in Section 5.09.
1.08 DISABILITY
Means the inability to engage in any substantial, gainful
activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months. The permanence and degree of
such impairment shall be supported by medical evidence.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which
personal services of the individual are a material
income-producing factor. Net earnings will be determined without
regard to items not included in gross income and the deductions
allocable to such items. Net earnings are reduced by
contributions by the Employer to a qualified plan to the extent
deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction
allowed to the Employer by Section 164(f) of the Code for taxable
years beginning after December 31, 1989.
1.10 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the
Adoption Agreement. However, where a separate date is stated in
the Plan as of which a particular Plan provision becomes
effective, such date will control with respect to that provision.
1.11 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be the
12 consecutive month period commencing with the date such
Employee first performs an Hour of Service (employment
commencement date). His subsequent Eligibility Computation
Periods shall be the 12 consecutive month periods commencing on
the anniversaries of his employment commencement date; provided,
however, if pursuant to the Adoption Agreement, an Employee is
required to complete one or less Years of Eligibility Service to
become a Participant, then his subsequent Eligibility Computation
Periods shall be the Plan Years commencing with the Plan Year
beginning during his initial Eligibility Computation Period.
1.12 EMPLOYEE
Means any person employed by the Employer maintaining the Plan or
of any other employer required to be aggregated with such
Employer under Sections 414(b),(c),(m) or (o) of the Code.
The term Employee shall also include any Leased Employee deemed
to be an Employee of any Employer described in the previous
paragraph as provided in Sections 414(n) or (o) of the Code.
1.13 EMPLOYER
Means any corporation, partnership, sole-proprietorship or other
entity named in the Adoption Agreement and any successor who by
merger, consolidation, purchase or otherwise assumes the
obligations of the Plan. A partnership is considered to be the
Employer of each of the partners and a sole-proprietorship is
considered to be the Employer of a sole proprietor.
1.14 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as
determined under this Plan.
1.15 ENTRY DATES
Means the first day of the Plan Year and the first day of the
seventh month of the Plan Year, unless the Employer has specified
more frequent dates in the Adoption Agreement.
1.16 ERISA
Means the Employee Retirement Income Security Act of 1974 as
amended from time-to-time.
1.17 FORFEITURE
Means that portion of a Participant's Individual Account as
derived from Employer Contributions which he or she is not
entitled to receive (i.e., the nonvested portion).
1.18 FUND
Means the Plan assets held by the Trustee or Custodian for the
Participants' exclusive benefit.
1.19 HIGHLY COMPENSATED EMPLOYEE
The term Highly Compensated Employee includes highly compensated
active employees and highly compensated former employees.
A highly compensated active employee includes any Employee who
performs service for the Employer during the determination year
and who, during the look-back year: (a) received Compensation
from the Employer in excess of $75,000 (as adjusted pursuant to
Section 415(d) of the Code); (b) received Compensation from the
Employer in excess of $50,000 (as adjusted pursuant to Section
415(d) of the Code) and was a member of the top-paid group for
such year; or (c) was an officer of the Employer and received
Compensation during such year that is greater than 50% of the
dollar limitation in effect under Section 415(b)(1)(A) of the
Code. The term Highly Compensated Employee also includes: (a)
Employees who are both described in the preceding sentence if the
term "determination year" is substituted for the term "look-back
year" and the Employee is one of the 100 Employees who received
the most Compensation from the Employer during the determination
year; and (b) Employees who are 5% owners at any time during the
look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c)
above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the 12 month period immediately
preceding the determination year.
A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Employer
during the determination year, and was a highly compensated
active employee for either the separation year or any
determination year ending on or after the Employee's 55th
birthday.
If an Employee is, during a determination year or look-back year,
a family member of either a 5% owner who is an active or former
Employee or a Highly Compensated Employee who is one of the 10
most Highly Compensated Employees ranked
<PAGE>
on the basis of Compensation paid by the Employer during such
year, then the family member and the 5% owner or top 10 Highly
Compensated Employee shall be aggregated. In such case, the
family member and 5% owner or top 10 Highly Compensated Employee
shall be treated as a single Employee receiving Compensation and
Plan contributions or benefits equal to the sum of such
Compensation and contributions or benefits of the family member
and 5% owner or top 10 Highly Compensated Employee. For purposes
of this Section, family member includes the spouse, lineal
ascendants and descendants of the Employee or former Employee and
the spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the Compensation that
is considered, will be made in accordance with Section 414(q) of
the Code and the regulations thereunder.
1.20 HOURS OF SERVICE - Means
A. Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These
hours will be credited to the Employee for the computation
period in which the duties are performed; and
B. Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence. No more than 501
Hours of Service will be credited under this paragraph for any
single continuous period (whether or not such period occurs in
a single computation period). Hours under this paragraph shall
be calculated and credited pursuant to Section 2530.200b-2 of
the Department of Labor Regulations which is incorporated
herein by this reference; and
C. Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The
same Hours of Service will not be credited both under
paragraph (A) or paragraph (B), as the case may be, and under
this paragraph (C). These hours will be credited to the
Employee for the computation period or periods to which the
award or agreement pertains rather than the computation period
in which the award, agreement, or payment is made.
D. Solely for purposes of determining whether a Break in
Eligibility Service or a Break in Vesting Service has occurred
in a computation period (the computation period for purposes
of determining whether a Break in Vesting Service has occurred
is the Plan Year), an individual who is absent from work for
maternity or paternity reasons shall receive credit for the
Hours of Service which would otherwise have been credited to
such individual but for such absence, or in any case in which
such hours cannot be determined, 8 Hours of Service per day of
such absence. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence (1)
by reason of the pregnancy of the individual, (2) by reason of
a birth of a child of the individual, (3) by reason of the
placement of a child with the individual in connection with
the adoption of such child by such individual, or (4) for
purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of
Service credited under this paragraph shall be credited (1) in
the Eligibility Computation Period or Plan Year in which the
absence begins if the crediting is necessary to prevent a
Break in Eligibility Service or a Break in Vesting Service in
the applicable period, or (2) in all other cases, in the
following Eligibility Computation Period or Plan Year.
E. Hours of Service will be credited for employment with other
members of an affiliated service group (under Section 414(m)
of the Code), a controlled group of corporations (under
Section 414(b) of the Code), or a group of trades or
businesses under common control (under Section 414(c) of the
Code) of which the adopting Employer is a member, and any
other entity required to be aggregated with the Employer
pursuant to Section 414(o) of the Code and the regulations
thereunder.
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Code
Sections 414(n) or 414(o) and the regulations thereunder.
F. Where the Employer maintains the plan of a predecessor
employer, service for such predecessor employer shall be
treated as service for the Employer.
G. The above method for determining Hours of Service may be
altered as specified in the Adoption Agreement.
1.21 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for
each Participant in accordance with Section 4.01.
1.22 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section
5.05.
1.23 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under
Section 10.08.
1.24 LEASED EMPLOYEE
Means any person (other than an Employee of the recipient) who
pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with Section 414(n)(6) of the Code) on a substantially
full time basis for a period of at least one year, and such
services are of a type historically performed by Employees in the
business field of the recipient Employer. Contributions or
benefits provided a Leased Employee by the leasing organization
which are attributable to services performed for the recipient
Employer shall be treated as provided by the recipient Employer.
A Leased Employee shall not be considered an Employee of the
recipient if: (1) such employee is covered by a money purchase
pension plan providing: (a) a nonintegrated employer contribution
rate of at least 10% of compensation, as defined in Section
415(c)(3) of the Code, but including amounts contributed pursuant
to a salary reduction agreement which are excludible from the
employee's gross income under Section 125, Section 402(a)(8),
Section 402(h) or Section 403(b) of the Code, (b) immediate
participation, and (c) full and immediate vesting; and (2) Leased
Employees do not constitute more than 20% of the recipient's
nonhighly compensated work force.
1.25 NORMAL RETIREMENT AGE
Means the age specified in the Adoption Agreement. However, if
the Employer enforces a mandatory retirement age which is less
than the Normal Retirement Age, such mandatory age is deemed to
be the Normal Retirement Age. If no age is specified in the
Adoption Agreement, the Normal Retirement Age shall be age
59 1/2.
1.26 OWNER-EMPLOYEE
Means an individual who is a sole proprietor, or who is a partner
owning more than 10% of either the capital or profits interest of
the partnership.
<PAGE>
1.27 PARTICIPANT
Means any Employee or former Employee of the Employer who has met
the Plan's eligibility requirements, has entered the Plan and who
is or may become eligible to receive a benefit of any type from
this Plan or whose Beneficiary may be eligible to receive any
such benefit.
1.28 PLAN
Means the prototype defined contribution plan adopted by the
Employer. The Plan consists of this Basic Plan Document plus the
corresponding Adoption Agreement as completed and signed by the
Employer.
1.29 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan
Administrator in accordance with Section 8.01.
1.30 PLAN YEAR
Means the 12 consecutive month period which coincides with the
Employer's tax year or such other 12 consecutive month period as
is designated in the Adoption Agreement.
1.31 PRIOR PLAN
Means a plan which was amended or replaced by adoption of this
Plan document, as indicated in the Adoption Agreement.
1.32 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement. Such entity
must meet the definition of a sponsoring organization set forth
in Section 3.07 of Revenue Procedure 89-9.
1.33 SELF-EMPLOYED INDIVIDUAL
Means an individual who has Earned Income for the taxable year
from the trade or business for which the Plan is established;
also, an individual who would have had Earned Income but for the
fact that the trade or business had no net profits for the
taxable year.
1.34 SEPARATE FUND
Means a subdivision of the Fund held in the name of a particular
Participant representing certain assets held for that
Participant. The assets which comprise a Participant's Separate
Fund are those assets earmarked for him and those assets subject
to the Participant's individual direction pursuant to Section
5.14.
1.35 TAXABLE WAGE BASE
Means, with respect to any taxable year, the maximum amount of
earnings which may be considered wages for such year under
Section 3121(a)(1) of the Code.
1.36 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer shall
occur whenever his status as an Employee of such Employer ceases
for any reason other than his death. An Employee who does not
return to work for the Employer on or before the expiration of an
authorized leave of absence from such Employer shall be deemed to
have incurred a Termination of Employment when such leave ends.
1.37 TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is
determined to be such pursuant to Section 10.08.
1.38 TRUSTEE
Means an individual, individuals or corporation specified in the
Adoption Agreement as Trustee or any duly appointed successor as
provided in Section 5.09. Trustee shall mean Custodian in the
event the financial organization named as Trustee does not have
full trust powers.
1.39 VALUATION DATE
Means the last day of the Plan Year and each other date
designated by the Plan Administrator which is selected in a
uniform and nondiscriminatory manner when the assets of the Fund
are valued at their then fair market value.
1.40 VESTED
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or
his Beneficiary to that part of an immediate or deferred benefit
under the Plan which arises from a Participant's Years of
Vesting Service.
1.41 YEAR OF ELIGIBILITY SERVICE
Means a 12-consecutive month period which coincides with an
Eligibility Computation period during which an Employee completes
at least 1,000 Hours of Service (or such lesser number of Hours
of Service specified in the Adoption Agreement for this purpose).
1.42 YEAR OF VESTING SERVICE
Means a Plan Year during which an Employee completes at least
1,000 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
In the case of a Participant who has 5 or more consecutive Breaks
in Vesting Service, all Years of Vesting Service after such
Breaks in Vesting Service will be disregarded for the purpose of
determining the Vested portion of his Individual Account derived
from Employer Contributions that accrued before such breaks. Such
Participant's prebreak service will count in vesting the
postbreak Individual Account derived from Employer Contributions
only if either:
(A) such Participant had any Vested right to any portion of
his Individual Account derived from Employer
Contributions at the time of his Termination of
Employment; or
(B) upon returning to service, the number of consecutive
Breaks in Vesting Service is less than his number of
Years of Vesting Service before such breaks.
Separate subaccounts will be maintained for the Participant's
prebreak and postbreak portions of his Individual Account derived
from Employer Contributions. Both subaccounts will share in the
gains and losses of the Fund.
<PAGE>
Years of Vesting Service shall not include any period of time
excluded from Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period,
Employees shall receive credit for Years of Vesting Service, in
accordance with the preceding provisions of this definition, for
each of the Plan Years (the old and new Plan Years) which overlap
as a result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 ELIGIBILITY TO PARTICIPATE
Each Employee of the Employer, except those Employees who belong
to a class of Employees which is excluded from participation as
indicated in the Adoption Agreement, shall be eligible to
participate in this Plan upon the satisfaction of the age and
Years of Eligibility Service requirements specified in the
Adoption Agreement.
2.02 PLAN ENTRY
A. If this Plan is a replacement of a Prior Plan by amendment or
restatement, each Employee of the Employer who was a
Participant in said Prior Plan before the Effective Date shall
continue to be a Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the
Effective Date if he has met the eligibility requirements of
Section 2.01 as of such date. After the Effective Date, each
Employee shall become a Participant on the first Entry Date
following the date the Employee satisfies the eligibility
requirements of Section 2.01.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall furnish
him with the application form, enrollment forms or other
documents which are required of Participants. The eligible
Employee shall execute such forms or documents and make
available such information as may be required in the
administration of the Plan.
2.03 TRANSFER TO OR FROM INELIGIBLE CLASS
If an Employee who had been a Participant becomes ineligible to
participate because he is no longer a member of an eligible
class of Employees, but has not incurred a Break in Eligibility
Service, such Employee shall participate immediately upon his
return to an eligible class of Employees. If such Employee incurs
a Break in Eligibility Service, his eligibility to participate
shall be determined by Section 2.04.
An Employee who is not a member of the eligible class of
Employees will become a Participant immediately upon becoming a
member of the eligible class provided such Employee has satisfied
the age and Years of Eligibility Service requirements. If such
Employee has not satisfied the age and Years of Eligibility
Service requirements as of the date he becomes a member of the
eligible class, he shall become a Participant on the first Entry
Date following the date he satisfies said requirements.
2.04 RETURN AS A PARTICIPANT AFTER BREAK IN ELIGIBILITY SERVICE
A. EMPLOYEE NOT PARTICIPANT BEFORE BREAK -- If an Employee incurs
a break in Eligibility Service before satisfying the Plan's
eligibility requirements, such Employee's Years of Eligibility
Service before such Break in Eligibility Service will not be
taken into account.
B. NONVESTED PARTICIPANTS -- In the case of a Participant who
does not have a Vested interest in his Individual Account
derived from Employer Contributions, Years of Eligibility
Service before a period of consecutive Breaks in Eligibility
Service will not be taken into account for eligibility
purposes if the number of consecutive Breaks in Eligibility
Service in such period equals or exceeds the greater of 5 or
the aggregate number of Years of Eligibility Service before
such break. Such aggregate number of Years of Eligibility
Service will not include an Years of Eligibility Service
disregarded under the preceding sentence by reason of prior
breaks.
If a Participant's Years of Eligibility Service are
disregarded pursuant to the preceding paragraph, such
Participant will be treated as a new Employee for eligibility
purposes. If a Participant's Years of Eligibility Service may
not be disregarded pursuant to the preceding paragraph, such
Participant shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment.
C. VESTED PARTICIPANTS -- A Participant who has sustained a Break
in Eligibility Service and who had a Vested interest in all or
a portion of his Individual Account derived from Employer
Contributions shall continue to participate in the Plan, or,
if terminated, shall participate immediately upon
reemployment.
2.05 DETERMINATIONS UNDER THIS SECTION
The Plan Administrator shall determine the eligibility of each
Employee to be a Participant. This determination shall be
conclusive and binding upon all persons except as otherwise
provided herein or by law.
2.06 TERMS OF EMPLOYMENT
Neither the fact of the establishment of the Plan nor the fact
that a common law Employee has become a Participant shall give to
that common law Employee any right to continued employment; nor
shall either fact limit the right of the Employer to discharge or
to deal with a common law Employee without regard to the effect
such treatment may have upon the Employee's rights under the
Plan.
SECTION THREE CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS
A. OBLIGATION TO CONTRIBUTE -- The Emmployer shall make
contributions to the Plan in accordance with the contribution
formula specified in the Adoption Agreement. If this Plan is a
profit sharing plan, the Employer shall, in its sole
discretion, make contributions without regard to current or
accumulated earnings or profits.
B. ALLOCATION FORMULA AND THE RIGHT TO SHARE IN THE EMPLOYER
CONTRIBUTION --
1. General -- The Employer Contribution for a Plan Year will
be allocated or contributed to the Individual Accounts of
qualifying Participants in accordance with the allocation
or contribution formula specified in the Adoption
Agreement. The Employer Contribution for any Plan Year will
be allocated to each Participant's Individual Account as of
the last day of that Plan Year.
<PAGE>
Any Employer Contribution for a Plan Year must satisfy
Section 401(a)(4) and the regulations thereunder for such
Plan Year.
2. Qualifying Participants -- A Participant is a qualifying
Participant and is entitled to share in the Employer
Contribution for any Plan Year if (l) he was a Participant
on at least one day during the Plan Year, (2) if this Plan
is a nonstandardized plan, he completes a Year of Vesting
Service during the Plan Year and (3) where the Employer has
selected the "last day requirement" in the Adoption
Agreement, he is an Employee of the Employer on the last
day of the Plan Year (except that this last requirement (3)
shall not apply if the Participant has died during the Plan
Year or incurred a Termination of Employment during the
Plan Year after having reached his Normal Retirement Age or
having incurred a Disability). Notwithstanding anything in
this paragraph to the contrary, a Participant will not be a
qualifying Participant for a Plan Year if he incurs a
Termination of Employment during such Plan Year with not
more than 500 Hours of Service if he is not an Employee on
the last day of the Plan Year. The determination of whether
a Participant is entitled to share in the Employer
Contribution shall be made as of the last day of each Plan
Year.
3. Special Rules for Integrated Plans -- If the Employer has
selected the integrated contribution or allocation formula
in the Adoption Agreement, then the maximum disparity rate
shall be determined in accordance with the following table.
<TABLE>
<CAPTION>
MAXIMUM DISPARITY RATE
Money Top-Heavy Nontop-Heavy
Integration Level Purchase Profit Sharing Profit Sharing
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more than X* 5.7% 2.7% 5.7%
More than X* of TWB but not more
than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but not
more than TWB 5.4% 2.4% 5.4%
*X means the greater of $10,000 or 20% of TWB.
</TABLE>
C. ALLOCATION OF FORFEITURES - Forfeitures for a Plan Year which
arise as a result of the application of Section 6.01(D) shall
be allocated as followers:
1. Profit Sharing Plan - If this is a profit sharing plan,
Forfeitures shall be allocated in the manner provided in
Section 3.01(B) (for Employer Contributions) to the
Individual Accounts of Participants who are entitled to
share in the Employer Contribution for such Plan Year.
2. Money, Purchase Pension and Target Benefit Plan - If this
Plan is a money purchase pension plan or a target benefit
plan, Forfeitures shall be applied towards the reduction of
Employer Contributions to the Plan. However, if the
Employer has indicated in the Adoption Agreement that
Forfeitures shall be allocated to the lndividual Accounts
of Participants' then Forfeitures shall be allocated in the
manner provided in Section 3.01(B) (for Employer
Contributions) to the Individual Accounts of Participants
who are entitled to share in the Employer Contributions for
such Plan Year.
D. TIMING OF EMPLOYER CONTRIBUTION - The employer Contribution
for each Plan Year shall be delivered to the Trustee (or
Custodian, if applicable) not later than the due date for
filing the Employer's income tax return for its fiscal year in
which the Plan Year ends, including extensions thereof.
E. MINIMUM ALLOCATION FOR TOP-HEAVY PLANS - The contribution and
allocation provisions of this Section 3.01(E) shall apply for
any Plan Year with respect to which this Plan is a Top-Heavy
Plan.
1. Except as otherwise provided in (3) and (4) below, the
Employer Contributions and Forfeitures allocated on behalf
of any Participant who is not a Key Emplovee shall not be
less than the lesser of 3% of such Participant's
Compensation or (in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy
Section 401 of the Code) the largest percentage of Employer
Contributions and Forfeitures, as a percentage of the first
$200,000 (increased by any cost of living adjustment made
by the Secretary of Treasury or his delegate) of the Key
Employee's Compensation, allocated on behalf of any Key
Employee for that year. The minimum allocation is
determined without regard to any Social Security
contribution. This minimum allocation shall be made even
though under other Plan provisions, the Participant would
not otherwise be entitled to receive an allocation, or
would have received a lesser allocation for the year
because of (a) the Participant's failure to complete 1,000
Hours of Service (or any equivalent provided in the Plan),
or (b) the Participant's failure to make mandatory Employee
Contributions to the Plan, or (c) Compensation less than a
stated amount.
2. For purposes of computing the minimum allocation,
Compensation shall mean Compensation as defined in Section
1.06 of the Plan.
3. The provision in (1) above shall not apply to any
Participant who was not employed by the Employer on the
last day of the Plan Year.
4. The provision in (1) above shall not apply to any
Participant to the extent the Participant is covered under
any other plan or plans of the Employer and the Employer
has provided in the Adoption Agreement that the minimum
allocation or benefit requirement applicable to Top-Heavy
Plans will be met in the other plan or plans.
5. The minimum allocation required under this Section 3.01(E)
and Section 3.01(F)(1) (to the extent required to be
nonforfeitable under Code Section 416(b)) may not be
forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D).
F. SPECIAL REQUIREMENTS FOR PAIRED PLANS - The Employer maintains
paired plans if the Employer has adopted both a standardized
profit sharing plan and a standardized money purchase pension
plan using this Basic Plan Document.
<PAGE>
1. Minimum Allocation - The mandatory minimum allocation
provision of Section 3.01(E) shall not apply to any
Participant if the Employer maintains paired plans. Rather,
for each Plan Year, the Employer will provide a minimum
contribution equal to 3% of Compensation for each non-Key
Employee who is entitled to a minimum contribution. Such
minimum contribution shall only be made to one of the
Plans. If an Employee is a Participant in only one of the
Plans, the minimum contribution shall be made to that Plan.
If the Employee is a Participant in both Plans, the minimum
contribution shall be made to the money purchase plan.
2. Only One Plan can be Integrated - If the Employer
maintains paired plans, only one of the Plans may provide
for the disparity in contributions which is permitted under
Section 401(l) of the Code. In the event that both Adoption
Agreements provide for such integration, only the money
purchase pension plan shall be deemed to be integrated.
G. RETURN OF THE EMPLOYER CONTRIBUTION TO THE EMPLOYER UNDER
SPECIAL CIRCUMSTANCES - Any contribution made by the Employer
because of a mistake of fact must be returned to the Employer
within one year of the contribution.
In the event that the Commissioner of Internal Revenue
determines that the Plan is not initially qualified under the
Code, any contributions made incident to that initial
qualification by the Employer must be returned to the Employer
within one year after the date the initial qualification is
denied, but only if the application for qualification is made
by the time prescribed by law for filing the Employer's return
for the taxable year in which the Plan is adopted, or such
later date as the Secretary of the Treasury may prescribe.
In the event that a contribution made by the Employer under
this Plan is conditioned on deductibility and is not
deductible under Code Section 404, the contribution, to the
extent of the amount disallowed, must be returned to the
Employer within one year after the deduction is disallowed.
H. OMISSION OF PARTICIPANT
1. If the Plan is a money purchase plan or a target benefit
plan and, if in any Plan Year, any Employee who should be
included as a Participant is erroneously omitted and
discovery of such omission is not made until after a
contribution by the Employer for the year has been made and
allocated, the Employer shall make a subsequent
contribution with respect to the omitted Employee in the
amount which the Employer would have contributed with
respect to that Employee had he not been omitted.
2. If the Plan is a profit sharing plan, and if in any Plan
Year, any Employee who should be included as a Participant
is erroneously omitted and discovery of such omission is
not made until after the Employer Contribution has been
made and allocated, then the Plan Administrator must re-do
the allocation (if a correction can be made) and inform the
Employee. Alternatively, the Employer may choose to
contribute for the omitted Employee the amount which the
Employer would have contributed for him.
3.02 EMPLOYEE CONTRIBUTIONS
This Plan will not accept nondeductible employee contributions
and matching contributions for Plan Years beginning after the
Plan Year in which this Plan is adopted by the Employer. Employee
contributions for Plan Years beginning after December 31, 1986,
together with any matching contributions as defined in Section
401(m) of the Code, will be limited so as to meet the
nondiscrimination test of Section 401(m) of the Code.
A separate account will be maintained by the Plan Administrator
for the nondeductible employee contributions of each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator, withdraw the lesser of the portion of his Indiv-
idual Account attributable to his nondeductible employee
contributions or the amount he contributed as nondeductible
employee contributions.
Employee contributions and earnings thereon shall be
nonforfeitable at all times. No Forfeiture will occur solely as a
result of an Employee's withdrawal of employee contributions.
The Plan Administrator will not accept deductible employee
contributions which are made for a taxable year beginning after
December 31, 1986. Contributions made prior to that date will be
maintained in a separate account which will be nonforfeitable at
all times. The account will share in the gains and losses of the
Fund in the same manner as described in Section 4.03 of the Plan.
No part of the deductible employee contribution account will be
used to purchase life insurance. Subject to Section 6.05, joint
and survivor annuity requirements (if applicable), the
Participant may withdraw any part of the deductible employee
contribution account by making a written application to the Plan
Administrator.
3.03 ROLLOVER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and
nondiscriminatory manner, an Employee may contribute a rollover
contribution to the Plan; provided that such Employee submits a
written certification, satisfactory to the Trustee (or
Custodian), that the contribution qualifies as a rollover
contribution.
A separate account shall be maintained by the Plan Administrator
for each Employee's rollover contributions which will be
nonforfeitable at all times. Such account will share in the
income and gains and losses of the Fund in the manner described
in Section 4.03 and shall be subject to the Plan's provisions
governing distributions.
For purposes of this Section 3.03, "rollover contribution" means
a contribution described in Sections 402(a)(5), 403(a)(4) or
408(d)(3) of the Code or in any other provision which may be
added to the Code which may authorize rollovers to the Plan.
3.04 TRANSFER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and
nondiscriminatory manner, the Trustee (or Custodian, if
applicable) may receive any amounts transferred to it from the
trustee or custodian of another plan qualified under Code
Section 401(a).
A separate account shall be maintained by the Plan Administrator
for each Employee's transfer contributions which will be
nonforfeitable at all times. Such account will share in the
income and gains and losses of the Fund in the manner described
in Section 4.03 and shall be subject to the Plan's provisions
governing distributions.
3.05 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the
Employer or a welfare benefit fund, as defined in Section
419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(l)(2) of
the Code, maintained by the Employer, which provides an annual
addition as defined in Section 305(E)(1), the following rules
shall apply:
<PAGE>
1. The amount of annual additions which may be credited to
the Participant's Individual Account for any limitation
year will not exceed the lesser of the maximum permissible
amount or any other limitation contained in this Plan. If
the Employer Contribution that would otherwise be
contributed or allocated to the Participant's Individual
Account would cause the annual additions for the
limitation year to exceed the maximum permissible amount,
the amount contributed or allocated will be reduced so that
the annual additions for the limitation year will equal the
maximum permissible amount.
2. Prior to determining the Participant's actual compensation
for the limitation year, the Employer may determine the
maximum permissible amount for a Participant on the basis
of a reasonable estimation of the Participant's
Compensation for the limitation year, uniformly determined
for all participants similarly situated.
3. As soon as is administratively feasible after the end of
the limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
4. If pursuant to Section 3.05(A)(3) or as a result of the
allocation of Forfeitures there is an excess amount, the
excess will be disposed of as follows:
a. Any nondeductible voluntary employee contributions, to
the extent they would reduce the excess amount, will be
returned to the Participant;
b. If after the application of paragraph (a) an excess
amount still exists, and the Participant is covered by
the Plan at the end of the limitation year, the excess
amount in the Participant's Individual Account will be
used to reduce Employer Contributions (including any
allocation of Forfeitures) for such Participant in the
next limitation year, and each succeeding limitation
year if necessary;
c. If after the application of paragraph (a) an excess
amount still exists, and the Participant is not covered
by the Plan at the end of a limitation year, the excess
amount will be held unallocated in a suspense account.
The suspense account will be applied to reduce future
Employer Contributions (including allocation of any
Forfeitures) for all remaining Participants in the next
limitation year, and each succeeding limitation year if
necessary;
d. If a suspense account is in existence at any time during
a limitation year pursuant to this Section, it will not
participate in the allocation of the Fund's investment
gains and losses. If a suspense account is in existence
at any time during a particular limitation year, all
amounts in the suspense account must be allocated and
reallocated to Participants' Individual Accounts before
any Employer Contributions or any Employee contributions
may be made to the Plan for that limitation year. Excess
amounts may not be distributed to Participants or former
Participants.
B. If, in addition to this Plan, the Participant is covered under
another qualified master or prototype defined contribution
plan maintained by the Employer, a welfare benefit fund as
defined in Section 419(e) of the Code maintained by the
Employer, or an Individual medical account, as defined in
Section 415(l)(2) of the Code, maintained by the Employer,
which provides an annual addition as defined in Section
3.05(E)(1), during any limitation year, the following rules
apply:
1. The annual additions which may be credited to a
Participant's Individual Account under this Plan for any
such limitation year will not exceed the maximum
permissible amount reduced by the annual additions credited
to a Participant's Individual Account under the other plans
and welfare benefit funds for the same limitation year. If
the annual additions with respect to the Participant under
other defined contribution plans and welfare benefit funds
maintained by the employer are less than the maximum
permissible amount and the Employer Contribution that would
otherwise be contributed or allocated to the Participant's
Individual Account under this Plan should cause the annual
additions for the limitation year to exceed this
limitation, the amount contributed or allocated will be
reduced so that the annual additions under all such plans
and funds for the limitation year will equal the maximum
permissible amount. If the annual additions with respect to
the Participant under such other defined contribution plans
and welfare benefit funds in the aggregate are equal to or
greater than the maximum permissible amount, no amount will
be contributed or allocated to the Participant's Individual
Account under this Plan for the limitation year.
2. Prior to determining the Participant's actual compensation
for the limitation year, the Employer may determine the
maximum permissible amount for a Participant in the manner
described in Section 3.05(A)(2).
3. As soon as is administratively feasible after the end of
the limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
4. If, pursuant to Section 3.05(B)(3) or as a result of the
allocation of Forfeitures, a Participant's annual additions
under this Plan and such other plans would result in an
excess amount for a limitation year, the excess amount will
be deemed to consist of the annual additions last
allocated, except that annual additions attributable to a
welfare benefit fund or individual medical account will be
deemed to have been allocated first regardless of the
actual allocation date.
5. If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an
allocation date of another plan, the excess amount
attributed to this Plan will be the product of,
a. the total excess amount allocated as of such date, times
b. the ratio of (i) the annual additions allocated to the
Participant for the limitation year as of such date
under this Plan to (ii) the total annual additions
allocated to the Participant for the limitation year as
of such date under this and all the other qualified
master or prototype defined contribution plans.
6. Any excess amount attributed to this Plan will be disposed
in the manner described in Sction 3.05(A)(4).
C. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a
master or prototype plan, annual additions which may be
credited to the Participant's Individual Account under this
Plan for any limitation year will be limited in accordance
with Sections 3.05(B)(1) through 3.05(B)(6) as though the
other plan were a master or prototype plan unless the Employer
provides other limitations in the Section of the Adoption
Agreement titled "Limitation on Allocation - More Than One
Plan."
<PAGE>
D. If the Employer maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in
this Plan, the sum of the Participant's defined benefit plan
fraction and defined contribution plan fraction will not
exceed 1.0 in any limitation year. The annual additions which
may be credited to the Participant's Individual Account under
this Plan for any limitation year will be limited in
accordance with the Section of the Adoption Agreement titled
"Limitation on Allocation - More Than One Plan."
E. The following terms shall have the following meanings when
used in this Section 3.05:
1. Annual additions: The sum of the following amounts credited
to a Participant's Individual Account for the limitation
year:
a. Employer Contributions,
b. Employee contributions,
c. Forfeitures, and
d. amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Section
415(l)(2) of the Code, which is part of a pension or
annuity plan maintained by the Employer are treated as
annual additions to a defined contribution plan. Also
amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such
date, which are attributable to post-retirement medical
benefits, allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code,
under a welfare benefit fund, as defined in Section
419(e) of the Code, maintained by the Employer are
treated as annual additions to a defined contribution
plan.
For this purpose, any excess amount applied under
Section 3.05(A)(4) or 3.05(B)(6) in the limitation year
to reduce Employer Contributions will be considered
annual additions for such limitation year.
2. Compensation: As elected by the Employer in the Adoption
Agreement (and if no election is made, Section 3401(a)
wages will be deemed to have been selected), Compensation
shall mean all of a Participant's:
a. Section 3121 wages. Wages as defined in Section 3121(a)
of the Code, for purposes of calculating Social Security
taxes, but determined without regard to the wage base
limitation in Section 3121(a)(1), the special rules in
Section 3121 (v), any rules that limit covered
employment based on the type or location of an
Employee's Employer, and any rules that limit the
remuneration included in wages based on familial
relationship or based on the nature or location of the
employment or the services performed (such as the
exceptions to the definition of employment in Section
3121(b)(1) through (20)).
b. Section 3401(a) wages. Wages as defined in Section
3401(a) of the Code, for the purposes of income tax
withholding at the source but determined without regard
to any rules that limit the remuneration included in
wages based on the nature or location of the employment
or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2)).
c. 415 safe-harbor compensation. Wages, salaries, and fees
for professional services and other amounts received
(without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the
course of employment with the Employer maintaining the
Plan to the extent that the amounts are includable in
gross income (including, but not limited to, commissions
paid salesmen, compensation for services on the basis of
a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances), and excluding
the following:
1. Employer contributions to a plan of deferred
compensation which are not includible in the
Employee's gross income for the taxable year in which
contributed, or employer contributions under a
simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
2. Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the Employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
3. Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
4. Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in Section 403(b) of
the Code (whether or not the amounts are actually
excludible from the gross income of the Employee).
For any Self-Employed Individual, Compensation will
mean Earned Income. For limitation years beginning
after December 31, 1991, for purposes of applying the
limitations of this Section 3.05, compensation for a
limitation year is the compensation actually paid or
includible in gross income during such limitation
year.
Notwithstanding the preceding sentence, compensation
for a Participant in a defined contribution plan who
is permanently and totally disabled (as defined in
Section 22(e)(3) of the Code) is the compensation
such Participant would have received for the
limitation year if the Participant had been paid at
the rate of compensation paid immediately before
becoming permanently and totally disabled; such
imputed compensation for the disabled participant may
be taken into account only if the Participant is not
a Highly Compensated Employee (as defined in Section
414(q) of the Code) and contributions made on behalf
of such Participant are nonforfeitable when made.
3. Defined benefit fraction: A fraction, the numerator of
which is the sum of the Participant's projected annual
benefits under all the defined benefit plans (whether or
not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125% of the dollar
limitation determined for the limitation year under Section
415(b) and (d) of the Code or 140% of the highest average
compensation, including any adjustments under Section
415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first limitation
year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the employer which were
in existence on May 6, 1986, the denominator of this
fraction will not be less than 125% of the sum of the
annual benefits under such plans which the participant had
accrued as of the close of the last limitation year
beginning
<PAGE>
before January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the
requirements of Section 415 of the Code for all limitation
years beginning before January 1, 1987.
4. Defined contribution dollar limitation: $30,000 or if
greater, one-fourth of the defined benefit dollar
limitation set forth in Section 415(b)(1) of the Code as in
effect for the limitation year.
5. Defined contribution fraction: A fraction, the numerator of
which is the sum of the annual additions to the
Participant's account under all the defined contribution
plans (whether or not terminated) maintained by the
Employer for the current and all prior limitation years
(including the annual additions attributable to the
Participant's nondeductible employee contributions to all
defined benefit plans, whether or not terminated,
maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in
Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(l)(2) of the Code,
maintained by the Employer) and the denominator of which
is the sum of the maximum aggregate amounts for the current
and all prior limitation years of service with the Employer
(regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate amount
in any limitation year is the lesser of 125% of the dollar
limitation determined under Section 415(b) and (d) of the
Code in effect under Section 415(c)(1)(A) of the Code or
35% of the Participant's compensation for such year.
If the Employee was a participant as of the end of the
first day of the first limitation year beginning after
December 31, 1986, in one or more defined contribution
plans maintained by the Employer which were in existence on
May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the defined
benefit fraction would otherwise exceed 1.0 under the terms
of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over
1.0 times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction.
The adjustment is calculated using the fractions as they
would be computed as of the end of the last limitation
year beginning before January 1, 1987, and disregarding
any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Section 415 limitation
applicable to the first limitation year beginning on or
after January 1, 1987.
The annual addition for any limitation year beginning
before January 1, 1987, shall not be recomputed to treat
all employee contributions as annual additions.
6. Employer: For purposes of this Section 3.05, Employer shall
mean the Employer that adopts this Plan, and all members of
a controlled group of corporations (as defined in Section
414(b) of the Code as modified by Section 415(h)), all
commonly controlled trades or businesses (as defined in
Section 414(c) as modified by Section 415(h)) or affiliated
service groups (as defined in Section 4l4(m)) of which the
adopting Employer is a part, and any other entity required
to be aggregated with the Employer pursuant to regulations
under Section 414(o) of the Code.
7. Excess amount: The excess of the Participant's annual
additions for the limitation year over the maximum
permissible amount.
8. Highest average compensation: The average compensation for
the three consecutive years of service with the Employer
that produces the highest average.
9. Limitation year: A calendar year, or the 12-consecutive
month period elected by the Employer in the Section of the
Adoption Agreement titled "Limitation on Allocation - More
Than One Plan." All qualified plans maintained by the
Employer must use the same limitation year. If the
limitation year is amended to a different 12-consecutive
month period, the new limitation year must begin on a date
within the limitation year in which the amendment is made.
10. Master or prototype plan: A plan the form of which is the
subject of a favorable opinion letter from the Internal
Revenue Service.
11. Maximum permissible amount: The maximum annual addition
that may be contributed or allocated to a Participant's
Individual Account under the Plan for any limitation year
shall not exceed the lesser of:
a. the defined contribution dollar limitation, or
b. 25%, of the Participant's compensation for the
limitation year.
The compensation limitation referred to in (b) shall not
apply to any contribution for medical benefits (within
the meaning of Section 401(h) or Section 419A(f)(2) of
the Code) which is otherwise treated as an annual
addition under Section 415(l)(1) or 419A(d)(2) of the
Code.
If a short limitation year is created because of an
amendment changing the limitation year to a different
12-consecutive month period, the maximum permissible
amount will not exceed the defined contribution dollar
limitation multiplied by the following fraction:
Number of months in the short limitation year
_____________________________________________
12
12. Projected annual benefit: The annual retirement benefit
(adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed in a form other than a
straight life annuity or qualified joint and survivor
annuity) to which the Participant would be entitled under
the terms of the Plan assuming:
a. the Participant will continue employment until normal
retirement age under the Plan (or current age, if
later), and
b. the Participant's compensation for the current
limitation year and all other relevant factors used to
determine benefits under the Plan will remain constant
for all future limitation years.
<PAGE>
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 INDIVIDUAL ACCOUNTS
A. The Plan Administrator shall establish and maintain an
individual Account in the name of each Participant to reflect
the total value of his interest in the Fund. Each Individual
Account established hereunder shall consist of such
subaccounts as may be needed for each Participant including:
1. a subaccount to reflect Employer Contributions and
Forfeitures allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover
contributions;
3. a subaccount to reflect a Participant's transfer
contributions;
4. a subaccount to reflect a Participant's nondeductible
employee contributions; and
5. a subaccount to reflect a Participant's deductible
employee contributions.
Such subaccounts are primarily for accounting purposes, and do
not necessarily require a segregation of the Fund.
B. The Plan Administrator may establish additional accounts as it
may deem necessary for the proper administration of the Plan,
including, but not limited to, a suspense account for
Forfeitures as required pursuant to Section 6.01(D).
4.02 VALUATION OF FUND
The Fund will be valued each Valuation Date at fair market value.
4.03 VALUATION OF INDIVIDUAL ACCOUNTS
A. Where all or a portion of the assets of a Participant's
Individual Account are invested in a Separate Fund for the
Participant, then the value of that portion of such
Participant's Individual Account at any relevant time equals
the sum of the fair market values of the assets in such
Separate Fund, less any applicable charges or penalties.
B. The fair market value of the remainder of each Individual
Account is determined in the following manner:
1. First, the portion of the Individual Account invested in
each Investment Fund as of the previous Valuation Date is
determined. Each such portion is reduced by any withdrawal
made from the applicable Investment Fund to or for the
benefit of a Participant or his Beneficiary, further
reduced by any amounts forfeited by the Participant
pursuant to Section 6.01(D) and further reduced by any
transfer to another Investment Fund since the previous
Valuation Date and is increased by any amount transferred
from another Investment Fund since the previous Valuation
Date. The resulting amounts are the net Individual Account
portions invested in the Investment Funds.
2. Secondly, the net Individual Account portions invested in
each Investment Fund are adjusted upwards or downwards,
pro rata (i.e., ratio of each net Individual Account
portion to the sum of all net Individual Account portions)
so that the sum of all the net Individual Account portions
invested in an Investment Fund will equal the then fair
market value of the Investment Fund. Notwithstanding the
previous sentence, for the first Plan Year only, the net
Individual Account portions shall be the sum of all
contributions made to each Participant's Individual
Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and Forfeitures are
allocated in accordance with the appropriate allocation
provisions of Section 3. For purposes of Section 4,
contributions made by the Employer for any Plan Year but
after that Plan Year will be considered to have been made
on the last day of that Plan Year regardless of when paid
to the Trustee (or Custodian, if applicable).
Amounts contributed between Valuation Dates will not be
credited with investment gains or losses until the next
following Valuation Date.
4. Finally, the portions of the Individual Account invested
in each Investment Fund (determined in accordance with
(1), (2) and (3) above) are added together.
4.04 SEGREGATION OF ASSETS
If a Participant elects a mode of distribution other than a lump
sum, the Plan Administrator may place that Participant's account
balance into a segregated Investment Fund for the purpose of
maintaining the necessary liquidity to provide benefit
installments on a periodic basis.
4.05 STATEMENT OF INDIVIDUAL ACCOUNTS
No later than 270 days after the close of each Plan Year, the
Plan Administrator shall furnish a statement to each Participant
indicating the Individual Account balances of such Participant as
of the last Valuation Date in such Plan Year.
4.06 MODIFICATION OF METHOD FOR VALUING INDIVIDUAL ACCOUNTS
If necessary or appropriate, the Plan Administrator may establish
different or additional procedures (which shall be uniform and
nondiscriminatory) for determining the fair market value of the
Individual Accounts.
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 CREATION OF FUND
By adopting this Plan, the Employer establishes the Fund which
shall consist of the assets of the Plan held by the Trustee (or
Custodian, if applicable) pursuant to this Section 5. Assets
within the Fund may be pooled on behalf of all Participants,
earmarked on behalf of each Participant or be a combination of
pooled and earmarked. To the extent that assets are earmarked for
a particular Participant, they will be held in a Separate Fund
for that Participant.
No part of the corpus or income of the Fund may be used for, or
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries.
5.02 INVESTMENT AUTHORITY
Except as provided in Section 5.14 (relating to individual
direction of investments by Participants), the Employer, not the
<PAGE>
Trustee (or Custodian, if applicable), shall have exclusive
management and control over the investment of the Fund into any
permitted investment. Notwithstanding the preceding sentence, a
Trustee with full trust powers (under applicable law) may make an
agreement with the Employer whereby the Trustee will manage the
investment of all or a portion of the Fund. Any such agreement
shall be in writing and set forth such matters as the Trustee
deems necessary or desirable.
5.03 FINANCIAL ORGANIZATION CUSTODIAN OR TRUSTEE WITHOUT FULL TRUST
POWERS
This Section 5.03 applies where a financial organization has
indicated in the Adoption Agreement that it will serve, with
respect to this Plan, as Custodian or as Trustee without full
trust powers (under applicable law). Hereinafter, a financial
organization Trustee without full trust powers (under applicable
law) shall be referred to as a Custodian.
A. PERMISSIBLE INVESTMENTS - The assets of the Plan shall be
invested only in those investments which are available through
the Custodian in the ordinary course of business which the
Custodian may legally hold in a qualified plan and which the
Custodian chooses to make available to Employers for qualified
plan investments.
B. RESPONSIBILITIES OF THE CUSTODIAN - The responsibilities of
the Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and
reinvest the Fund without distinction between principal
and interest; provided, however, that nothing in this Plan
shall require the Custodian to maintain physical custody
of stock certificates (or other indicia of ownership of
any type of asset) representing assets within the Fund;
2. To maintain accurate records of contributions, earnings,
withdrawals and other information the Custodian deems
relevant with respect to the Plan;
3. To make disbursements from the Fund to Participants or
Beneficiaries upon the proper authorization of the Plan
Administrator; and
4. To furnish to the Plan Administrator a statement which
reflects the value of the investments in the hands of the
Custodian as of the end of each Plan Year.
C. POWERS OF THE CUSTODIAN - Except as otherwise provided in this
Plan, the Custodian shall have the power to take any action
with respect to the Fund which it deems necessary or advisable
to discharge its responsibilities under this Plan including,
but not limited to, the following powers:
1. To invest all or a portion of the Fund (including idle
cash balances) in time deposits, savings accounts, money
market accounts or similar investments bearing a
reasonable rate of interest in the Custodian's own savings
department or the savings department of another financial
organization;
2. To vote upon any stocks, bonds, or other securities; to
give general or special proxies or powers of attorney with
or without power of substitution; to exercise any
conversion privileges or subscription rights and to make
any payments incidental thereto; to oppose, or to consent
to, or otherwise participate in, corporate reorganizations
or other changes affecting corporate securities, and to
pay any assessments or charges in connection therewith;
and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other
property;
3. To hold securities or other property of the Fund in its
own name, in the name of its nominee or in bearer form;
and
4. To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry
out the powers herein granted.
5.04 FINANCIAL ORGANIZATION TRUSTEE WITH FULL TRUST POWERS AND
INDIVIDUAL TRUSTEE
This Section 5.04 applies where a financial organization has
indicated in the Adoption Agreement that it will serve as Trustee
with full trust powers. This Section also applies where one or
more individuals are named in the Adoption Agreement to serve as
Trustee(s).
A. PERMISSIBLE INVESTMENTS - The Trustee may invest the assets of
the Plan in property of any character, real or personal,
including, but not limited to the following: stocks, including
shares of open-end investment companies (mutual funds); bonds;
notes; debentures; options; limited partnership interests;
mortgages; real estate or any interests therein; unit
investment trusts; Treasury Bills, and other U.S. Government
obligations; common trust funds, combined investment trusts,
collective trust funds or commingled funds maintained by a
bank or similar financial organization (whether or not the
Trustee hereunder); savings accounts, time deposits or money
market accounts of a bank or similar financial organization
(whether or not the Trustee hereunder); annuity contracts;
life insurance policies; or in such other investments as is
deemed proper without regard to investments authorized by
statute or rule of law governing the investment of trust funds
but with regard to ERISA and this Plan.
Notwithstanding the preceding sentence, the Prototype Sponsor
may, as a condition of making the Plan available to the
Employer for adoption, limit the types of property in which
the Trustee (other than a financial organization Trustee with
full trust powers), is permitted to invest.
B. RESPONSIBILITIES OF THE TRUSTEE - The responsibilities of the
Trustee shall be limited to the following:
1. To receive Plan contributions and to hold, invest and
reinvest the Fund without distinction between principal
and interest; provided, however, that nothing in this Plan
shall require the Trustee to maintain physical custody of
stock certificates (or other indicia of ownership)
representing assets within the Fund;
2. To maintain accurate records of contributions, earnings,
withdrawals and other information the Trustee deems
relevant with respect to the Plan;
3. To make disbursements from the Fund to Participants or
Beneficiaries upon the proper authorization of the Plan
Administrator; and
4. To furnish to the Plan Administrator a statement which
reflects the value of the investments in the hands of the
Trustee as of the end of each Plan Year.
C. POWERS OF THE TRUSTEE - Except as otherwise provided in this
Plan, the Trustee shall have the power to take any action with
respect to the Fund which it deems necessary or advisable to
discharge its responsibilities under this Plan including, but
not limited to, the following powers:
<PAGE>
l. To hold any securities or other property of the Fund in
its own name, in the name of its nominee or in bearer
form;
2. To purchase or subscribe for securities issued, or real
property owned, by the Employer or any trade or business
under common control with the Employer but only if the
prudent investment and diversification requirements of
ERISA are satisfied;
3. To sell, exchange, convey, transfer or otherwise dispose
of any securities or other property held by the Trustee,
by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the
validity, expediency, or propriety of any such sale or
other disposition, with or without advertisement;
4. To vote upon any stocks, bonds, or other securities; to
give general or special proxies or powers of attorney with
or without power of substitution; to exercise any
conversion privileges or subscription rights and to make
any payments incidental thereto; to oppose, or to consent
to, or otherwise participate in, corporate reorganizations
or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments
or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to
stocks, bonds, securities or other property;
5. To invest any part or all of the Fund (including idle cash
balances) in certificates of deposit, demand or time
deposits, savings accounts, money market accounts or
similar investments of the Trustee (if the Trustee is a
bank or similar financial organization), the Prototype
Sponsor or any affiliate of such Trustee or Prototype
Sponsor, which bear a reasonable rate of interest;
6. To provide sweep services without the receipt by the
Trustee of additional compensation or other consideration
(other than reimbursement of direct expenses properly and
actually incurred in the performance of such services);
7. To hold in the form of cash for distribution or investment
such portion of the Fund as, at any time and from
time-to-time, the Trustee shall deem prudent and deposit
such cash in interest bearing or noninterest bearing
accounts;
8. To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry
out the powers herein granted;
9. To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the
Plan, to commence or defend suits or legal or
administrative proceedings, and to represent the Plan in
all suits and legal and administrative proceedings;
10. To employ suitable agents and counsel, to contract with
agents to perform administrative and recordkeeping duties
and to pay their reasonable expenses, fees and
compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
11. To cause any part or all of the Fund, without limitation
as to amount, to be commingled with the funds of other
trusts (including trusts for qualified employee benefit
plans) by causing such money to be invested as a part of
any pooled, common, collective or commingled trust fund
heretofore or hereafter created by any trustee (if the
Trustee is a bank), by the Prototype Sponsor, by any
affiliate bank of such a Trustee or the Prototype Sponsor,
or by such a Trustee, the Prototype Sponsor or such an
affiliate in participation with others; the instrument or
instruments establishing such trust fund or funds, as
amended, being made part of this Plan and trust so long as
any portion of the Fund shall be invested through the
medium thereof.
12. Generally to do all such acts, execute all such
instruments, initiate all such proceedings, and exercise
all such rights and privileges with relation to property
constituting the Fund as if the Trustee were the absolute
owner thereof.
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee (or Custodian, if applicable)
from time-to-time to divide and redivide the Fund into one or
more Investment Funds. Such Investment Funds may include, but not
be limited to, Investment Funds representing the assets under the
control of an investment manager pursuant to Section 5.12 and
Investment Funds representing investment options available for
individual direction by Participants pursuant to Section 5.14.
Upon each division or redivision, the Employer may specify the
part of the Fund to be allocated to each such Investment Fund and
the terms and conditions, if any, under which the assets in such
Investment Fund shall be invested.
5.06 COMPENSATION AND EXPENSES
The Trustee (or Custodian, if applicable) shall receive such
reasonable compensation as may be agreed upon by the Trustee (or
Custodian) and the Employer. The Trustee (or Custodian) shall be
entitled to reimbursement by the Employer for all proper expenses
incurred in carrying out his duties under this Plan, including
reasonable legal, accounting and actuarial expenses. If not paid
by the Employer, such compensation and expenses may be charged
against the Fund.
All taxes of any kind that may be levied or assessed under
existing or future laws upon, or in respect of, the Fund or the
income thereof shall be paid from the Fund.
5.07 NOT OBLIGATED TO QUESTION DATA
The Employer shall furnish the Trustee (or Custodian, if
applicable) and Plan Administrator the information which each
party deems necessary for the administration of the Plan
including, but not limited to, changes in a Participant's status,
eligibility, mailing addresses and other such data as may be
required. The Trustee (or Custodian) and Plan Administrator shall
be entitled to act on such information as is supplied them and
shall have no duty or responsibility to further verify or
question such information.
5.08 LIABILITY FOR WITHHOLDING ON DISTRIBUTIONS
The Plan Administrator shall be responsible for withholding
federal income taxes from distributions from the Plan, unless the
Participant (or Beneficiary, where applicable) elects not to have
such taxes withheld. However, the Trustee (or Custodian, if
applicable) shall act as agent for the Plan Administrator to
withhold such taxes and to make the appropriate distribution
reports, subject to the Plan Administrator's obligation to
furnish all the necessary information to so withhold to the
Trustee (or Custodian).
5.09 RESIGNATION OR REMOVAL OF TRUSTEE (OR CUSTODIAN)
The Trustee (or Custodian, if applicable) may resign at any time
by giving 30 days advance written notice to the Employer. The
resignation shall become effective 30 days after receipt of such
notice unless a shorter period is agreed upon.
<PAGE>
The Employer may remove any Trustee (or Custodian) at any time by
giving written notice to such Trustee (or Custodian) and such
removal shall be effective 30 days after receipt of such notice
unless a shorter period is agreed upon. The Employer shall have
the power to appoint a successor Trustee (or Custodian).
Upon such resignation or removal, if the resigning or removed
Trustee (or Custodian) is the sole Trustee (or Custodian), he
shall transfer all of the assets of the Fund then held by him as
expeditiously as possible to the successor Trustee (or
Custodian) after paying or reserving such reasonable amount as
he shall deem necessary to provide for the expense in the
settlement of the accounts and the amount of any compensation due
him and any sums chargeable against the Fund for which he may be
liable. If the Funds as reserved are not sufficient for such
purpose, then he shall be entitled to reimbursement from the
successor Trustee (or Custodian) out of the assets in the
successor Trustee's (or Custodian's) hands under this Plan. If
the amount reserved shall be in excess of the amount actually
needed, the former Trustee (or Custodian) shall return such
excess to the successor Trustee (or Custodian).
Upon receipt of such assets, the successor Trustee (or Custodian)
shall thereupon succeed to all of the powers and responsibilities
given to the Trustee (or Custodian) by this Plan.
The resigning or removed Trustee (or Custodian) shall render an
accounting to the Employer and unless objected to by the
Employer within 30 days of its receipt, the accounting shall
be deemed to have been approved and the resigning or removed
Trustee (or Custodian) shall be released and discharged as to all
matters set forth in the accounting. Where a financial
organization is serving as Trustee (or Custodian) and it is
merged with or bought by another organization (or comes under
the control of any federal or state agency), that organization
shall serve as the successor Trustee (or Custodian) of this Plan,
but only if it is the type of organization that can so serve
under applicable law.
Where the Trustee or Custodian is serving as a nonbank trustee or
custodian pursuant to Section 1.401-12(n) of the Income Tax
Regulations, the Employer will appoint a successor Trustee (or
Custodian) upon notification by the Commissioner of Internal
Revenue that such substitution is required because the Trustee
(or Custodian) has failed to comply with the requirements of
Section 1.401-12(n) or is not keeping such records or making such
returns or rendering such statements as are required by forms or
regulations.
5.10 DEGREE OF CARE
Limitations of Liability - The Trustee (or Custodian, if
applicable) shall not be liable for any losses incurred by the
Fund by any lawful direction to invest communicated by the
Employer, Plan Administrator or any Participant or Beneficiary.
The Trustee (or Custodian) shall be under no liability for
distributions made or other action taken or not taken at the
written direction of the Plan Administrator. It is specifically
understood that the Trustee (or Custodian) shall have no duty or
responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a
Participant or remain a Participant hereunder, the amount of
benefit to which a Participant or Beneficiary shall be entitled
to receive hereunder, whether a distribution to Participant or
Beneficiary is appropriate under the terms of the Plan or the
size and type of any policy to be purchased from any insurer for
any Participant hereunder or similar matters; it being understood
that all such responsibilities under the Plan are vested in the
Plan Administrator.
5.11 INDEMNIFICATION OF PROTOTYPE SPONSOR AND TRUSTEE (OR CUSTODIAN)
Notwithstanding any other provision herein, and except as may
be otherwise provided by ERISA, the Employer shall indemnify and
hold harmless the Trustee (or Custodian, if applicable) and the
Prototype Sponsor, their officers, directors, employees, agents,
their heirs, executors, successors and assigns, from and against
any and all liabilities, damages, judgments, settlements, losses,
costs, charges, or expenses (including legal expenses) at any
time arising out of or incurred in connection with any action
taken by such parties in the performance of their duties with
respect to this Plan, unless there has been a final adjudication
of gross negligence or willful misconduct in the performance of
such duties.
Further, except as may be otherwise provided by ERISA, the
Employer will indemnify the Trustee (or Custodian) and
Prototype Sponsor from any liability, claim or expense
(including legal expense) which the Trustee (or Custodian) and
Prototype Sponsor shall incur by reason of or which results, in
whole or in part, from the Trustee's (or Custodian's) or
Prototype Sponsor's reliance on the facts and other directions
and elections the Employer communicates or fails to
communicate.
5.12 INVESTMENT MANAGERS
A. DEFINITION OF INVESTMENT MANAGER - The Employer may appoint
one or more investment managers to make investment
decisions with respect to all or a portion of the Fund. The
investment manager shall be any firm or individual registered
as an investment adviser under the Investment Advisers Act of
1940, a bank as defined in said Act or an insurance company
qualified under the laws of more than one state to perform
services consisting of the management, acquisition or
disposition of any assets of the Plan.
B. INVESTMENT MANAGER'S AUTHORITY - A separate Investment Fund
shall be established representing the assets of the Fund
invested at the direction of the investment manager. The
investment manager so appointed shall direct the Trustee (or
Custodian, if applicable) with respect to the investment of
such Investment Fund. The investments which may be acquired
at the direction of the investment manager are limited to
those described in Section 5.03(A) (for Custodians) or Section
5.04(A) (for Trustees).
C. WRITTEN AGREEMENT - The appointment of any investment manager
shall be by written agreement between the Employer and the
investment manager and a copy of such agreement (and any
modification or termination thereof) must be given to the
Trustee (or Custodian).
The agreement shall set forth, among other matters, the
effective date of the investment manager's appointment and an
acknowledgment by the investment manager that it is a
fiduciary of the Plan under ERISA.
D. CONCERNING THE TRUSTEE (OR CUSTODIAN) - Written notice of each
appointment of an investment manager shall be given to the
Trustee (or Custodian) in advance of the effective date of
such appointment. Such notice shall specify which portion of
the Fund will constitute the Investment Fund subject to the
investment manager's direction. The Trustee (or Custodian)
shall comply with the investment direction given to it by the
investment manager and will not be liable for any loss
which may result by reason of any action (or inaction) it
takes at the direction of the investment manager.
5.13 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a
Participant, the aggregate premium for certain life insurance
for each Participant must be less than a certain percentage of
the aggregate Employer Contributions and Forfeitures allocated
to Participant's Individual Account at any particular time
as follows:
<PAGE>
1. Ordinary Life Insurance - For purposes of these
incidental insurance provisions, ordinary life insurance
contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums. If such contracts are
purchased less than 50% of the aggregate Employer
Contributions and Forfeitures allocated to any
Participant's Individual Account will be used to pay the
premiums attributable to them.
2. Term and Universal Life Insurance - No more than 25% of
the aggregate Employer Contributions and Forfeitures
allocated to any Participant's Individual Account will be
used to pay the premiums on term life insurance contracts,
universal life insurance contracts, and all other life
insurance contracts which are not ordinary life.
3. Combination - The sum of 50% of the ordinary life
insurance premiums and all other life insurance premiums
will not exceed 25% of the aggregate Employer
Contributions and Forfeitures allocated to any
Participant's Individual Account.
B. Any dividends or credits earned on insurance contracts for a
Participant shall be allocated to such Participant's
Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's life
will be converted to cash or an annuity or distributed to the
Participant upon commencement of benefits.
D. The Trustee (or Custodian if applicable) shall apply for and
will be the owner of any insurance contract(s) purchased under
the terms of this Plan. The insurance contract(s) must provide
that proceeds will be payable to the Trustee (or Custodian),
however, the Trustee (or Custodian) shall be required to pay
over all proceeds of the contract(s) to the Participant's
designated Beneficiary in accordance with the distribution
provisions of this Plan. A Participant's spouse will be the
designated Beneficiary of the proceeds in all circumstances
unless a qualified election has been made in accordance with
Section 6.05, Joint and Survivor Annuity Requirements, if
applicable. Under no circumstances shall the Fund retain any
part of the proceeds. In the event of any conflict between the
terms of this Plan and the terms of any insurance contract
purchased hereunder, the Plan provisions shall control.
E. The Employer may direct the Trustee (or Custodian) to sell and
distribute insurance or annuity contracts to a Participant (or
other party as may be permitted) in accordance with applicable
law or regulations.
5.14 DIRECTION OF INVESTMENTS BY PARTICIPANT
If so indicated in the Adoption Agreement, each Participant may
individually direct the Trustee (or Custodian, if applicable)
regarding the investment of part or all of his Individual
Account. To the extent so directed, the Employer Plan
Administrator, Trustee (or Custodian) and all other fiduciaries
are relieved of their fiduciary responsibility under Section 404
of ERISA.
The Plan Administrator shall direct that a Separate Fund be
established in the name of each Participant who directs the
investment of part or all of his Individual Account. Each
Separate Fund shall be charged or credited (as appropriate) with
the earnings, gains, losses or expenses attributable to such
Separate Fund. No fiduciary shall be liable for any loss which
results from a Participant's individual direction. The assets
subject to individual direction shall not be invested in
collectibles as that term is defined in Section 408(m) of the
Code.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules relating to individual direction as it
deems necessary or advisable including, but not limited to, rules
describing (1) which portions of Participant's Individual Account
can be individually directed; (2) the frequency of investment
changes; (3) the forms and procedures for making investment
changes; and (4) the effect of a Participant's failure to make a
valid direction.
Subject to the approval of the Prototype Sponsor, the Plan
Administrator may, in a uniform and nondiscriminatory manner,
limit the available investments for Participants' individual
direction to certain specified investment options (including, but
not limited to, certain mutual funds, investment contracts,
deposit accounts and group trusts). The Plan Administrator may
permit, in a uniform and nondiscriminatory manner, a Beneficiary
of a deceased Participant to individually direct in accordance
with this Section.
SECTION SIX VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. WHEN DISTRIBUTABLE
1. Entitlement to Distribution - The Vested portion of a
Participant's Individual Account shall be distributable to
the Participant upon the occurrence of any of the
following events:
a. the Participant's Termination of Employment;
b. the Participant's attainment of Normal Retirement Age;
c. the Participant's Disability; or
d. the termination of the Plan.
2. Written Request: When Distributed - A Participant entitled
to distribution who wishes to receive a distribution must
submit a written request to the Plan Administrator. Such
request shall be made upon a form provided by the Plan
Administrator. Upon a valid request, the Plan
Administrator shall direct the Trustee (or Custodian,
if applicable) to commence distribution no later than 90
days following the later of:
a. the close of the Plan Year within which the event
occurs which entitles the Participant to distribution;
or
b. the close of the Plan Year in which the request is
received.
3. Special Rules For Withdrawals During Service - If this is
a profit sharing plan and the Adoption Agreement so
provides a Participant who is not otherwise entitled to a
distribution under Section 6.01(A)(1) may elect to receive
a distribution of all or a part of the Vested portion of
his Individual Account, subject to the requirements of
Section 6.05 and further subject to the following limits:
<PAGE>
a. Participant for 5 or more years. An Employee who has
been a Participant in the Plan for 5 or more years may
withdraw up to his entire Vested portion of his
Individual Account.
b. Participant for less than 5 years. An Employee who has
been a Participant in the Plan for less than 5 years
may withdraw only the amount which has been in his
Vested Individual Account attributable to Employer
Contributions for at least 2 full Plan Years.
However, if the distribution is on account of
hardship, the Participant may withdraw up to his
entire Vested portion of his Individual Account. For
purposes of the preceding sentence, hardship is
defined as an immediate and heavy financial need of
the Participant where such Participant lacks other
available resources. The following are the only
financial needs considered immediate and heavy:
expenses incurred or necessary for medical care,
described in Section 213(d) of the Code, of the
Employee, the Employee's spouse or dependents; the
purchase (excluding mortgage payments) of a principal
residence for the Employee; payment of tuition and
related educational fees for the next 12 months of
post-secondary education for the Employee, the
Employee's spouse, children or dependents; or the need
to prevent the eviction of the Employee from, or a
foreclosure on the mortgage of, the Employee's
principal residence.
A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the
Employee only if:
1) The employee has obtained all distributions, other
than hardship distributions, and all nontaxable
loans under all plans maintained by the Employer;
2) The distribution is not in excess of the amount of
an immediate and heavy financial need (including
amounts necessary to pay any federal, state or
local income taxes or penalties reasonably
anticipated to result from the distribution).
4. Commencement of Benefits - Notwithstanding any other
provision, unless the Participant elects otherwise,
distribution of benefits will begin no later than the 60th
day after the latest of the close of the Plan Year in
which:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or
c. the Participant incurs a Termination of Employment.
Notwithstanding the foregoing, the failure of a
Participant and spouse to consent to a distribution
while a benefit is immediately distributable, within
the meaning of Section 6.02(B), shall be deemed to be
an election to defer commencement of payment of any
benefit sufficient to satisfy this Section 6.01(A)(4).
B. DETERMINING THE VESTED PORTION - In determining the Vested
portion of a Participant's Individual Account, the following
rules apply:
1. Employer Contributions and Forfeitures - The Vested
portion of a Participant's Individual Account derived from
Employer Contributions and Forfeitures is determined by
applying the vesting schedule selected in the Adoption
Agreement (or the vesting schedule described in Section
6.01(C) if the Plan is a Top-Heavy Plan).
2. Rollover and Transfer Contributions - A Participant is
fully Vested in his rollover contributions and transfer
contributions.
3. Fully Vested Under Certain Circumstances - A Participant
is fully Vested in his Individual Account if any of the
following occurs:
a. the Participant reaches Normal Retirement Age;
b. the Participant incurs a Disability;
c. the Participant dies;
d. the Plan is terminated or partially terminated; or
e. there exists a complete discontinuance of
contributions under the Plan (if this Plan is a profit
sharing plan).
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date, his
Vested percentage shall not be less than it would have
been under such Prior Plan as computed on the Effective
Date.
C. MINIMUM VESTING SCHEDULE FOR TOP-HEAVY PLANS - The following
vesting provisions apply for any Plan Year in which this Plan
is a Top-Heavy Plan.
Notwithstanding the other provisions of this Section 6.01 or
the vesting schedule selected in the Adoption Agreement
(unless those provisions or that schedule provide for more
rapid vesting), a Participant's Vested portion of his Individ-
ual Account attributable to Employer Contributions and
Forfeitures shall be determined in accordance with the
following minimum vesting schedule:
YEARS OF VESTING SERVICE VESTED PERCENTAGE
1 0
2 20
3 40
4 60
5 80
6 100
<PAGE>
This minimum vesting schedule applies to all benefits within
the meaning of Section 411(a)(7) of the Code, except those
attributable to employee contributions including benefits
accrued before the effective date of Section 416 of the Code
and benefits accrued before the Plan became a Top-Heavy Plan.
Further, no decrease in a Participant's Vested percentage may
occur in the event the Plan's status as a Top-Heavy Plan
changes for any Plan Year. However, this Section 6.01(C) does
not apply to the Individual Account of any Employee who does
not have an Hour of Service after the Plan has initially
become a Top-Heavy Plan and such Employee's Individual Account
attributable to Employer Contributions and Forfeitures will be
determined without regard to this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance
with the above restrictions, the vesting schedule as selected
in the Adoption Agreement will govern. If the vesting schedule
under the Plan shifts in or out of top-heavy status, such
shift is an amendment to the vesting schedule and the election
in Section 9.04 applies.
D. BREAK IN VESTING SERVICE AND FORFEITURES - If a Participant
incurs a Termination of Employment, any portion of his
Individual Account which is not Vested shall be held in a
suspense account. Such suspense account shall share in any
increase or decrease in the fair market value of the assets of
the Fund in accordance with Section 4 of the Plan. The
disposition of such suspense account shall be as follows:
1. No Breaks in Vesting Service - If a Participant neither
receives nor is deemed to receive a distribution pursuant
to Section 6.01(D)(2) or (3) and the Participant returns
to the service of the Employer before incurring 5
consecutive Breaks in Vesting Service, there shall be no
Forfeiture and the amount in such suspense account shall
be recredited to such Participant's Individual Account.
2. Cash-out of Certain Participants - If the value of the
Vested portion of such Participant's Individual Account
derived from Employee and Employer Contributions does not
exceed $3,500, the Participant shall receive a
distribution of the entire Vested portion of such
Individual Account and the portion which is not Vested
shall be treated as a Forfeiture. For purposes of this
Section, if the value of the Vested portion of a
Participant's Individual Account is zero, the Participant
shall be deemed to have received a distribution of such
Vested Individual Account. A Participant's Vested
Individual Account balance shall not include accumulated
deductible employee contributions within the meaning of
Section 72(o)(5)(B) of the Code for Plan Years beginning
prior to January 1, 1989.
3. Participants Who Elect to Receive Distributions - If such
Participant elects to receive a distribution, in
accordance with Section 6.02(B), of the value of the
Vested portion of his Individual Account derived from
Employee and Employer Contributions, the portion which is
not Vested shall be treated as a Forfeiture.
4. Re-employed Participants - If a Participant receives or is
deemed to receive a distribution pursuant to Section
6.01(D)(2) or (3) above and the Participant resumes
employment covered under this Plan, the Participant's
Employer-derived Individual Account balance will be
restored to the amount on the date of distribution if the
Participant repays to the Plan the full amount of the
distribution attributable to Employer Contributions before
the earlier of 5 years after the first date on which the
Participant is subsequently re-employed by the Employer,
or the date the Participant incurs 5 consecutive Breaks in
Vesting Service following the date of the distribution.
Amounts forfeited under Section 6.01(D) shall be allocated
in accordance with Section 3.01(C) as of the last day of
the Plan Year during which the Forfeiture arises. Any
restoration of a Participant's Individual Account pursuant
to Section 6.01(D)(4) shall be made from other
Forfeitures, income or gain to the Fund or contributions
made by the Employer.
E. DISTRIBUTION PRIOR TO FULL VESTING - If a distribution is
made to a Participant who was not then fully Vested in his
Individual Account derived from Employer Contributions and the
Participant may increase his Vested percentage in his
Individual Account, then the following rules shall apply:
1. a separate account will be established for the
Participant's interest in the Plan as of the time of the
distribution, and
2. at any relevant time the Participant's Vested portion of
the separate account will be equal to an amount ("X")
determined by the formula: X=P (AB + (R x D)) - (R x D)
where "P" is the Vested percentage at the relevant time,
"AB" is the separate account balance at the relevant
time; "D" is the amount of the distribution; and "R" is
the ratio of the separate account balance at the relevant
time to the separate account balance after distribution.
6.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. VALUE OF INDIVIDUAL ACCOUNT DOES NOT EXCEED $3,500 - If the
value of the Vested portion of a Participant's Individual
Account derived from Employee and Employer Contributions does
not exceed $3,500, distribution from the Plan shall be made to
the Participant in a single lump sum in lieu of all other
forms of distribution from the Plan.
B. VALUE OF INDIVIDUAL ACCOUNT EXCEEDS $3,500
1. If the value of the Vested portion of a Participant's
Individual Account derived from Employee and Employer
Contributions exceeds (or at the time of any prior
distribution exceeded) $3,500, and the Individual Account
is immediately distributable, the Participant and the
Participant's spouse (or where either the Participant or
the spouse died, the survivor) must consent to any
distribution of such Individual Account. The consent of
the Participant and the Participant's spouse shall be
obtained in writing within the 90-day period ending on the
annuity starting date. The annuity starting date is the
first day of the first period for which an amount is paid
as an annuity or any other form. The Plan Administrator
shall notify the Participant and the Participant's spouse
of the right to defer any distribution until the
Participant's Individual Account is no longer immediately
distributable. Such notification shall include a general
description of the material features, and an explanation
of the relative values of, the optional forms of benefit
available under the Plan in a manner that would satisfy
the notice requirements of Section 417(a)(3) of the Code,
and shall be provided no less than 30 days and no more
than 90 days prior to the annuity starting date. If a
distribution is one to which Sections 401(a)(11) and 417
of the Internal Revenue Code do not apply, such
distribution may commence less than 30 days after the
notice required under Section 1.411(a)-11(c) of the Income
Tax Regulations is given, provided that:
a. the Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at
least 30 days after receiving the notice to consider
the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution
option), and
b. the Participant, after receiving the notice,
affirmatively elects a distribution.
<PAGE>
Notwithstanding the foregoing, only the Participant need
consent to the commencement of a distribution in the form
of a qualified joint and survivor annuity while the
Individual Account is immediately distributable. Neither
the consent of the Participant nor the Participant's
spouse shall be required to the extent that a distribution
is required to satisfy Section 401(a)(9) or Section 415 of
the Code. In addition upon termination of this Plan if the
Plan does not offer an annuity option (purchased from a
commercial provider), the Participant's Individual Account
may, without the Participant's consent, be distributed to
the Participant or transferred to another defined
contribution plan (other than an employee stock ownership
plan as defined in Section 4975(e)(7) of the Code) within
the same controlled group.
An individual Account is immediately distributable if any
part of the Individual Account could be distributed to the
Participant (or surviving spouse) before the Participant
attains or would have attained (if not deceased) the later
of Normal Retirement Age or age 62.
2. For purposes of determining the applicability of the
foregoing consent requirements to distributions made
before the first day of the first Plan year beginning
after December 31, 1988, the Vested portion of a
Participant's Individual Account shall not include amounts
attributable to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of
the Code.
C. OTHER FORMS OF DISTRIBUTION TO PARTICIPANT - If the value of
the Vested portion of a Participant's Individual Account
exceeds $3,500 and the Participant has properly waived the
joint and survivor annuity, as described in Section 6.05, the
Participant may request in writing that the Vested portion of
his Individual Account be paid to him in one or more of the
following forms of payment: (1) in a lump sum; (2) in
installment payments over a period not to exceed the life
expectancy of the Participant or the joint and last survivor
life expectancy of the Participant and his designated
Beneficiary; or (3) applied to the purchase of an annuity
contract.
Notwithstanding anything in this Section 6.02 to the contrary,
a Participant cannot elect payments in the form of an annuity
if the safe harbor rules of Section 6.05(F) apply.
6.03 DISTRIBUTIONS UPON THE DEATH OF A PARTICIPANT
A. DESIGNATION OF BENEFICIARY - SPOUSAL CONSENT - Each
Participant may designate, upon a form provided by and
delivered to the Plan Administrator, one or more primary and
contingent Beneficiaries to receive all or a specified portion
of his Individual Account in the event of his death. A
Participant may change or revoke such Beneficiary designation
from time to time by completing and delivering the proper form
to the Plan Administrator.
In the event that a Participant wishes to designate a primary
Beneficiary who is not his spouse, his spouse must consent in
writing to such designation, and the spouse's consent must
acknowledge the effect of such designation and be witnessed by
a notary public. Notwithstanding this consent requirement, if
the Participant establishes to the satisfaction of the Plan
Administrator that such written consent may not be obtained
because there is no spouse or the spouse cannot be located, no
consent shall be required. Any change of Beneficiary will
require a new spousal consent.
B. PAYMENT TO BENEFICIARY - If a Participant dies before his
entire Individual Account has been paid to him, such deceased
Participant's Individual Account shall be payable to any
surviving Beneficiary designated by the Participant, or, if no
Beneficiary survives the Participant, to the Participant's
estate.
C. WRITTEN REQUEST: WHEN DISTRIBUTED - A Beneficiary of a
deceased Participant entitled to a distribution who wishes to
receive a distribution must submit a written request to the
Plan Administrator. Such request shall be made upon a form
provided by the Plan Administrator. Upon a valid request, the
Plan Administrator shall direct the Trustee (or Custodian) to
commence distribution no later than 90 days following the
later of:
1. the close of the Plan Year within which the Participant
dies; or
2. the close of the Plan Year in which the request is
received.
D. LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN - In the event
that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the
expiration of 5 years after it becomes payable, remain unpaid
solely by reason of the inability of the Plan Administrator,
after sending a registered letter, return receipt requested,
to the last known address, and after further diligent effort,
to ascertain the whereabouts of such Participant or his
Beneficiary, the amount so distributable shall be forfeited
and allocated in accordance with the terms of the Plan. In the
event a Participant or Beneficiary is located subsequent to
his benefit being forfeited, such benefit shall be restored;
provided, however, if all or a portion of such amount has been
lost by reason of escheat under state law, the Participant or
Beneficiary shall cease to be entitled to the portion so lost.
6.04 FORM OF DISTRIBUTION TO BENEFICIARY
A. VALUE OF INDIVIDUAL ACCOUNT DOES NOT EXCEED $3,500 - If the
value of the Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500 the
Plan Administrator shall direct the Trustee (or Custodian, if
applicable) to make a distribution to the Beneficiary in a
single lump sum in lieu of all other forms of distribution
from the Plan.
B. VALUE OF INDIVIDUAL ACCOUNT EXCEEDS $3,500 - If the value of a
Participant's Individual Account derived from Employee and
Employer Contributions exceeds $3,500 the preretirement
survivor annuity requirements of Section 6.05 shall apply
unless waived in accordance with that Section or unless the
safe harbor rules of Section 6.05(F) apply.
C. OTHER FORMS OF DISTRIBUTION TO BENEFICIARY - If the value of a
Participant's Individual Account exceeds $3,500 and the
Participant has properly waived the preretirement survivor
annuity, as described in Section 6.05 (if applicable) the
Beneficiary may, subject to the requirements of Section 6.06,
request in writing that the Participant's Individual Account
be paid to him as follows: (1) in a lump sum; or (2) in
installment payments over a period not to exceed the life
expectancy of such Beneficiary.
6.05 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
A. The provisions of this Section shall apply to any Participant
who is credited with at least one Hour of Eligibility Service
with the Employer on or after August 23, 1984, and such other
participants as provided in Section 6.05(G).
<PAGE>
B. QUALIFIED JOINT AND SURVIVOR ANNUITY - Unless an optional form
of benefit is selected pursuant to a qualified election within
the 90-day period ending on the annuity starting date, a
married Participant's Vested account balance will be paid in
the form of a qualified joint and survivor annuity and an
unmarried Participant's Vested account balance will be paid in
the form of a life annuity. The Participant may elect to have
such annuity distributed upon attainment of the earliest
retirement age under the Plan.
C. QUALIFIED PRERETIREMENT SURVIVOR ANNUITY - Unless an optional
form of benefit has been selected within the election period
pursuant to a qualified election, if a Participant dies before
the annuity starting date then the Participant's Vested
account balance shall be applied toward the purchase of an
annuity for the life of the surviving spouse. The surviving
spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
D. DEFINITIONS
1. Election Period - The period which begins on the first day
of the Plan Year in which the Participant attains age 35
and ends on the date of the Participant's death. lf a
Participant separates from service prior to the first day
of the Plan year in which age 35 is attained, with respect
to the account balance as of the date of separation, the
election period shall begin on the date of separation.
Pre-age 35 waiver - A Participant who will not yet attain
age 35 as of the end of any current Plan Year may make a
special qualified election to waive the qualified
preretirement survivor annuity for the period beginning on
the date of such election and ending on the first day of
the Plan Year in which the Participant will attain age 35.
Such election shall not be valid unless the Participant
receives a written explanation of the qualified
preretirement survivor annuity in such terms as are
comparable to the explanation required under Section
6.05(E)(1). Qualified preretirement survivor annuity
coverage will be automatically reinstated as of the first
day of the Plan Year in which the Participant attains age
35. Any new waiver on or after such date shall be subject
to the full requirements of this Section 6.05.
2. Earliest Retirement Age - The earliest date on which,
under the Plan, the Participant could elect to receive
retirement benefits.
3. Qualified Election - A waiver of a qualified joint and
survivor annuity or a qualified preretirement survivor
annuity. Any waiver of a qualified joint and survivor
annuity or a qualified preretirement survivor annuity
shall not be effective unless: (a) the Participant's
spouse consents in writing to the election, (b) the
election designates a specific Beneficiary, including any
class of beneficiaries or any contingent beneficiaries,
which may not be changed without spousal consent (or the
spouse expressly permits designations by the Participant
without any further spousal consent); (c) the spouse's
consent acknowledges the effect of the election; and (d)
the spouse's consent is witnessed by a plan representative
or notary public. Additionally, a Participant's waiver of
the qualified joint and survivor annuity shall not be
effective unless the election designates a form of benefit
payment which may not be changed without spousal consent
(or the spouse expressly permits designations by the
Participant without any further spousal consent). If it is
established to the satisfaction of a plan representative
that there is no spouse or that the spouse cannot be
located, a waiver will be deemed a qualified election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be
obtained) shall be effective only with respect to such
spouse. A consent that permits designations by the
Participant without any requirement of further consent by
such spouse must acknowledge that the spouse has the right
to limit consent to a specific Beneficiary, and a specific
form of benefit where applicable, and that the spouse
voluntarily elects to relinquish either or both of such
rights. A revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any time
before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained
under this provision shall be valid unless the Participant
has received notice as provided in Section 6.05(E) below.
4. Qualified Joint and Survivor Annuity - An immediate
annuity for the life of the Participant with a survivor
annuity for the life of the spouse which is not less than
50% and not more than 100% of the amount of the annuity
which is payable during the joint lives of the Participant
and the spouse and which is the amount of benefit which
can be purchased with the Participant's vested account
balance. The percentage of the survivor annuity under the
Plan shall be 50% (unless a different percentage is
elected by the Employer in the Adoption Agreement).
5. Spouse (surviving spouse) - The spouse or surviving spouse
of the Participant, provided that a former spouse will be
treated as the spouse or surviving spouse and a current
spouse will not be treated as the spouse or surviving
spouse to the extent provided under a qualified domestic
relations order as described in Section 414(p) of the
Code.
6. Annuity Starting Date - The first day of the first period
for which an amount is paid as an annuity or any other
form.
7. Vested Account Balance - The aggregate value of the
Participant's Vested account balances derived from
Employer and Employee contributions (including rollovers),
whether Vested before or upon death, including the
proceeds of insurance contracts, if any, on the
Participant's life. The provisions of this Section 6.05
shall apply to a Participant who is Vested in amounts
attributable to Employer Contributions, Employee
contributions (or both) at the time of death or
distribution.
E. NOTICE REQUIREMENTS
1. In the case of a qualified joint and survivor annuity, the
Plan Administrator shall no less than 30 days and not more
than 90 days prior to the annuity starting date provide
each Participant a written explanation of: (a) the terms
and conditions of a qualified joint and survivor annuity;
(b) the Participant's right to make and the effect of an
election to waive the qualified joint and survivor annuity
form of benefit; (c) the rights of a Participant's spouse;
and (d) the right to make, and the effect of, a revocation
of a previous election to waive the qualified joint and
survivor annuity.
2. In the case of a qualified preretirement survivor annuity
as described in Section 6.05(C), the Plan Administrator
shall provide each Participant within the applicable
period for such Participant a written explanation of the
qualified preretirement survivor annuity in such terms and
in such manner as would be comparable to the explanation
provided for meeting the requirements of Section
6.05(E)(1) applicable to a qualified joint and survivor
annuity.
<PAGE>
The applicable period for a Participant is whichever of
the following periods ends last: (a) the period beginning
with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of
the Plan Year preceding the Plan Year in which the
Participant attains age 35; (b) a reasonable period ending
after the individual becomes a Participant; (c) a
reasonable period ending after Section 6.05(E)(3) ceases
to apply to the Participant; (d) a reasonable period
ending after this Section 6.05 first applies to the
Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after
separation from service in the case of a Participant who
separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events
described in (b), (c) and (d) is the end of the two-year
period beginning one year prior to the date the applicable
event occurs, and ending one year after that date. In the
case of a Participant who separates from service before
the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year
prior to separation and ending one year after separation.
If such a Participant thereafter returns to employment
with the Employer, the applicable period for such
Participant shall be redetermined.
3. Notwithstanding the other requirements of this Section
6.05(E), the respective notices prescribed by this Section
6.05(E), need not be given to a Participant if (a) the
Plan "fully subsidizes" the costs of a qualified joint and
survivor annuity or qualified preretirement survivor
annuity, and (b) the Plan does not allow the Participant
to waive the qualified joint and survivor annuity or
qualified preretirement survivor annuity and does not
allow a married Participant to designate a nonspouse
beneficiary. For purposes of this Section 6.05(E)(3), a
plan fully subsidizes the costs of a benefit if no
increase in cost, or decrease in benefits to the
Participant may result from the Participant's failure to
elect another benefit.
F. SAFE HARBOR RULES
1. If the Employer so indicates in the Adoption Agreement,
this Section 6.05(F) shall apply to a Participant in a
profit sharing plan, and shall always apply to any
distribution, made on or after the first day of the first
Plan Year beginning after December 31, 1988, from or under
a separate account attributable solely to accumulated
deductible employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of a
Participant in a money purchase pension plan, (including a
target benefit plan) if the following conditions are
satisfied:
a. the Participant does not or cannot elect payments in
the form of a life annuity; and
b. on the death of a participant, the Participant's
Vested account balance will be paid to the
Participant's surviving spouse, but if there is no
surviving spouse, or if the surviving spouse has
consented in a manner conforming to a qualified
election, then to the Participant's designated
beneficiary. The surviving spouse may elect to have
distribution of the Vested account balance commence
within the 90-day period following the date of the
Participant's death. The account balance shall be
adjusted for gains or losses occurring after the
Participant's death in accordance with the provisions
of the Plan governing the adjustment of account
balances for other types of distributions. This
Section 6.05(F) shall not be operative with respect to
a Participant in a profit sharing plan if the plan is
a direct or indirect transferee of a defined benefit
plan, money purchase plan, a target benefit plan,
stock bonus, or profit sharing plan which is subject
to the survivor annuity requirements of Section
401(a)(11) and Section 417 of the Code. lf this
Section 6.05(F) is operative, then the provisions of
this Section 6.05 other than Section 6.05(G) shall be
inoperative.
2. The Participant may waive the spousal death benefit
described in this Section 6.05(F) at any time provided
that no such waiver shall be effective unless it satisfies
the conditions of Section 6.05(D)(3) (other than the
notification requirement referred to therein) that would
apply to the Participant's waiver of the qualified
preretirement survivor annuity.
3. For purposes of this Section 6.05(F), Vested account
balance shall mean, in the case of a money purchase
pension plan or a target benefit plan, the Participant's
separate account balance attributable solely to
accumulated deductible employee contributions within the
meaning of Section 72(o)(5)(B) of the Code. In the case of
a profit sharing plan, vested account balance shall have
the same meaning as provided in Section 6.05(D)(7).
G. TRANSITIONAL RULES
1. Any living Participant not receiving benefits on August
23, 1984, who would otherwise not receive the benefits
prescribed by the previous subsections of this Section
6.05 must be given the opportunity to elect to have the
prior subsections of this Section apply if such
Participant is credited with at least one Hour of Service
under this Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and such
Participant had at least 10 Years of Vesting Service when
he or she separated from service.
2. Any living Participant not receiving benefits on August
23, 1984, who was credited with at least one Hour of
Service under this Plan or a predecessor plan on or after
September 2, 1974, and who is not otherwise credited with
any service in a Plan Year beginning on or after January
1, 1976, must be given the opportunity to have his or her
benefits paid in accordance with Section 6.05(G)(4).
3. The respective opportunities to elect (as described in
Section 6.05(G)(1) and (2) above) must be afforded to the
appropriate Participants during the period commencing on
August 23, 1984, and ending on the date benefits would
otherwise commence to said Participants.
4. Any Participant who has elected pursuant to Section
6.05(G)(2) and any Participant who does not elect under
Section 6.05(G)(1) or who meets the requirements of
Section 6.05(G)(1) except that such Participant does not
have at least 10 Years of Vesting Service when he or she
separates from service, shall have his or her benefits
distributed in accordance with all of the following
requirements if benefits would have been payable in the
form of a life annuity:
a. Automatic Joint and Survivor Annuity - If benefits in
the form of a life annuity become payable to a married
Participant who:
1. begins to receive payments under the Plan on or
after Normal Retirement Age; or
2. dies on or after Normal Retirement Age while still
working for the Employer; or
<PAGE>
3. begins to receive payments on or after the
qualified early retirement age; or
4. separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement
age) and after satisfying the eligibility
requirements for the payment of benefits under the
Plan and thereafter dies before beginning to
receive such benefits;
then such benefits will be received under this Plan
in the form of a qualified joint and survivor
annuity, unless the Participant has elected
otherwise during the election period. The election
period must begin at least 6 months before the
Participant attains qualified early retirement age
and ends not more than 90 days before the
commencement of benefits. Any election hereunder
will be in writing and may be changed by the
Participant at any time.
b. Election of Early Survivor Annuity - A Participant who
is employed after attaining the qualified early
retirement age will be given the opportunity to elect,
during the election period, to have a survivor annuity
payable on death. If the Participant elects the
survivor annuity, payments under such annuity must not
be less than the payments which would have been made
to the spouse under the qualified joint and survivor
annuity if the Participant had retired on the day
before his or her death. Any election under this
provision will be in writing and may be changed by the
Participant at any time. The election period begins on
the later of (1) the 90th day before the Participant
attains the qualified early retirement age, or (2) the
date on which participation begins, and ends on the
date the Participant terminates employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest of:
a. the earliest date, under the Plan, on which the
Participant may elect to receive retirement
benefits,
b. the first day of the 120th month beginning
before the Participant reaches Normal
Retirement Age, or
c. the date the Participant begins participation.
2. Qualified joint and survivor annuity is an annuity
for the life of the Participant with a survivor
annuity for the life of the spouse as described in
Section 6.05 (D)(4) of this Plan.
6.06 DISTRIBUTION REQUIREMENTS
A. GENERAL RULES
1. Subject to Section 6.05, Joint and Survivor Annuity
Requirements, the requirements of this Section shall apply
to any distribution of a Participant's interest and will
take precedence over any inconsistent provisions of this
Plan. Unless otherwise specified, the provisions of this
Section 6.06 apply to calendar years beginning after
December 31, 1984.
2. All distributions required under this Section 6.06 shall
be determined and made in accordance with the Income Tax
Regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the regulations.
B. REQUIRED BEGINNING DATE - The entire interest of a Participant
must be distributed or begin to be distributed no later than
the Participant's required beginning date.
C. LIMITS ON DISTRIBUTION PERIODS - As of the first distribution
calendar year, distributions, if not made in a single sum, may
only be made over one of the following periods (or a
combination thereof):
1. the life of the Participant,
2. the life of the Participant and a designated Beneficiary,
3. a period certain not extending beyond the life expectancy
of the Participant, or
4. a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
D. DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR - If the
Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall
apply on or after the required beginning date:
1. Individual Account
a. If a Participant's benefit is to be distributed over
(1) a period not extending beyond the life expectancy
of the Participant or the joint life and last survivor
expectancy of the Participant and the Participant's
designated Beneficiary or (2) a period not extending
beyond the life expectancy of the designated
Beneficiary, the amount required to be distributed for
each calendar year, beginning with distributions for
the first distribution calendar year, must at least
equal the quotient obtained by dividing the
Participant's benefit by the applicable life
expectancy.
b. For calendar years beginning before January 1, 1989,
if the Participant's spouse is not the designated
Beneficiary, the method of distribution selected must
assure that at least 50% of the present value of the
amount available for distribution is paid within the
life expectancy of the Participant.
c. For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with
distributions for the first distribution calendar year
shall not be less than the quotient obtained by
dividing the Participant's benefit by the lesser of
(1) the applicable life expectancy or (2) if the
Participant's spouse is not the designated
Beneficiary, the applicable divisor determined from
the table set forth in Q&A-4 of Section 1.401(a)(9)-2
of the Income Tax Regulations. Distributions after the
death of the Participant shall be distributed using
the applicable life expectancy in Section
6.06(D)(1)(a) above as the relevant divisor without
regard to regulations 1.401(a)(9)-2.
<PAGE>
d. The minimum distribution required for the
Participant's first distribution calendar year must be
made on or before the Participant's required beginning
date. The minimum distribution for other calendar
years, including the minimum distribution for the
distribution calendar year in which the Employee's
required beginning date occurs, must be made on or
before December 31 of that distribution calendar year.
2. Other Forms - If the Participant's benefit is distributed
in the form of an annuity purchased from an insurance
company, distributions thereunder shall be made in
accordance with the requirements of Section 401(a)(9) of
the Code and the regulations thereunder.
E. DEATH DISTRIBUTION PROVISIONS
1. Distribution Beginning Before Death - If the Participant
dies after distribution of his or her interest has begun,
the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
2. Distribution Beginning After Death - If the Participant
dies before distribution of his or her interest begins,
distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing
the fifth anniversary of the Participant's death except to
the extent that an election is made to receive
distributions in accordance with (a) or (b) below:
a. if any portion of the Participant's interest is
payable to a designated Beneficiary, distributions may
be made over the life or over a period certain not
greater than the life expectancy of the designated
Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year
in which the Participant died;
b. if the designated Beneficiary is the Participant's
surviving spouse, the date distributions are required
to begin in accordance with (a) above shall not be
earlier than the later of (1) December 31 of the
calendar year immediately following the calendar year
in which the Participant dies or (2) December 31 of
the calendar year in which the Participant would have
attained age 70 1/2.
If the Participant has not made an election pursuant
to this Section 6.06(E)(2) by the time of his or her
death, the Participant's designated Beneficiary must
elect the method of distribution no later than the
earlier of (1) December 31 of the calendar year in
which distributions would be required to begin under
this Section 6.06(E)(2), or (2) December 31 of the
calendar year which contains the fifth anniversary of
the date of death of the Participant. If the
Participant has no designated Beneficiary, or if the
designated Beneficiary does not elect a method of
distribution, distribution of the Participant's entire
interest must be completed by December 31 of the
calendar year containing the fifth anniversary of the
Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the surviving
spouse dies after the Participant, but before payments to
such spouse begin, the provisions of Section 6.06(E)(2),
with the exception of paragraph (b) therein, shall be
applied as if the surviving spouse were the Participant.
4. For purposes of this Section 6.06(E), any amount paid to a
child of the Participant will be treated as if it had been
paid to the surviving spouse if the amount becomes payable
to the surviving spouse when the child reaches the age of
majority.
5. For purposes of this Section 6.06(E), distribution of a
Participant's interest is considered to begin on the
Participant's required beginning date (or, if Section
6.06(E)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to
Section 6.06(E)(2) above). If distribution in the form of
an annuity irrevocably commences to the Participant before
the required beginning date, the date distribution is
considered to begin is the date distribution actually
commences.
F. DEFINITIONS
1. Applicable Life Expectancy - The life expectancy (or joint
and last survivor expectancy) calculated using the
attained age of the Participant (or designated
Beneficiary) as of the Participant's (or designated
Beneficiary's) birthday in the applicable calendar year
reduced by one for each calendar year which has elapsed
since the date life expectancy was first calculated. If
life expectancy is being recalculated, the applicable life
expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the
first distribution calendar year, and if life expectancy
is being recalculated such succeeding calendar year.
2. Designated Beneficiary - The individual who is designated
as the Beneficiary under the Plan in accordance with
Section 401(a)(9) of the Code and the regulations
thereunder.
3. Distribution Calendar Year - A calendar year for which a
minimum distribution is required. For distributions
beginning before the Participant's death, the first
distribution calendar year is the calendar year
immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions
beginning after the Participant's death, the first
distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section
6.06(E) above.
4. Life Expectancy - Life expectancy and joint and last
survivor expectancy are computed by use of the expected
return multiples in Tables V and VI of Section 1.72-9 of
the Income Tax Regulations.
Unless otherwise elected by the Participant (or spouse, in
the case of distributions described in Section
6.06(E)(2)(b) above) by the time distributions are
required to begin, life expectancies shall be recalculated
annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent
years. The life expectancy of a nonspouse Beneficiary may
not be recalculated.
5. Participant's Benefit
a. The account balance as of the last valuation date in
the valuation calendar year (the calendar year
immediately preceding the distribution calendar year)
increased by the amount of any Contributions or
Forfeitures allocated to the account balance as of
dates in the valuation calendar year after the
valuation date and decreased by distributions made in
the valuation calendar year after the valuation date.
<PAGE>
b. Exception for second distribution calendar year. For
purposes of paragraph (a) above, if any portion of the
minimum distribution for the first distribution
calendar year is made in the second distribution
calendar year on or before the required beginning
date, the amount of the minimum distribution made in
the second distribution calendar year shall be treated
as if it had been made in the immediately preceding
distribution calendar year.
6. Required Beginning Date
a. General Rule - The required beginning date of a
Participant is the first day of April of the calendar
year following the calendar year in which the
Participant attains age 70 1/2.
b. Transitional Rules - The required beginning date of a
Participant who attains age 70 1 /2 before January 1,
1988, shall be determined in accordance with (1) or
(2) below:
1. Non 5% Owners - The required beginning date of a
Participant who is not a 5% owner is the first day
of April of the calendar year following the
calendar year in which the later of retirement or
attainment of age 70-1/2 occurs.
2. 5% Owners - The required beginning date of a
Participant who is a 5% owner during any year
beginning after December 31, 1979, is the first day
of April following the later of:
a. the calendar year in which the Participant
attains age 70 1/2, or
b. the earlier of the calendar year with or within
which ends the Plan Year in which the
Participant becomes a 5% owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant
who is not a 5% owner who attains age 70-1/2
during 1988 and who has not retired as of
January 1, 1989, is April 1, 1990.
c. 5% Owner - A Participant is treated as a 5% owner for
purposes of this Section 6.06(F)(6) if such
Participant is a 5% owner as defined in Section 416(i)
of the Code (determined in accordance with Section 416
but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within
the calendar year in which such owner attains age
66 1/2 or any subsequent Plan Year.
d. Once distributions have begun to a 5% owner under this
Section 6.06(F)(6) they must continue to be
distributed, even if the Participant ceases to be a 5%
owner in a subsequent year.
G. TRANSITIONAL RULE
1. Notwithstanding the other requirements of this Section
6.06 and subject to the requirements of Section 6.05,
Joint and Survivor Annuity Requirements, distribution on
behalf of any Employee, including a 5% owner, may be made
in accordance with all of the following requirements
(regardless of when such distribution commences):
a. The distribution by the Fund is one which would not
have disqualified such Fund under Section 401(a)(9) of
the Code as in effect prior to amendment by the
Deficit Reduction Act of 1984.
b. The distribution is in accordance with a method of
distribution designated by the Employee whose interest
in the Fund is being distributed or, if the Employee
is deceased, by a Beneficiary of such Employee.
c. Such designation was in writing, was signed by the
Employee or the Beneficiary, and was made before
January 1, 1984.
d. The Employee had accrued a benefit under the Plan as
of December 31, 1983.
e. The method of distribution designated by the Employee
or the Beneficiary specifies the time at which
distribution will commence, the period over which
distributions will be made, and in the case of any
distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of
priority.
2. A distribution upon death will not be covered by this
transitional rule unless the information in the
designation contains the required information described
above with respect to the distributions to be made upon
the death of the Employee.
3. For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Employee,
or the Beneficiary, to whom such distribution is being
made, will be presumed to have designated the method of
distribution under which the distribution is being made if
the method of distribution was specified in writing and
the distribution satisfies the requirements in Sections
6.06(G)(l)(a) and (e).
4. If a designation is revoked, any subsequent distribution
must satisfy the requirements of Section 401(a)(9) of the
Code and the regulations thereunder. If a designation is
revoked subsequent to the date distributions are required
to begin, the Plan must distribute by the end of the
calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed
which would have been required to have been distributed to
satisfy Section 401(a)(9) of the Code and the regulations
thereunder, but for the Section 242(b)(2) election. For
calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution
incidental benefit requirements in Section 1.401(a)(9)-2
of the Income Tax Regulations. Any changes in the
designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of
another Beneficiary (one not named in the designation)
under the designation will not be considered to be a
revocation of the designation, so long as such
substitution or addition does not alter the period over
which distributions are to be made under the designation,
directly or indirectly (for example, by altering the
relevant measuring life). In the case in which an amount
is transferred or rolled over from one plan to another
plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
6.07 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted or
required by this Section 6) must be nontransferable. The terms of
any annuity contract purchased and distributed by the Plan to a
Participant or spouse shall comply with the requirements of the
Plan.
<PAGE>
6.08 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may receive
a loan from the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a
reasonably equivalent basis.
B. Loans shall not be made available to Highly Compensated
Employees (as defined in Section 414(q) of the Code) in an
amount greater than the amount made available to other
Employees.
C. Loans must be adequately secured and bear a reasonable
interest rate.
D. No Participant loan shall exceed the present value of the
Vested portion of a Participant's Individual Account.
E. A Participant must obtain the consent of his or her spouse, if
any, to the use of the Individual Account as security for the
loan. Spousal consent shall be obtained no earlier than the
beginning of the 90 day period that ends on the date on which
the loan is to be so secured. The consent must be in writing,
must acknowledge the effect of the loan, and must be witnessed
by a plan representative or notary public. Such consent shall
thereafter be binding with respect to the consenting spouse or
any subsequent spouse with respect to that loan. A new consent
shall be required if the account balance is used for
renegotiation, extension, renewal, or other revision of the
loan.
F. In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable
event occurs in the Plan.
G. No loans will be made to any shareholder-employee or Owner-
Employee. For purposes of this requirement, a shareholder-
employee means an employee or officer of an electing small
business (Subchapter S) corporation who owns (or is considered
as owning within the meaning of Section 318(a)(1) of the
Code), on any day during the taxable year of such corporation,
more than 5% of the outstanding stock of the corporation.
If a valid spousal consent has been obtained in accordance with
6.08(E), then, notwithstanding any other provisions of this Plan,
the portion of the Participant's Vested Individual Account used
as a security interest held by the Plan by reason of a loan
outstanding to the Participant shall be taken into account for
purposes of determining the amount of the account balance payable
at the time of death or distribution, but only if the reduction
is used as repayment of the loan. If less than 100% of the
Participant's Vested Individual Account (determined without
regard to the preceding sentence) is payable to the surviving
spouse, then the account balance shall be adjusted by first
reducing the Vested Individual Account by the amount of the
security used as repayment of the loan, and then determining the
benefit payable to the surviving spouse.
No loan to any Participant can be made to the extent that such
loan when added to the outstanding balance of all other loans to
the Participant would exceed the lesser of (a) $50,000 reduced by
the excess (if any) of the highest outstanding balance of loans
during the one year period ending on the day before the loan is
made, over the outstanding balance of loans from the Plan on the
date the loan is made, or (b) 50% of the present value of the
nonforfeitable Individual Account of the Participant or, if
greater, the total Individual Account up to $10,000. For the
purpose of the above limitation, all loans from all plans of the
Employer and other members of a group of employers described in
Sections 414(b), 414(c), and 414(m) of the Code are aggregated.
Furthermore, any loan shall by its terms require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond 5
years from the date of the loan, unless such loan is used to
acquire a dwelling unit which within a reasonable time
(determined at the time the loan is made) will be used as the
principal residence of the Participant. An assignment or pledge
of any portion of the Participant's interest in the Plan and a
loan, pledge, or assignment with respect to any insurance
contract purchased under the Plan, will be treated as a loan
under this paragraph.
The Plan Administrator shall administer the loan program in
accordance with a written document. Such written document shall
include, at a minimum, the following: (i) the identity of the
person or positions authorized to administer the Participant loan
program; (ii) the procedure for applying for loans; (iii) the
basis on which loans will be approved or denied; (iv) limitations
(if any) on the types and amounts of loans offered; (v) the
procedure under the program for determining a reasonable rate of
interest; (vi) the types of collateral which may secure a
Participant loan; and (vii) the events constituting default and
the steps that will be taken to preserve Plan assets in the event
of such default.
6.09 DISTRIBUTION IN KIND
The Plan Administrator may cause any distribution under this Plan
to be made either in a form actually held in the Fund, or in cash
by converting assets other than cash into cash, or in any
combination of the two foregoing ways.
6.10 DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS
A. DIRECT ROLLOVER OPTION - This Section applies to distributions
made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a
distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of
an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct
rollover.
B. DEFINITIONS
l. Eligible rollover distribution - An eligible rollover
distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that
an eligible rollover distribution does not include:
a. any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a
specified period of ten years or more;
b. any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and
c. the portion of any distribution that is not includible
in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect
to employer securities).
2. Eligible retirement plan - An eligible retirement plan is
an individual retirement account described in
<PAGE>
Section 403(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code,
that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or
individual retirement annuity.
3. Distributee - A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Section
414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
4. Direct rollover - A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the
distributee.
SECTION SEVEN CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
A Participant or Beneficiary who desires to make a claim for the
Vested portion of the Participant's Individual Account shall file
a written request with the Plan Administrator on a form to be
furnished to him by the Plan Administrator for such purpose. The
request shall set forth the basis of the claim. The Plan
Administrator is authorized to conduct such examinations as may
be necessary to facilitate the payment of any benefits to which
the Participant or Beneficiary may be entitled under the terms of
the Plan.
7.02 DENIAL OF CLAIM
Whenever a claim for a Plan distribution by any Participant or
Beneficiary has been wholly or partially denied, the Plan
Administrator must furnish such Participant or Beneficiary
written notice of the denial within 60 days of the date the
original claim was filed. This notice shall set forth the
specific reasons for the denial, specific reference to pertinent
Plan provisions on which the denial is based, a description of
any additional information or material needed to perfect the
claim, an explanation of why such additional information or
material is necessary and an explanation of the procedures for
appeal.
7.03 REMEDIES AVAILABLE
The Participant or Beneficiary shall have 60 days from receipt of
the denial notice in which to make written application for review
by the Plan Administrator. The Participant or Beneficiary may
request that the review be in the nature of a hearing. The
Participant or Beneficiary shall have the right to
representation, to review pertinent documents and to submit
comments in writing. The Plan Administrator shall issue a
decision on such review within 60 days after receipt of an
application for review as provided for in Section 7.02. Upon a
decision unfavorable to the Participant or Beneficiary, such
Participant or Beneficiary shall be entitled to bring such
actions in law or equity as may be necessary or appropriate to
protect or clarify his right to benefits under this Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 EMPLOYER IS PLAN ADMINISTRATOR
A. The Employer shall be the Plan Administrator unless the
managing body of the Employer designates a person or persons
other than the Employer as the Plan Administrator and so
notifies the Prototype Sponsor and the Trustee (or Custodian,
if applicable). The Employer shall also be the Plan
Administrator if the person or persons so designated cease to
be the Plan Administrator
B. If the managing body of the Employer designates a person or
persons other than the Employer as Plan Administrator, such
person or persons shall serve at the pleasure of the Employer
and shall serve pursuant to such procedures as such managing
body may provide. Each such person shall be bonded as may be
required by law.
8.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
A. The Plan Administrator may, by appointment, allocate the
duties of the Plan Administrator among several individuals or
entities. Such appointments shall not be effective until the
party designated accepts such appointment in writing.
B. The Plan Administrator shall have the authority to control and
manage the operation and administration of the Plan. The Plan
Administrator shall administer the Plan for the exclusive
benefit of the Participants and their Beneficiaries in
accordance with the specific terms of the Plan.
C. The Plan Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited
to, the following:
1. To determine all questions of interpretation or policy in
a manner consistent with the Plan's documents and the Plan
Administrator's construction or determination in good
faith shall be conclusive and binding on all persons
except as otherwise provided herein or by law. Any
interpretation or construction shall be done in a
nondiscriminatory manner and shall be consistent with the
intent that the Plan shall continue to be deemed a
qualified plan under the terms of Section 401(a) of the
Code, as amended from time-to-time, and shall comply with
the terms of ERISA, as amended from time-to-time;
2. To determine all questions relating to the eligibility of
Employees to become or remain Participants hereunder;
3. To compute the amounts necessary or desirable to be
contributed to the Plan;
4. To compute the amount and kind of benefits to which a
Participant or Beneficiary shall be entitled under the
Plan and to direct the Trustee (or Custodian, if
applicable) with respect to all disbursements under the
Plan, and, when requested by the Trustee (or Custodian),
to furnish the Trustee (or Custodian) with instructions,
in writing, on matters pertaining to the Plan and the
Trustee (or Custodian) may rely and act thereon;
5. To maintain all records necessary for the administration
of the Plan;
6. To be responsible for preparing and filing such disclosure
and tax forms as may be required from time-to-time by the
Secretary of Labor or the Secretary of the Treasury; and
<PAGE>
7. To furnish each Employee, Participant or Beneficiary such
notices, information and reports under such circumstances
as may be required by law.
D. The Plan Administrator shall have all of the powers necessary
or appropriate to accomplish his duties under the Plan,
including, but not limited to, the following:
1. To appoint and retain such persons as may be necessary to
carry out the functions of the Plan Administrator;
2. To appoint and retain counsel, specialists or other
persons as the Plan Administrator deems necessary or
advisable in the administration of the Plan;
3. To resolve all questions of administration of the Plan;
4. To establish such uniform and nondiscriminatory rules
which it deems necessary to carry out the terms of the
Plan;
5. To make any adjustments in a uniform and nondiscriminatory
manner which it deems necessary to correct any
arithmetical or accounting errors which may have been made
for any Plan Year; and
6. To correct any defect, supply any omission or reconcile
any inconsistency in such manner and to such extent as
shall be deemed necessary or advisable to carry out the
purpose of the Plan.
8.03 EXPENSES AND COMPENSATION
All reasonable expenses of administration including, but not
limited to, those involved in retaining necessary professional
assistance may be paid from the assets of the Fund.
Alternatively, the Employer may, in its discretion, pay such
expenses. The Employer shall furnish the Plan Administrator with
such clerical and other assistance as the Plan Administrator may
need in the performance of his duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his duties, the
Employer shall supply full and timely information to the Plan
Administrator (or his designated agents) on all matters relating
to the Compensation of all Participants, their regular
employment, retirement, death, Disability or Termination of
Employment, and such other pertinent facts as the Plan
Administrator (or his agents) may require. The Plan Administrator
shall advise the Trustee (or Custodian, if applicable) of such of
the foregoing facts as may be pertinent to the Trustee's (or
Custodian's) duties under the Plan. The Plan Administrator (or
his agents) is entitled to rely on such information as is
supplied by the Employer and shall have no duty or responsibility
to verify such information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 RIGHT OF PROTOTYPE SPONSOR TO AMEND THE PLAN
A. The Employer, by adopting the Plan, expressly delegates to the
Prototype Sponsor the power, but not the duty, to amend the
Plan without any further action or consent of the Employer as
the Prototype Sponsor deems necessary for the purpose of
adjusting the Plan to comply with all laws and regulations
governing pension or profit sharing plans. Specifically, it is
understood that the amendments may be made unilaterally by the
Prototype Sponsor. However, it shall also be understood that
the Prototype Sponsor shall be under no obligation to amend
the Plan documents and the Employer expressly waives any
rights or claims against the Prototype Sponsor for not
exercising this power to amend. For purposes of Prototype
Sponsor amendments, the mass submitter shall be recognized as
the agent of the Prototype Sponsor. If the Prototype Sponsor
does not adopt the amendments made by the mass submitter, it
will no longer be identical to or a minor modifier of the mass
submitter plan.
B. An amendment by the Prototype Sponsor shall be accomplished by
giving written notice to the Employer of the amendment to be
made. The notice shall set forth the text of such amendment
and the date such amendment is to be effective. Such amendment
shall take effect unless within the 30 day period after such
notice is provided, or within such shorter period as the
notice may specify, the Employer gives the Prototype Sponsor
written notice of refusal to consent to the amendment. Such
written notice of refusal shall have the effect of withdrawing
the Plan as a prototype plan and shall cause the Plan to be
considered an individually designed plan. The right of the
Prototype Sponsor to cause the Plan to be amended shall
terminate should the Plan cease to conform as a prototype plan
as provided in this or any other section.
9.02 RIGHT OF EMPLOYER TO AMEND THE PLAN
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement
when such language is necessary to satisfy Section 415 or Section
416 of the Code because of the required aggregation of multiple
plans, and (3) add certain model amendments published by the
Internal Revenue Service which specifically provide that their
adoption will not cause the Plan to be treated as individually
designed. An Employer that amends the Plan for any other reason,
including a waiver of the minimum funding requirement under
Section 412(d) of the Code, will no longer participate in this
prototype plan and will be considered to have an individually
designed plan.
An Employer who wishes to amend the Plan to change the options it
has chosen in the Adoption Agreement must complete and deliver a
new Adoption Agreement to the Prototype Sponsor and Trustee (or
Custodian, if applicable). Such amendment shall become effective
upon execution by the Employer and Trustee (or Custodian).
The Employer further reserves the right to replace the Plan in
its entirety by adopting another retirement plan which the
Employer designates as a replacement plan.
9.03 LIMITATION ON POWER TO AMEND
No amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's accrued benefit.
Notwithstanding the preceding sentence, a Participant's
Individual Account may be reduced to the extent permitted under
Section 412(c)(8) of the Code. For purposes of this paragraph, a
plan amendment which has the effect of decreasing a Participant's
Individual Account or eliminating an optional form of benefit
with respect to benefits attributable to service before the
amendment shall be treated as reducing an accrued benefit.
Furthermore, if the vesting schedule of a Plan is amended, in the
case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective,
the Vested percentage (determined as of such date) of such
Employee's Individual Account derived from Employer Contributions
will not be less than the percentage computed under the Plan
without regard to such amendment.
<PAGE>
9.04 AMENDMENT OF VESTING SCHEDULE
If the Plan's vesting schedule is amended, or the Plan is amended
in any way that directly or indirectly affects the computation of
the Participant's Vested percentage, or if the Plan is deemed
amended by an automatic change to or from a top-heavy vesting
schedule, each Participant with at least 3 Years of Vesting
Service with the Employer may elect, within the time set forth
below, to have the Vested percentage computed under the Plan
without regard to such amendment.
For Participants who do not have at least 1 Hour of Service in
any Plan Year beginning after December 31, 1988, the preceding
sentence shall be applied by substituting "5 Years of Vesting
Service" for "3 Years of Vesting Service" where such language
appears.
The Period during which the election may be made shall commence
with the date the amendment is adopted or deemed to be made and
shall end the later of:
A. 60 days after the amendment is adopted;
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
9.05 PERMANENCY
The Employer expects to continue this Plan and make the necessary
contributions thereto indefinitely, but such continuance and
payment is not assumed as a contractual obligation. Neither the
Adoption Agreement nor the Plan nor any amendment or modification
thereof nor the making of contributions hereunder shall be
construed as giving any Participant or any person whomsoever any
legal or equitable right against the Employer, the Trustee (or
Custodian, if applicable), the Plan Administrator or the
Prototype Sponsor except as specifically provided herein, or as
provided by law.
9.06 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Employer at any time by
appropriate action of its managing body. Such termination shall
be effective on the date specified by the Employer. The Plan
shall terminate if the Employer shall be dissolved, terminated,
or declared bankrupt. Written notice of the termination and
effective date thereof shall be given to the Trustee (or
Custodian, if applicable), Plan Administrator, Prototype Sponsor,
Participants and Beneficiaries of deceased Participants, and the
required filings (such as the Form 5500 series and others) must
be made with the Internal Revenue Service and any other
regulatory body as required by current laws and regulations.
Until all of the assets have been distributed from the Fund, the
Employer must keep the Plan in compliance with current laws and
regulations by (a) making appropriate amendments to the Plan and
(b) taking such other measures as may be required.
9.07 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 9.06, a successor of the
Employer may continue the Plan and be substituted in the place of
the present Employer. The successor and the present Employer (or,
if deceased, the executor of the estate of a deceased
Self-Employed Individual who was the Employer) must execute a
written instrument authorizing such substitution and the
successor must complete and sign a new Adoption Agreement.
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to attain or retain its qualified status, the
Plan will no longer be considered to be part of a prototype plan,
and such Employer can no longer participate under this prototype.
In such event, the Plan will be considered an individually
designed plan.
SECTION TEN MISCELLANEOUS
10.01 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable without
regard to the community property laws of any state.
10.02 HEADINGS
The headings of the Plan have been inserted for convenience of
reference only and are to be ignored in any construction of the
provisions hereof.
10.03 GENDER AND NUMBER
Whenever any words are used herein in the masculine gender they
shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and whenever any
words are used herein in the singular form they shall be
construed as though they were also used in the plural form in all
cases where they would so apply.
10.04 PLAN MERGER OR CONSOLIDATION
In the case of any merger or consolidation of the Plan with, or
transfer of assets or liabilities of such Plan to, any other
plan, each Participant shall be entitled to receive benefits
immediately after the merger, consolidation, or transfer (if the
Plan had then terminated) which are equal to or greater than the
benefits he would have been entitled to receive immediately
before the merger, consolidation, or transfer (if the Plan had
then terminated). The Trustee (or Custodian, if applicable) has
the authority to enter into merger agreements or agreements to
directly transfer the assets of this Plan but only if such
agreements are made with trustees or custodians of other
retirement plans described in Section 401(a) of the Code.
10.05 STANDARD OF FIDUCIARY CONDUCT
The Employer, Plan Administrator, Trustee and any other fiduciary
under this Plan shall discharge their duties with respect to this
Plan solely in the interests of Participants and their
Beneficiaries and with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting
in like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims.
No fiduciary shall cause the Plan to engage in any transaction
known as a "prohibited transaction" under ERISA.
10.06 GENERAL UNDERTAKING OF ALL PARTIES
All parties to this Plan and all persons claiming any interest
whatsoever hereunder agree to perform any and all acts and
execute any and all documents and papers which may be necessary
or desirable for the carrying out of this Plan and any of its
provisions.
<PAGE>
10.07 AGREEMENT BINDS HEIRS, ETC.
This Plan shall be binding upon the heirs, executors,
administrators, successors and assigns, as those terms shall
apply to any and all parties hereto, present and future.
10.08 DETERMINATION OF TOP-HEAVY STATUS
A. For any Plan Year beginning after December 3l, 1983, this Plan
is a Top-Heavy Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and this
Plan is not part of any required aggregation group or
permissive aggregation group of plans;
2. If this Plan is part of a required aggregation group of
plans but not part of a permissive aggregation group and
the top-heavy ratio for the group of plans exceeds 60%;
3. If this Plan is a part of a required aggregation group and
part of a permissive aggregation group of plans and the
top-heavy ratio for the permissive aggregation group
exceeds 60%.
For purposes of this Section 10.08, the following terms shall
have the meanings indicated below:
B. KEY EMPLOYEE - Any Employee or former Employee (and the
beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such
individual's annual compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code an owner (or
considered an owner under Section 318 of the Code) of one of
the 10 largest interests in the Employer if such individual's
compensation exceeds 100% of the dollar limitation under
Section 415(c)(1)(A) of the Code, a 5% owner of the Employer,
or a 1% owner of the Employer who has an annual compensation
of more than $150,000. Annual compensation means compensation
as defined in Section 415(c)(3) of the Code, but including
amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the Employee's
gross income under Section 125, Section 402(a)(8), Section
402(h) or Section 403(b) of the Code. The determination period
is the Plan Year containing the determination date and the 4
preceding Plan Years.
The determination of who is a Key Employee will be made in
accordance with Section 416(i)(1) of the Code and the
regulations thereunder.
C. TOP-HEAVY RATIO
1. If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and
the Employer has not maintained any defined benefit plan
which during the 5-year period ending on the determination
date(s) has or has had accrued benefits, the top-heavy
ratio for this Plan alone or for the required or
permissive aggregation group as appropriate is a fraction,
the numerator of which is the sum of the account balances
of all Key Employees as of the determination date(s)
(including any part of any account balance distributed in
the 5 year period ending on the determination date(s)),
and the denominator of which is the sum of all account
balances (including any part of any account balance
distributed in the 5-year period ending on the
determination date(s)) both computed in accordance with
Section 416 of the Code and the regulations thereunder.
Both the numerator and the denominator of the top-heavy
ratio are increased to reflect any contribution not
actually made as of the determination date, but which is
required to be taken into account on that date under
Section 416 of the Code and the regulations thereunder.
2. If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and
the Employer maintains or has maintained one or more
defined benefit plans which during the 5-year period
ending on the determination date(s) has or has had any
accrued benefits, the top-heavy ratio for any required or
permissive aggregation group as appropriate is a fraction,
the numerator of which is the sum of account balances
under the aggregated defined contribution plan or plans
for all Key Employees, determined in accordance with (1)
above, and the present value of accrued benefits under the
aggregated defined benefit plan or plans for all Key
Employees as of the determination date(s), and the
denominator of which is the sum of the account balances
under the aggregated defined contribution plan or plans
for all Participants, determined in accordance with (1)
above, and the present value of accrued benefits under the
defined benefit plan or plans for all Participants as of
the determination date(s), all determined in accordance
with Section 416 of the Code and the regulations
thereunder. The accrued benefits under a defined benefit
plan in both the numerator and denominator of the
top-heavy ratio are increased for any distribution of an
accrued benefit made in the 5-year period ending on the
determination date.
3. For purposes of (1) and (2) above, the value of account
balances and the present value of accrued benefits will be
determined as of the most recent valuation date that falls
within or ends with the 12-month period ending on the
determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and
second plan years of a defined benefit plan. The account
balances and accrued benefits of a Participant (a) who is
not a Key Employee but who was a Key Employee in a Prior
Year, or (b) who has not been credited with at least one
Hour of Service with any employer maintaining the plan at
any time during the 5-year period ending on the
determination date will be disregarded. The calculation of
the top-heavy ratio, and the extent to which
distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the
Code and the regulations thereunder. Deductible employee
contributions will not be taken into account for purposes
of computing the top-heavy ratio. When aggregating plans
the value of account balances and accrued benefits will be
calculated with reference to the determination dates that
fall within the same calendar year.
The accrued benefit of a Participant other than a Key
Employee shall be determined under (a) the method, if any,
that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer, or (b)
if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under
the fractional rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required aggregation
group of plans plus any other plan or plans of the
Employer which, when considered as a group with the
required aggregation group, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
<PAGE>
5. Required aggregation group: (a) Each qualified plan of
the Employer in which at least one Key Employee
participates or participated at any time during the
determination period (regardless of whether the Plan has
terminated) and (b) any other qualified plan of the
Employer which enables a plan described in (a) to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
6. Determination date: For any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year.
For the first Plan Year of the Plan, the last day of that
year.
7. Valuation date: For purposes of calculating the top-heavy
ratio, the valuation date shall be the last day of each
Plan Year.
8. Present value: For purposes of establishing the "present
value" of benefits under a defined benefit plan to compute
the top-heavy ratio, any benefit shall be discounted only
for mortality and interest based on the interest rate and
mortality table specified for this purpose in the defined
benefit plan.
10.09 SPECIAL LIMITATIONS FOR OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan
is established and one or more other trades or businesses, this
Plan and the plan established for other trades or businesses
must, when looked at as a single plan, satisfy Sections 401(a)
and (d) of the Code for the employees of those trades or
businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must
be included in a plan which satisfies Sections 401(a) and (d) of
the Code and which provides contributions and benefits not less
favorable than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans
of two or more trades or businesses which are not controlled and
the individual controls a trade or business, then the
contributions or benefits of the employees under the plan of the
trade or business which is controlled must be as favorable as
those provided for him under the most favorable plan of the trade
or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or
two or more Owner-Employees, will be considered to control a
trade or business if the Owner-Employee, or two or more
Owner-Employees, together:
A. own the entire interest in a unincorporated trade or business,
or
B. in the case of a partnership, own more than 50% of either the
capital interest or the profit interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two
or more Owner-Employees, shall be treated as owning any interest
in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more
Owner-Employees, are considered to control within the meaning of
the preceding sentence.
10.10 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to
assignment or alienation, either voluntarily or involuntarily.
The preceding sentence shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order.
unless such order is determined to be a qualified domestic
relations order, as defined in Section 414(p) of the Code.
Generally, a domestic relations order cannot be a qualified
domestic relations order until January 1, 1985. However, in the
case of a domestic relations order entered before such date, the
Plan Administrator:
(1) shall treat such order as a qualified domestic relations
order if such Plan Administrator is paying benefits pursuant
to such order on such date, and
(2) may treat any other such order entered before such date as a
qualified domestic relations order even if such order does
not meet the requirements of Section 414(p) of the Code.
#709(1/94)J92 (C)1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
- --------------------------------------------------------------------------------
POST OFFICE BOX 449, BOSTON, MASSACHUSETTS 02117 800-345-4048
KEOPLAN94
<PAGE>
The CGM Funds
Adoption Agreement
Simplified Standardized
Profit Sharing Plan
<PAGE>
INSTRUCTIONS FOR COMPLETING ADOPTION AGREEMENT
SIMPLIFIED STANDARDIZED PROFIT SHARING PLAN AND TRUST
These instructions are designed to help you, the employer, along
with your attorney and/or tax advisor, complete the Adoption
Agreement for the Qualified Retirement Plan. The instructions are
meant to be used only as a general guide and are not intended as
a substitute for qualified legal and tax advisors.
If you wish to have us, the financial organization sponsoring
this prototype plan, help you fill out the Adoption Agreement, we
will do so. However, we recommend that you obtain the advice of
your legal or tax advisor before you sign the Adoption Agreement.
This Adoption Agreement has been designed for easy completion.
There is one page (an original plus two carbonless copies) which
require your completion. Insert the adoption agreement into a
typewriter and follow the section instructions to complete. When
finished, detach at the top and you will have three copies.
EMPLOYER Fill in the requested information. The "Federal Tax
INFORMATION Identification Number" is the tax identification number assigned
to your business. If your business does not have a Federal Tax
Identification Number, complete and file an Internal Revenue
Service (IRS) Form SS4 to obtain a number. The IRS Form SS4 can
be obtained from an IRS office or from your tax advisor. If you
have already filed a Form SS4, print "Applied for" on the
"Federal Tax Identification Number" line. After you receive a tax
identification number, be sure to let our financial organization
know what that number is. In the space marked "Nature of
Business," accurately describe the type of business, (e.g., radio
and TV repair, agricultural, etc.). The "Plan Sequence Number" is
used for annual reporting to the IRS. The IRS uses this number to
identify your plan. For example, if this is the fourth plan you
have ever opened, the Plan Sequence Number would be 004 and so
on.
EFFECTIVE This profit sharing plan is either a new plan (an initial
DATES adoption) or an amendment and restatement of an existing profit
sharing plan.
If this is a new profit sharing plan, check Option A and fill in
the effective date. The effective date is usually the first day
of the plan year in which this Adoption Agreement is signed. For
example, if an employer maintains a plan on a calendar year basis
and this Adoption Agreement is signed on September 24, 1991, the
effective date would be January 1, 1991.
If the reason you are adopting this plan is to amend and replace
an existing profit sharing plan, check Option B. The existing
profit sharing plan which will be replaced is called a "prior
plan" You will need to know the effective date of the prior
plan. The best way to determine its effective date is to refer to
the prior plan adoption agreement. The effective date of this
amendment and restatement is usually the first day of the plan
year in which the Adoption Agreement is signed. However, if you
are adopting this plan to update a prior plan for changes brought
about by the Tax Reform Act of 1986 (and other recent changes
which apply to qualified plans), the effective date will be the
first day of the plan year which begins in 1989 (January 1,1989
for a calendar year plan).
PLAN NOTE: This section should be completed even if you do not have
PROVISIONS employees.
Within limits, you as the employer can specify the number of
years your employees must work for you and the age they must
attain before they are eligible to participate in this plan. Note
that the eligibility requirements which you set up for the plan
also apply to you.
Suppose, for example, you establish a service requirement of two
years and an age requirement of 21. In that case, only those
employees (including yourself) who have worked for you for two
years and are at least 21 years old are eligible to participate
in this plan.
PART A. YEARS OF ELIGIBILITY SERVICE REQUIREMENT
Fill in the number of years of service (no more than 2).
This number must be either 0,1, or 2.
PART B. AGE REQUIREMENT
Fill in the age an employee must attain (no more than 21)
to be eligible to participate in the plan.
PART F. RETIREMENT EQUITY ACT SAFE HARBOR
As a general rule, the Retirement Equity Act requires
that a distribution from a plan to a participant be made
in the form of a joint and survivor annuity purchased
from an insurance company, unless the participant elects
otherwise and his or her spouse consents. However, the
Retirement Equity Act allows employers who maintain
certain profit sharing plans to elect to have a safe
harbor rule apply. If you check "yes" indicating that the
safe harbor rule applies, then payouts from the plan to
participants and beneficiaries will not be subject to the
annuity requirements.
<PAGE>
EMPLOYER An authorized representative of the employer must sign and date
SIGNATURE the Adoption Agreement.
TRUSTEE OR A trustee or custodian must be named for this plan.
CUSTODIAN
If the financial organization will be acting as trustee or
custodian, the financial organization should fill in its name.
The financial organization should check the box if it will be
acting as trustee with full trust powers.
If an individual (e.g., the employer, partners, or an appointed
individual) will be acting as individual trustee, the
individual's name and signature should be entered.
PROTOTYPE The prototype sponsor must fill in its name, address and
SPONSOR telephone number.
ADDITIONAL This plan is a standardized plan under applicable IRS procedures.
PLANS An employer who adopts a standardized plan generally does not
have to request a ruling from a Key District Office of the IRS
(called a determination letter) that the plan, under facts and
circumstances unique to that particular employer, meets the
requirements for qualification under the tax laws and
regulations.
This section states an exception to the procedures for
standardized plans, namely, if you maintain another plan (other
than a paired standardized money purchase pension plan using the
same Basic Plan Document), you must obtain a determination
letter if you wish to obtain assurance that the plan is
qualified.
LIMITATION ON You must read and complete this section if, in addition to the
ALLOCATIONS - plan:
MORE THAN 1. You ever maintained a defined benefit plan, or
ONE PLAN 2. You currently maintain an individually designed plan.
Individually designed plans are not master or prototype plans,
but rather, plans written for just one particular employer.
<PAGE>
T H E C G M F U N D S
QUALIFIED SIMPLIFIED STANDARDIZED PROFIT SHARING PLAN
- --------------------------------------------------------------------------------
Retirement Plan ADOPTION AGREEMENT
- --------------------------------------------------------------------------------
EMPLOYER Name of Employer Telephone
INFORMATION -------------------------- -------------
Business Address
-------------------------------------------------
City State Zip
------------------------- ---- ----------------------
Federal Tax
Identification Number Income Tax Year End
------------- -----------
(month)(day)
Type of Business (Check only one) [ ] Sole Proprietorship [ ]
Partnership [ ] Corporation [ ] Other (Specify)
-----------------
Plan Sequence No. Enter 001 if this is the first qualified
--------
plan the Employer has ever maintained, enter 002 if it is the
second, etc.
For a Plan which covers only the owner of the business, please
provide the following information about the owner:
Social Security No. Date Business Established
---------- ----------
Date of Birth Marital Status
---------------- ----------------------
Home Address
-----------------------------------------------------
EFFECTIVE Check and complete Option A or B
DATES
OPTION A. [ ] This is the initial adoption of a profit sharing plan by the
Employer. The Effective Date of this Plan is 19 .
NOTE: The effective date is usually the first day of the Plan Year
in which this Adoption Agreement is signed.
OPTION B. [ ] This is an amendment and restatement of an existing profit
sharing plan (a prior plan). NOTE: The effective date is usually
the first day of the Plan Year in which this Adoption Agreement is
signed.
The Prior Plan was initially effective on , 19
---------------- ---
The Effective Date of this amendment and restatement
is , 19
---------------- ---
PLAN
PROVISIONS Complete Parts A through F
PART A. Service Requirement: An Employee will be eligible to become a
Participant in the Plan after completing (enter 0,
1 or 2) Years of Eligibility Service. NOTE: If left blank, the
Years of Eligibility Service required will be deemed to be 0.
PART B. Age Requirement: An Employee will be eligible to become a
Participant in the Plan after attaining age (no more
than 21). NOTE: If left blank, it will be deemed there is no age
requirement for eligibility.
PART C. 100% Vesting: A Participant shall be fully Vested at all times in
his or her Individual Account.
PART D. Normal Retirement Age: The Normal Retirement Age under the Plan
is age 59 1/2.
PART E. Contribution Formula: For each Plan Year the Employer will
contribute an amount to be determined from year to year. Such
contribution shall be allocated to the Individual Accounts of
qualifying Participants in the ratio that each qualifying
Participant's Compensation for the Plan Year bears to the total
Compensation of all qualifying Participants for the Plan Year.
PART F. Retirement Equity Act Safe Harbor: Will the safe harbor provisions
of Section 6.05(F) apply? [ ] Yes [ ]No
NOTE: If left blank, it will be deemed, yes.
EMPLOYER I am an authorized representative of the Employer named above and
SIGNATURE I state the following:
Important:
Please read 1. I acknowledge that I have relied upon my own advisors
before regarding the completion of this Adoption Agreement and the legal
signing and tax implications of adopting this Plan.
2. I understand that my failure to properly complete this
Adoption Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer Date Signed
------------------ ------------
Type Name
-------------------------------
TRUSTEE OR STATE STREET BANK AND TRUST COMPANY,
CUSTODIAN Trustee or Custodian BOSTON, MA
--------------------------------------
Signature [x]Check this box
--------------------------------------- only if a
Type Name financial
-------------------------------------- organization
is named as
Trustee and it
has full trust
powers.
PROTOTYPE Name of Telephone
SPONSOR Prototype Sponsor THE CGM FUNDS Number 800-345-4048
------------------- ----------------
Address P.O. BOX 449, BOSTON, MA 02117
---------------------------------------------------------
ADDITIONAL An Employer who has ever maintained or who later adopts any plan
PLANS (including a welfare benefit fund, as defined in Section 419(e)
of the Code, which provides post-retirement medical benefits
allocated to separate accounts for key employees as defined in
Section 419A(d)(3) of the Code or an individual medical account,
as defined in Section 415(l)(2) of the Code) in addition to this
Plan (other than a paired standardized money purchase pension plan
using Basic Plan Document No. 03) may not rely on the opinion
letter issued by the National Office of the internal Revenue
Service as evidence that this Plan is qualified under Section 401
of the Code. If the Employer who adopts or maintains multiple
plans wishes to obtain reliance that the Employer's plan(s) are
qualified, application for a determination letter should be made
to the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
IMPORTANT: Please save a copy of this agreement with your
permanent records.
#725(12/92)L90 (C)1992 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SIMPLIFIED STANDARDIZED PROFIT SHARING PLAN
ADOPTION AGREEMENT -----------------------------------
LIMITATION More Than One Plan
ON
ALLOCATIONS If you maintain or ever maintained another qualified plan (other
than a paired standardized money purchase pension plan using Basic
Plan Document No. 03) in which any Participate in this Plan is (or
was) a participant or could become a participant, you must
complete this section. You must also complete this section if you
maintain a welfare benefit fund, as defined in Section 419(e) of
the Code, or an individual medical account, as defined in Section
415(1)(2) of the Code, under which amounts are treated as annual
additions with respect to any Participant in this Plan.
PART A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan:
1. [ ] The provisions of Sections 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans
will limit total annual additions to the maximum
permissible amount, and will properly reduce any excess
amounts, in a manner that precludes Employer
discretion.)
---------------------------------------------
---------------------------------------------------------
PART B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of
section 415(e) of the Code. Such language must preclude Employer
discretion (Complete)
-------------------------------------------
PART C. The limitation year is the following 12-consecutive month
period:
---------------------
KEOADOPT
PS/SIM
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
Plan Description: Prototype Standardized Profit Sharing Plan
FFN: 50295842702-003 Case: 9201730 EIN: 04-3076053 Washington, DC 20224
BPD: 02 Plan: 003 Letter Serial No: D260703a
Person to Contact: Ms. Arrington
CAPITAL GROWTH MANAGEMENT
Telephone Number (202) 622-8173
P O BOX 449
Refer Reply to E:EP:Q:ICU
BOSTON, MA 02117
Date 11/03/92
</TABLE>
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one or
more employees who are covered by this plan, other than a specified paired plan
within the meaning of section 7 of Rev. Proc. 89-9, 1989-1 C.B. 780; or (2)
after December 31, 1985, the employer maintains a welfare benefit fund defined
in Code section 419(e), which provides postretirement medical benefits allocated
to separate accounts for key employees as defined in Code section 419A(d)(3).
An employer that has adopted a standardized plan may not rely on this opinion
letter with respect to: (1) whether any amendment or series of amendments to the
plan satisfies the nondiscrimination requirements of section 1.401(a)(4)-5(a) of
the regulations, except with respect to plan amendments granting past service
that meet the safe harbor described in section 1.401(a)(4)-5(a)(5) and are not
part of a pattern of amendments that significantly discriminates in favor of
highly compensated employees; or (2) whether the plan satisfies the effective
availability requirement of section 1.401(a)(4)-4(c) of the regulations with
respect to any benefit, right or feature.
An employer that has adopted a standardized plan as an amendment to a plan other
than a standardized plan may not rely on this opinion letter with respect to
whether a benefit, right or other feature that is prospectively eliminated
satisfies the current availability requirements of section 1.401(a)-4 of the
regulations.
SIMDETLTR/PS003
<PAGE>
CAPITAL GROWTH
MANAGEMENT
FFN: 50295842702-003
Page 2
The employer may request a determination (1) as to whether the plan, considered
with all related qualified plans and, if appropriate, welfare benefit funds,
satisfies the requirements of Code section 401(a)(16) as to limitations on
benefits and contributions in Code section 415; (2) regarding the
nondiscriminatory effect of grants of past service, and (3) with respect to
whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for purposes of section
401(a) of the Code unless the terms of the plan, as adopted or amended, that
pertain to the requirements of sections 401(a)(4), 401(a)(5), 401(a)(17),
401(l), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986
or subsequent legislation, (a) are made effective retroactively to the first day
of the first plan year beginning after December 31, 1988 (or such other date on
which these requirements first became effective with respect to this plan), or
(b) are made effective no later than the first day on which the employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the plan
constitute such an interpretation.
Because you submitted this plan for approval after March 31, 1991, the continued
and interim reliance provisions of section 13 of Rev. Proc. 89-9, 1989-1 C.B.
780, are not applicable. However, solely for purposes of section 17.03 of Rev.
Proc. 89-9, you are deemed to have submitted this plan prior to March 31, 1991,
and therefore the extended reliance provisions of section 17.03 are applicable.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ Jobn Swieca
---------------------
Chief, Employee Plans Qualifications Branch
<PAGE>
The CGM Funds
ADOPTION AGREEMENT
SIMPLIFIED STANDARDIZED
MONEY PURCHASE PENSION PLAN
<PAGE>
INSTRUCTIONS FOR COMPLETING ADOPTION AGREEMENT
SIMPLIFIED STANDARDIZED MONEY PURCHASE PENSION PLAN AND TRUST
These instructions are designed to help you, the employer, along
with your attorney and/or tax advisor, complete the Adoption
Agreement for the Qualified Retirement Plan. The instructions are
meant to be used only as a general guide ant are not intended as
a substitute for qualified legal and tax advisors.
If you wish to have us, the financial organization sponsoring
this prototype plan, help you fill out the Adoption Agreement, we
will do so. However, we recommend that you obtain the advice of
your legal or tax advisor before you sign the Adoption Agreement.
This Adoption Agreement has been designed for easy completion.
There is one page (an original plus two carbonless copies) which
require your completion. Insert the adoption agreement into a
typewriter and follow the section instructions to complete. When
finished, detach at the top and you will have three copies.
EMPLOYER Fill in the requested information. The "Federal Tax
INFORMATION Identification Number" is the tax identification number assigned
to your business. If your business does not have a Federal Tax
Identification Number, complete and file an Internal Revenue
Service (IRS) Form SS4 to obtain a number. The IRS Form SS4 can
be obtained from an IRS office or from your tax advisor. If you
have already filed a Form SS4, print "Applied for" on the
"Federal Tax Identification Number" line. After you receive a tax
identification number, be sure to let our financial organization
know what that number is. In the space marked "Nature of
Business," accurately describe the type of business, (e.g., radio
and TV repair, agricultural, etc.). The "Plan Sequence Number" is
used for annual reporting to the IRS. The IRS uses this number to
identify your plan. For example, if this is the fourth plan you
have ever opened, the Plan Sequence Number would be 004 and so
on.
EFFECTIVE This money purchase pension plan is either a new plan (an initial
DATES adoption) or an amendment and restatement of an existing money
purchase pension plan.
If this is a new money purchase pension plan, check Option A and
fill in the effective date. The effective date is usually the
first day of the plan year in which this Adoption Agreement is
signed. For example, if an employer maintains a plan on a
calendar year basis and this Adoption Agreement is signed on
September 24, 1991, the effective date would be January 1, 1991.
If the reason you are adopting this plan is to amend and replace
an existing money purchase pension plan, check Option B. The
existing money purchase pension plan which will be replaced is
called a "prior plan." You will need to know the effective date
of the prior plan. The best way to determine its effective date
is to refer to the prior plan adoption agreement. The effective
date of this amendment and restatement is usually the first day
of the plan year in which the Adoption Agreement is signed.
However, if you are adopting this plan to update a prior plan for
changes brought about by the Tax Reform Act of 1986 (and other
recent changes which apply to qualified plans), the effective
date will be the first day of the plan year which begins in 1989
(January 1, 1989 for a calendar year plan).
PLAN NOTE: This section should be completed even if you do not have
PROVISIONS employees.
Within limits, you as the employer can specify the number of
years your employees must work for you and the age they must
attain before they are eligible to participate in this plan. Note
that the eligibility requirements which you set up for the plan
also apply to you.
Suppose, for example, you establish a service requirement of two
years and an age requirement of 21. In that case, only those
employees (including yourself) who have worked for you for two
years and are at least 21 years old are eligible to participate
in this plan.
PART A. YEARS OF ELIGIBILITY SERVICE REQUIREMENT
Fill in the number of years of service (no more than 2).
This number must be either 0, 1, or 2.
PART B. AGE REQUIREMENT
Fill in the age an employee must attain (no more than 21)
to be eligible to participate in the plan.
PART C. CONTRIBUTION FORMULA
Fill in the percentage of each participant's compensation
which you will contribute to the plan each year.
<PAGE>
EMPLOYER An authorized representative of the employer must sign and date
SIGNATURE the Adoption Agreement.
TRUSTEE OR A trustee or custodian must be named for this plan.
CUSTODIAN
If the financial organization will be acting as trustee or
custodian, the financial organization should fill in its name.
The financial organization should check the box if it will be
acting as trustee with full trust powers.
If an individual (e.g., the employer, partners, or an appointed
individual) will be acting as individual trustee, the
individual's name and signature should be entered.
PROTOTYPE The prototype sponsor must fill in its name, address and
SPONSOR telephone number.
ADDITIONAL This plan is a standardized plan under applicable IRS procedures.
PLANS An employer who adopts a standardized plan generally does not
have to request a ruling from a Key District Office of the IRS
(called a determination letter) that the plan, under facts and
circumstances unique to that particular employer, meets the
requirements for qualification under the tax laws and
regulations.
This section states an exception to the procedures for
standardized plans, namely, if you maintain another plan (other
than a paired standardized money purchase pension plan using the
same Basic Plan Document), you must obtain a determination
letter if you wish to obtain assurance that the plan is
qualified.
LIMITATION ON You must read and complete this section if, in addition to the
ALLOCATIONS - plan:
MORE THAN 1. You ever maintained a defined benefit plan, or
ONE PLAN 2. You currently maintain an individually designed plan.
Individually designed plans are not master or prototype plans,
but rather, plans written for just one particular employer.
<PAGE>
T H E C G M F U N D S
QUALIFIED SIMPLIFIED STANDARDIZED MONEY PURCHASE PENSION PLAN
- --------------------------------------------------------------------------------
RETIREMENT PLAN ADOPTION AGREEMENT
- --------------------------------------------------------------------------------
EMPLOYER
INFORMATION
Name of Employer ____________________________________ Telephone ________________
Business Address _______________________________________________________________
City __________________________________________ State _______ Zip ______________
Federal Tax Identification Number______________ Income Tax Year End_____________
(month)(day)
Type of Business (Check only one) [ ] Sole Proprietorship [ ] Partnership [ ]
Corporation [ ] Other (Specify)_____________________________________________
Plan Sequence No._______ Enter 001 if this is the first qualified plan the
Employer has ever maintained, enter 002 if it is the second, etc.
For a Plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No.__________________ Date Business Established_________________
Date of Birth________________________ Marital Status ___________________________
Home Address ___________________________________________________________________
EFFECTIVE DATES
Check and complete Option A or B
OPTION A.
[ ] This is the initial adoption of a money purchase pension plan by the
Employer.
The Effective Date of this Plan is _____________________ 19_____ .
NOTE: The effective date is usually the first day of the Plan Year in which
this Adoption Agreement is signed.
OPTION B.
[ ] This is an amendment and restatement of an existing money purchase pension
plan (a prior plan). NOTE: The effective date is usually the first day of
the Plan Year in which this Adoption Agreement is signed.
The Prior Plan was initially effective on______________ , 19____
The Effective Date of this amendment and restatement is____________ , 19____
PLAN
PROVISIONS
Complete Parts A through E
PART A.
Service Requirement: An Employee will be eligible to become a Participant in the
Plan after completing__________(enter 0, 1 or 2) Years of Eligibility Service.
NOTE: If left blank, the Years of Eligibility Service required will be deemed to
be 0.
PART B.
Age Requirement: An Employee will be eligible to become a Participant in the
Plan after attaining age________(no more than 21). NOTE: If left blank, it will
be deemed there is no age requirement for eligibility.
PART C.
100% Vesting: A Participant shall be fully Vested at all times in his or her
Individual Account.
PART D.
Normal Retirement Age: The Normal Retirement Age under the Plan is age 59 1/2.
PART E.
Contribution Formula: For each Plan Year the Employer will contribute an amount
equal to ______% (not to exceed 25%) of the qualifying Participant's
Compensation for the Plan Year.
EMPLOYER
SIGNATURE
Important: Please read before signing
I am an authorized representative of the Employer named above and I state the
following:
1. I acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal and tax implications of
adopting this Plan.
2. I understand that my failure to properly complete this Adoption Agreement may
result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any amendments made
to the Plan and will notify me should it discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the corresponding Basic
Plan Document.
Signature for Employer___________________________ Date Signed___________________
Type Name_______________________________________________________________________
TRUSTEE OR
CUSTODIAN
Trustee or Custodian [x] Check this box only
STATE STREET BANK AND TRUST COMPANY, BOSTON, MA if a financial organization
Signature_________________________________ is named as Trustee and it
Type Name ________________________________ has full trust powers.
PROTOTYPE
SPONSOR
Named of Prototype Sponsor THE CGM FUNDS Telephone Number 800-345-4048
Address P.O. BOX 449, BOSTON, MA 02117
ADDITIONAL
PLANS
An Employer who has ever maintained or who later adopts any plan (including a
welfare benefit fund, as defined in Section 419(e) of the Code, which provides
post-retirement medical benefits allocated to separate accounts for key
employees as defined in Section 419A(d)(3) of the Code or an individual medical
account, as defined in Section 415(l)(2) of the Code) in addition to this Plan
(other than a paired standardized money purchase pension plan using Basic Plan
Document No. 03) may not rely on the opinion letter issued by the National
Office of the Internal Revenue Service as evidence that this Plan is qualified
under Section 401 of the Code. If the Employer who adopts or maintains multiple
plans wishes to obtain reliance that the Employer's plan(s) are qualified,
application for a determination letter should be made to the appropriate Key
District Director of Internal Revenue. This Adoption Agreement may be used only
in conjunction with Basic Plan Document No. 03.
IMPORTANT: Please save a copy of this agreement with your permanent records.
#726(12/92)L90 (C)1992 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SIMPLIFIED STANDARDIZED MONEY PURCHASE PENSION PLAN_____________________________
ADOPTION AGREEMENT
LIMITATION ON
ALLOCATIONS More Than One Plan
If you maintain or ever maintained another qualified plan (other than a paired
standardized money purchase pension plan using Basic Plan Document No. 03) in
which any Participate in this Plan is (or was) a participant or could become a
participant, you must complete this section. You must also complete this section
if you maintain a welfare benefit fund, as defined in Section 419(e) of the
Code, or an individual medical account, as defined in Section 415(l)(2) of the
Code, under which amounts are treated as annual additions with respect to any
Participant in this Plan.
PART A.
If the Participant is covered under another qualified defined contribution plan
maintained by the Employer, other than a master or prototype plan:
1. [ ] The provisions of Sections 3.05(B)(1) through 3.05(B)(6) of the Plan will
apply as if the other plan were a master or prototype plan.
2. [ ] Other method. (Provide the method under which the plans will limit total
annual additions to the maximum permissible amount, and will properly
reduce any excess amounts, in a manner that precludes Employer
discretion.)_____________________________________________________________
_________________________________________________________________________
PART B.
If the Participant is or has ever been a participant in a defined benefit plan
maintained by the Employer, the Employer will provide below the language which
will satisfy the 1.0 limitation of section 415(e) of the Code. Such language
must preclude Employer discretion (Complete)____________________________________
________________________________________________________________________________
PART C.
The limitation year is the following 12-consecutive month period:_______________
KEOADOPT
MP/SIM
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
Plan Description: Prototype Standardized Money Purchase Pension Plan
FFN: 50295842702-004 Case: 9201731 EIN: 04-3076053 Washington, DC 20224
BPD: 02 Plan: 004 Letter Serial No: D260704a
Person to Contact: Ms. Arrington
CAPITAL GROWTH MANAGEMENT
Telephone Number (202) 622-8173
P O BOX 449
Refer Reply to E:EP:Q:ICU
BOSTON, MA 02117
Date 11/03/92
</TABLE>
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one or
more employees who are covered by this plan, other than a specified paired plan
within the meaning of section 7 of Rev. Proc. 89-9, 1989-1 C.B. 780; or (2)
after December 31, 1985, the employer maintains a welfare benefit fund defined
in Code section 419(e), which provides postretirement medical benefits allocated
to separate accounts for key employees as defined in Code section 419A(d)(3).
An employer that has adopted a standardized plan may not rely on this opinion
letter with respect to: (1) whether any amendment or series of amendments to the
plan satisfies the nondiscrimination requirements of section 1.401(a)(4)-5(a) of
the regulations, except with respect to plan amendments granting past service
that meet the safe harbor described in section 1.401(a)(4)-5(a)(5) and are not
part of a pattern of amendments that significantly discriminates in favor of
highly compensated employees; or (2) whether the plan satisfies the effective
availability requirement of section 1.401(a)(4)-4(c) of the regulations with
respect to any benefit, right or feature.
An employer that has adopted a standardized plan as an amendment to a plan other
than a standardized plan may not rely on this opinion letter with respect to
whether a benefit, right or other feature that is prospectively eliminated
satisfies the current availability requirements of section 1.401(a)-4 of the
regulations.
SIMDETLTR/MP004
<PAGE>
CAPITAL GROWTH
MANAGEMENT
FFN: 50295842702-004
Page 2
The employer may request a determination (1) as to whether the plan, considered
with all related qualified plans and, if appropriate, welfare benefit funds,
satisfies the requirements of Code section 401(a)(16) as to limitations on
benefits and contributions in Code section 415; (2) regarding the
nondiscriminatory effect of grants of past service, and (3) with respect to
whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for purposes of section
401(a) of the Code unless the terms of the plan, as adopted or amended, that
pertain to the requirements of sections 401(a)(4), 401(a)(5), 401(a)(17),
401(l), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986
or subsequent legislation, (a) are made effective retroactively to the first day
of the first plan year beginning after December 31, 1988 (or such other date on
which these requirements first became effective with respect to this plan), or
(b) are made effective no later than the first day on which the employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the plan
constitute such an interpretation.
Because you submitted this plan for approval after March 31, 1991, the continued
and interim reliance provisions of section 13 of Rev. Proc. 89-9, 1989-1 C.B.
780, are not applicable. However, solely for purposes of section 17.03 of Rev.
Proc. 89-9, you are deemed to have submitted this plan prior to March 31, 1991,
and therefore the extended reliance provisions of section 17.03 are applicable.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ John Swieca
---------------------
Chief, Employee Plans Qualifications Branch
<PAGE>
----------
QUALIFIED
RETIREMENT
PLAN
----------
---------------------------
ADOPTION AGREEMENT
STANDARDIZED
MONEY PURCHASE PENSION PLAN
---------------------------
<PAGE>
INSTRUCTIONS FOR COMPLETING ADOPTION AGREEMENT
STANDARDIZED MONEY PURCHASE PENSION PLAN AND TRUST
These instructions are designed to help you, the employer, along
with your attorney and/or tax advisor, complete the Adoption
Agreement for the Qualified Retirement Plan. The instructions are
meant to be used only as a general guide and are not intended as a
substitute for qualified legal and tax advisors.
SECTION 1 EMPLOYER INFORMATION
Fill in the requested information. The "Federal Tax Identification
Number" is the tax identification number assigned to your business.
If your business does not have a Federal Tax Identification Number,
complete and file an Internal Revenue Service (IRS) Form SS4 to
obtain a number. The IRS Form SS4 can be obtained from an IRS office
or from your tax advisor. If you have already filed a Form SS4,
print "Applied for" on the "Federal Tax Identification Number" line.
After you receive a tax identification number, be sure to let our
financial organization know what that number is. In the space marked
"Nature of Business," accurately describe the type of business
(e.g., radio and TV repair, agricultural, etc.). The "Plan Sequence
Number" is used for annual reporting to the IRS. The IRS uses this
number to identify your plan. For example, if this is the fourth
plan you have ever opened, the Plan Sequence Number would be 004 and
so on.
SECTION 2 EFFECTIVE DATES
This money purchase pension plan is either a new plan (an initial
adoption) or an amendment and restatement of an existing money
purchase pension plan.
If this is a new money purchase pension plan, check Option A and
fill in the effective date. The effective date is usually the first
day of the plan year in which this Adoption Agreement is signed. For
example, if an employer maintains a plan on a calendar year basis
and this Adoption Agreement is signed on September 24, 1991, the
effective date would be January 1, 1991.
If the reason you are adopting this plan is to amend and replace an
existing money purchase pension plan, check Option B. The existing
money purchase pension plan which will be replaced is called a
"prior plan." You will need to know the effective date of the prior
plan. The best way to determine its effective date is to refer to
the prior plan adoption agreement. The effective date of this
amendment and restatement is usually the first day of the plan year
in which the Adoption Agreement is signed. However, if you are
adopting this plan to update a prior plan for changes brought about
by the Tax Reform Act of 1986 (and other recent changes which apply
to qualified plans), the effective date will be the first day of the
plan year which begins in 1989 (January 1, 1989 for a calendar year
plan).
SECTION 3 ELIGIBILITY REQUIREMENTS
NOTE: Section 3 should be completed even if you do not have
employees.
Within limits, you as the employer can specify the number of years
your employees must work for you and the age they must attain before
they are eligible to participate in this plan. Note that the
eligibility requirements which you set up for the plan also apply to
you.
Suppose, for example, you establish a service requirement of two
years and an age requirement of 21. In that case, only those
employees (including yourself) who have worked for you for two years
and are at least 21 years old are eligible to participate in this
plan.
PART A. YEARS OF ELIGIBILITY SERVICE REQUIREMENT
Fill in the number of years of service (no more than 2). This number
must be either 0,1, or 2.
PART B. AGE REQUIREMENT
Fill in the age an employee must attain (no more than 21) to be
eligible to participate in the plan.
PART C. CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE
Generally you are permitted to exclude certain employees covered by
the terms of a collective bargaining agreement (e.g., a union
agreement) where retirement benefits were bargained for and
nonresident aliens who have no U.S. income. If you wish to exclude
those employees, check the box under Section 3, Part C.
SECTION 4 EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
Because a money purchase pension plan has a fixed contribution, the
percent of the contribution must be completed.
Option A. Check Option A if you wish to have the contribution allocated to all
qualifying participants based on their compensation for the plan
year.
Option B. Check Option B and complete the percentage in Step 1 if the plan is
to be integrated. Generally, integration is a method of giving some
participants in the plan an extra contribution allocation. Because
of the complexity of integration, you should consult your tax
advisor on this issue.
SECTION 5 VESTING
The vesting schedule determines how fast the money in a
participant's plan account becomes nonforfeitable. For example,
suppose you select the vesting schedule of Option B. If a
participant quits work after 4 years of service, the participant
would be entitled to 60% of his or her plan account The remaining
40% would remain in the plan and become a forfeiture.
NOTE: If you choose more than 1 year of service as an eligibility
requirement in Section 3, Part A, you must choose the 100% vesting
schedule in Section 5 (Option C).
SECTION 6 NORMAL RETIREMENT AGE
Fill in the desired normal retirement age. When a participant
attains normal retirement age, he or she can request a distribution
from the plan.
<PAGE>
SECTION 7 HOURS REQUIRED
Part A. In the blank provided, fill in the number of hours of service
which shall be required to constitute a year of service for vesting
and eligibility. This can be no more than 1,000. If you fail to fill
in the blank, the number of hours required will be deemed to be
1,000. Suppose, for example, you fill in 1,000 hours of service.
This means any employee who works at least 1,000 hours during the
appropriate period will be credited with a year of service for the
purposes of vesting, eligibility, etc. On the other hand, if the
employee works less than 1,000 hours, he or she will not be credited
with a year of service for those purposes.
Part B. In the blank provided, fill in the number of hours of service
which must be exceeded to avoid a break in service. This can be no
more than 500. If you fail to fill in the blank, the number of hours
required to avoid a break in service will be deemed to be 500.
SECTION 8 OTHER OPTIONS
PART A. Check whether or not you wish to allow loans to participants. Note
that loans cannot be made to an owner of an unincorporated business
(whether a sole proprietor or a partner) or an owner of a Subchapter
S corporation.
Part B. Check whether or not you wish to allow each participant to direct
the investment of his or her own plan account.
SECTION 9 JOINT AND SURVIVOR ANNUITY
A distribution to a participant must generally be made in the form
of a joint and survivor annuity purchased from an insurance company.
When a participant who is receiving payments under a joint and
survivor annuity dies, the participant's spouse will receive a
survivor annuity. This section determines the percentage of the
survivor annuity. If this is an amendment and restatement of a money
purchase pension plan that was subject to the joint and survivor
annuity rules, this percentage must be at least as great as the
survivor annuity percentage in the prior plan.
SECTION 10 ADDITIONAL PLANS
This plan is a standardized plan under applicable IRS procedures. An
employer who adopts a standardized plan generally does not have to
request a ruling from a Key District Office of the IRS (called a
determination letter) that the plan, under facts and circumstances
unique to that particular employer, meets the requirements for
qualification under the tax laws and regulations.
Section 10 states an exception to the procedures for standardized
plans, namely, if you maintain another plan (other than a paired
standardized profit sharing plan using the same Basic Plan
Document), you must obtain a determination letter if you wish to
obtain assurance that the plan is qualified.
SECTION 11 EMPLOYER SIGNATURE
An authorized representative of the employer must sign and date the
Adoption Agreement.
SECTION 12 TRUSTEE OR CUSTODIAN
A trustee or custodian must be named for this plan.
If the financial organization will be acting as trustee or
custodian, the financial organization should complete Option A.
Section 5.03 of the Basic Plan Document will apply if "Custodian" or
"Trustee without full trust powers" is checked. Section 5.04 of the
Basic Plan Document will apply if "Trustee with full trust powers"
is checked.
If an individual (e.g., the employer, partners, or an appointed
individual) will be acting as individual trustee, complete Option B.
If Option B is completed, Section 5.04 of the Basic Plan Document
will apply.
SECTION 13 PROTOTYPE SPONSOR
The prototype sponsor must fill in its name, address and telephone
number.
SECTION 14 LIMITATION ON ALLOCATIONS - MORE THAN ONE PLAN
You must read and complete this section if, in addition to this
plan:
1) You ever maintained a defined benefit plan, or
2) You currently maintain an individually designed plan.
Individually designed plans are not master or prototype plans,
but rather, plans written for just one particular employer.
In addition, if you want to select a definition of compensation
other than the Internal Revenue Code Section 3401(a) wages (that is,
W-2 wages), you must complete Part C.
<PAGE>
#713(12/90) L90 (c)1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Qualified Standardized Money Purchase Pension Plan Page 1 of 3
- --------------------------------------------------------------------------------
Retirement Plan ADOPTION AGREEMENT
- --------------------------------------------------------------------------------
SECTION 1. EMPLOYER INFORMATION
Name of Employer ___________________________________________________
Address ____________________________________________________________
City ____________________ State ____________________ Zip ___________
Telephone ____________ Federal Tax Identification Number ___________
Income Tax Year End _______________________________
(month) (day)
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation
[ ] Other (Specify) ________________________________________________
Nature of Business (Describe) ______________________________________
Plan Sequence No. ____________ Enter 001 if this is the first
qualified plan the Employer has ever maintained, enter 002 if it is
the second, etc.
For a plan which covers only the owner of the business, please
provide the following information about the owner,
Social Security No. __________ Date Business Established ___________
Date of Birth __________________ Marital Status ____________________
Home Address _______________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A. [ ] This is the initial adoption of a money purchase pension plan by
the Employer.
The Effective Date of this Plan is _____________________, 19___.
NOTE: The effective date is usually the first day of the Plan
Year in which this Adoption Agreement is signed.
OPTION B: [ ] This is an amendment and restatement of an existing money
purchase pension plan (a Prior Plan).
The Prior Plan was initially effective on _____________, 19____.
The Effective Date of this amendment and restatement is
___________________________, 19____.
NOTE: The effective date is usually the first day of the Plan
Year in which the Adoption Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
PART A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan
after completing ___________ (enter 0, 1 or 2) Years of Eligibility
Service.
Note: If more than 1 year is selected, the immediate 100% vesting
schedule of Section 5, Option C will automatically apply.
If left blank, the Year's of Eligibility Service required will be
deemed to be 0.
PART B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan
after attaining age ______ (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
PART C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (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 the Employer under which retirement benefits were
the subject of good faith bargaining unless the agreement
provides that such Employees are to be included in the Plan, and
except those Employees who are non-resident aliens pursuant to
Section 410(b)(3)(C) of the Code and who received no earned
income from the Employer which constitutes income from sources
within the United States.
<PAGE>
Standardized Money Purchase Pension Plan ___________________________ Page 2 of 3
ADOPTION AGREEMENT
SECTION 4. EMPLOYER CONTRIBUTION FORMULA Check and Complete either Option A
or B
OPTION A. [ ] NONINTEGRATED FORMULA:
For each Plan Year the Employer will contribute for each
qualifying Participant an amount equal to ________% (not to
exceed 25%) of the qualifying Participant's Compensation for the
Plan Year.
OPTION B. [ ] INTEGRATED FORMULA:
For each Plan Year, the Employer will contribute for each
qualifying Participant an amount equal to the sum of the amounts
determined in Step 1 and Step 2:
Step 1. An amount equal to _____% (the base contribution
percentage) of the Participant's Compensation for the
Plan Year up to the integration level; plus
Step 2. An amount equal to _____% (not to exceed the base
contribution percentage by more than the lesser of:
(1) the base contribution percentage, or (2) the money
purchase maximum disparity rate as described in Section
3.01(B)(3) of the Plan) of such Participant's
Compensation for the Plan Year in excess of the
integration level.
The integration level shall be (Choose one):
OPTION 1. [ ] The Taxable Wage Base
OPTION 2. [ ] $__________ (a dollar amount less than the Taxable
Wage Base)
OPTION 3. [ ] _______________% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the
Taxable Wage Base.
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
<TABLE>
----------------------------------------------------------------------------------------------------------------
YEARS OF VESTED PERCENTAGE
VESTING SERVICE Option A [ ] Option B [ ] Option C [ ] Option D [ ] (Complete if chosen)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 0% 0% 100% ____%
2 0% 20% 100% ____% (not less than 20%)
3 100% 40% 100% ____% (not less than 40%)
4 100% 60% 100% ____% (not less than 60%)
5 100% 80% 100% ____% (not less than 80%)
6 100% 100% 100% ____% (not less than 100%)
----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: If left blank, Option C, 100% vesting, will be deemed to be
selected.
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age _____________ (not
to exceed 65).
NOTE: If left blank. the Normal Retirement Age will be deemed to be
age 59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
PART A. _____ Hours of Service (no more than 1,000) shall be required to
constitute a Year of Vesting Service or a Year of Eligibility
Service.
PART B. _____ Hours of Service (no more than 500) must be exceeded to avoid
a Break in Vesting Service or a Break in Eligibility Service.
NOTE: The number of hours in Part A must be greater than the number
of hours in Part B.
SECTION 8. OTHER OPTIONS
Answer "Yes" or "No" to each of the following questions by checking
the appropriate box.
If a box is not checked for a question, the answer will be deemed to
be "No."
A. Loans: Will loans to Participants pursuant to
Section 6.08 of the Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will
Participants be permitted to direct the investment
of their Individual Accounts pursuant to Section
5.14 of the Plan? [ ] Yes [ ] No
SECTION 9. JOINT AND SURVIVOR ANNUITY
The survivor annuity portion of the Joint and Survivor Annuity shall
be a percentage equal to ____% (at least 50% but no more than 100%)
of the amount paid to the Participant prior to his or her death.
<PAGE>
STANDARDIZED MONEY PURCHASE PENSION PLAN ___________________________ Page 3 of 3
ADOPTION AGREEMENT
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of
the Code, which provides post-retirement medical benefits
allocated to separate accounts for key employees as defined in
Section 419A(d)(3) of the Code or an individual medical account,
as defined in Section 415(1)(2) of the Code) in addition to this
Plan (other than a paired standardized profit sharing plan using
Basic Plan Document No. 03) may not rely on the opinion letter
issued by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under Section 401 of the
Code. If the Employer who adopts or maintains multiple plans
wishes to obtain reliance that the Employer's plan(s) are
qualified, application for a determination letter should be made
to the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing.
I am an authorized representative of the Employer named above and
I state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer _________________ Date Signed _____________
(Type Name) ______________________________________________________
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one Option
[ ] OPTION A. FINANCIAL ORGANIZATION AS TRUSTEE OR CUSTODIAN
CHECK ONE: [ ] Custodian, [ ] Trustee without full trust powers,
[ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization ___________________________________________
Signature ________________________________________________________
(Type Name) ______________________________________________________
[ ] OPTION B. INDIVIDUAL TRUSTEE(S)
Signature ______________________ Signature ______________________
(Type Name) ____________________ (Type Name) ____________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor ________________________________________
Address __________________________________________________________
Telephone Number _________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - MORE THAN ONE PLAN
If you maintain or ever maintained another qualified plan (other
than a paired standardized profit sharing plan using Basic Plan
Document No. 03) in which any Participant in this Plan is (or was)
a Participant or could become a Participant, you must complete
this section. You must also complete this section if you maintain
a welfare benefit fund, as defined in Section 419(e) of the Code,
or an individual medical account, as defined in Section 415(1)(2)
of the Code, under which amounts are treated as annual additions
with respect to any Participant in this Plan.
PART A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan:
1. [ ] The provisions of Sections 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans
will limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.) ___________________
_______________________________________________________________
PART B. If the Participant is or has ever been a participant in a
defined benefit plan maintained by the Employer, the Employer will
provide below the language which will satisfy the 1.0 limitation
of Section 415(e) of the Code. Such language must preclude
Employer discretion. (Complete) __________________________________
PART C. Compensation will mean all of each Participant's (Choose one):
OPTION 1. [ ] Section 3121(a) wages
OPTION 2. [ ] Section 3401(a) wages
Option 3. [ ] 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be
selected.
PART D. The limitation year is the following 12-consecutive month
period: _____________________________________
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
Plan Description: Prototype Standardized Money Purchase Pension
FFN: 50295842702-002 Case: 9201729 EIN: 04-3076053 Washington, DC 20224
BPD: 02 Plan: 002 Letter Serial No: D260702a
Person to Contact: Ms. Arrington
CAPITAL GROWTH MANAGEMENT
Telephone Number (202) 622-8173
P O BOX 449
Refer Reply to E:EP:Q:ICU
BOSTON, MA 02117
Date 11/03/92
</TABLE>
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one or
more employees who are covered by this plan, other than a specified paired plan
within the meaning of section 7 of Rev. Proc. 89-9, 1989-1 C.B. 780; or (2)
after December 31, 1985, the employer maintains a welfare benefit fund defined
in Code section 419(e), which provides postretirement medical benefits allocated
to separate accounts for key employees as defined in Code section 419A(d)(3).
An employer that has adopted a standardized plan may not rely on this opinion
letter with respect to: (1) whether any amendment or series of amendments to the
plan satisfies the nondiscrimination requirements of section 1.401(a)(4)-5(a) of
the regulations, except with respect to plan amendments granting past service
that meet the safe harbor described in section 1.401(a)(4)-5(a)(5) and are not
part of a pattern of amendments that significantly discriminates in favor of
highly compensated employees; or (2) whether the plan satisfies the effective
availability requirement of section 1.401(a)(4)-4(c) of the regulations with
respect to any benefit, right or feature.
An employer that has adopted a standardized plan as an amendment to a plan other
than a standardized plan may not rely on this opinion letter with respect to
whether a benefit, right or other feature that is prospectively eliminated
satisfies the current availability requirements of section 1.401(a)-4 of the
regulations.
STANDETLTR/MP002
<PAGE>
CAPITAL GROWTH MANAGEMENT
FFN: 50295842702-002
Page 2
The employer may request a determination (1) as to whether the plan, considered
with all related qualified plans and, if appropriate, welfare benefit funds,
satisfies the requirements of Code section 401(a)(16) as to limitations on
benefits and contributions in Code section 415; (2) regarding the
nondiscriminatory effect of grants of past service, and (3) with respect to
whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for purposes of section
401(a) of the Code unless the terms of the plan, as adopted or amended, that
pertain to the requirements of sections 401(a)(4), 401(a)(5), 401(a)(17),
401(l), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986
or subsequent legislation, (a) are made effective retroactively to the first day
of the first plan year beginning after December 31, 1988 (or such other date on
which these requirements first became effective with respect to this plan), or
(b) are made effective no later than the first day on which the employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the plan
constitute such an interpretation.
Because you submitted this plan for approval after March 31, 1991, the continued
and interim reliance provisions of section 13 of Rev. Proc. 89-9, 1989-1 C.B.
780, are not applicable. However, solely for purposes of section 17.03 of Rev.
Proc. 89-9, you are deemed to have submitted this plan prior to March 31, 1991,
and therefore the extended reliance provisions of section 17.03 are applicable.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ John Swieca
---------------------
Chief, Employee Plans Qualifications Branch
<PAGE>
---------------
QUALIFIED
RETIREMENT PLAN
---------------
-------------------
ADOPTION AGREEMENT
STANDARDIZED
PROFIT SHARING PLAN
-------------------
<PAGE>
INSTRUCTIONS FOR COMPLETING ADOPTION AGREEMENT
STANDARDIZED PROFIT SHARING PLAN AND TRUST
These instructions are designed to help you, the employer, along
with your attorney and/or tax advisor, complete the Adoption
Agreement for the Qualified Retirement Plan. The instructions are
meant to be used only as a general guide and are not intended as a
substitute for qualified legal and tax advisors.
SECTION 1 EMPLOYER INFORMATION
Fill in the requested information. The "Federal Tax Identification
Number" is the tax identification number assigned to your business.
If your business does not have a Federal Tax Identification Number,
complete and file an Internal Revenue Service (IRS) Form SS4 to
obtain a number. The IRS Form SS4 can be obtained from an IRS
office or from your tax advisor. If you have already filed a Form
SS4, print "Applied for" on the "Federal Tax Identification Number"
line. After you receive a tax identification number, be sure to let
our financial organization know what that number is. In the space
marked "Nature of Business," accurately describe the type of
business (e.g., radio and TV repair, agricultural, etc.). The "Plan
Sequence Number" is used for annual reporting to the IRS. The IRS
uses this number to identify your plan. For example, if this is the
fourth plan you have ever opened, the Plan Sequence Number would be
004 and so on.
SECTION 2 EFFECTIVE DATES
This profit sharing plan is either a new plan (an initial adoption)
or an amendment and restatement of an existing profit sharing plan
If this is a new profit sharing plan, check Option A and fill in
the effective date. The effective date is usually the first day of
the plan year in which this Adoption Agreement is signed. For
example, if an employer maintains a plan on a calendar year basis
and this Adoption Agreement is signed on September 24, 1991, the
effective date would be January 1, 1991.
If the reason you are adopting this plan is to amend and replace an
existing profit sharing plan, check Option B. The existing profit
sharing plan which will be replaced is called a "prior plan." You
will need to know the effective date of the prior plan. The best
way to determine its effective date is to refer to the prior plan
adoption agreement. The effective date of this amendment and
restatement is usually the first day of the plan year in which the
Adoption Agreement is signed. However, if you are adopting this
plan to update a prior plan for changes brought about by the Tax
Reform Act of 1986 (and other recent changes which apply to
qualified plans), the effective date will be the first day of the
plan year which begins in 1989 (January 1, 1989 for a calendar year
plan).
SECTION 3 ELIGIBILITY REQUIREMENTS
NOTE: Section 3 should be completed even if you do not have
employees.
Within limits, you as the employer can specify the number of years
your employees must work for you and the age they must attain
before they are eligible to participate in this plan. Note that the
eligibility requirements which you set up for the plan also apply
to you.
Suppose, for example, you establish a service requirement of two
years and an age requirement of 21. In that case, only those
employees (including yourself) who have worked for you for two
years and are at least 21 years old are eligible to participate in
this plan.
PART A. YEARS OF ELIGIBILITY SERVICE REQUIREMENT
Fill in the number of years of service (no more than 2). This
number must be either 0, 1, or 2.
Part B. AGE REQUIREMENT
Fill in the age an employee must attain (no more than 21) to be
eligible to participate in the plan.
PART C. CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE
Generally you are permitted to exclude certain employees covered by
the terms of a collective bargaining agreement (e.g., a union
agreement) where retirement benefits were bargained for and
nonresident aliens who have no U.S. income. If you wish to exclude
those employees, check the box under Section 3, Part C.
SECTION 4 EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
PART A. CONTRIBUTION FORMULA
Because a profit sharing plan allows for flexible contributions,
the amount of the contribution will be determined from year to
year. There are no blanks to be completed in Part A.
Part B. ALLOCATION FORMULA
Once the contribution amount has been decided for a plan year, it
must be allocated among the participants in the plan. The
contribution can be allocated using either a pro rata formula or an
integrated formula. Check either Option 1 or 2.
OPTION 1. Pro Rata Formula
Check this option if you wish to have the contribution allocated to
all qualifying participants based on their compensation for the
plan year.
Option 2. Integrated Formula
Check this option if the plan is to be integrated. Generally,
integration is a method of giving some participants in the plan an
extra contribution allocation. Because of the complexity of
integration, you should consult your tax advisor on this issue.
SECTION 5 VESTING
The vesting schedule determines how fast the money in a
participant's plan account becomes nonforfeitable. For example,
suppose you select the vesting schedule of Option B. If a
participant quits work after 4 years of service, the participant
would be entitled to 60% of his or her plan account. The remaining
40% would remain in the plan and become a forfeiture.
<PAGE>
NOTE: If you choose more than 1 year of service as an eligibility
requirement in Section 3, Part A, you must choose the 100% vesting
schedule in Section 5 (Option C).
SECTION 6 NORMAL RETIREMENT AGE
Fill in the desired normal retirement age. When a participant
attains normal retirement age, he or she can request a distribution
from the plan.
SECTION 7 HOURS REQUIRED
PART A. In the blank provided, fill in the number of hours of service which
shall be required to constitute a year of service for vesting and
eligibility. This can be no more than 1,000. If you fail to fill in
the blank, the number of hours required will be deemed to be 1,000.
Suppose, for example, you fill in 1,000 hours of service. This
means any employee who works at least 1,000 hours during the
appropriate period will be credited with a year of service for the
purposes of vesting, eligibility, etc. On the other hand, if the
employee works less than 1,000 hours, he or she will not be
credited with a year of service for those purposes.
PART B. In the blank provided, fill in the number of hours of service which
must be exceeded to avoid a break in service. This can be no more
than 500. If you fail to fill in the blank, the number of hours
required to avoid a break in service will be deemed to be 500.
SECTION 8 OTHER OPTIONS
PART A. Check whether or not you wish to allow loans to participants. Note
that loans cannot be made to an owner of an unincorporated business
(whether a sole proprietor or a partner) or an owner of a
Subchapter S corporation.
PART B. Check whether or not you wish to allow each participant to direct
the investment of his or her own plan account.
PART C. Check whether or not you wish to allow in-service withdrawals.
Generally, an in-service withdrawal is a distribution to a
participant who is still working for your company. If this is an
amendment and restatement of a prior plan that allowed in-service
withdrawals, this plan must also allow in-service withdrawals.
SECTION 9 JOINT AND SURVIVOR ANNUITY
PART A. As a general rule, the Retirement Equity Act requires that a
distribution from a plan to a participant be made in the form of a
joint and survivor annuity purchased from an insurance company,
unless the participant elects otherwise and his or her spouse
consents. However, the Retirement Equity Act allows employers who
maintain certain profit sharing plans to elect to have a safe
harbor rule apply. If you check "yes" indicating that the safe
harbor rule applies, then payouts from the plan to participants and
beneficiaries will not be subject to the annuity requirements.
PART B. If the safe harbor rules do not apply, you must complete Part B.
When a participant who is receiving payments under a joint and
survivor annuity dies, the participant's spouse will receive a
survivor annuity. This section determines the percentage of the
survivor annuity. If this is an amendment and restatement of a
profit sharing plan that was subject to the joint and survivor
annuity rules, this percentage must be at least as great as the
survivor annuity percentage in the prior plan.
SECTION 10 ADDITIONAL PLANS
This plan is a standardized plan under applicable IRS procedures.
An employer who adopts a standardized plan generally does not have
to request a ruling from a Key District Office of the IRS (called a
determination letter) that the plan, under facts and circumstances
unique to that particular employer, meets the requirements for
qualification under the tax laws and regulations.
Section 10 states an exception to the procedures for standardized
plans, namely, if you maintain another plan (other than a paired
standardized money purchase pension plan using the same Basic Plan
Document), you must obtain a determination letter if you wish to
obtain assurance that the plan is qualified.
SECTION 11 EMPLOYER SIGNATURE
An authorized representative of the employer must sign and date the
Adoption Agreement.
SECTION 12 TRUSTEE OR CUSTODIAN
A trustee or custodian must be named for this plan.
If the financial organization will be acting as trustee or
custodian, the financial organization should complete Option A.
Section 5.03 of the Basic Plan Document will apply if "Custodian"
or "Trustee without full trust powers" is checked. Section 5.04 of
the Basic Plan Document will apply if "Trustee with full trust
powers" is checked.
If an individual (e.g., the employer, partners, or an appointed
individual) will be acting as individual trustee, complete Option
B. If Option B is completed, Section 5.04 of the Basic Plan
Document will apply.
SECTION 13 PROTOTYPE SPONSOR
The prototype sponsor must fill in its name, address and telephone
number.
SECTION 14 LIMITATION ON ALLOCATIONS - MORE THAN ONE PLAN
You must read and complete this section if, in addition to this
plan:
1) You ever maintained a defined benefit plan, or
2) You currently maintain an individually designed plan.
Individually designed plans are not master or prototype plans, but
rather, plans written for just one particular employer.
In addition, if you want to select a definition of compensation
other than the Internal Revenue Code Section 3401(a) wages (that
is, W-2 wages), you must complete Part C.
<PAGE>
#705(12/90) L90 (c)1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Qualified Standardized Profit Sharing Plan Page 1 of 4
- -------------------------------------------------------------------------------
Retirement Plan ADOPTION AGREEMENT
- -------------------------------------------------------------------------------
SECTION 1. EMPLOYER INFORMATION
Name of Employer__________________________________________________
Address __________________________________________________________
City __________________State___________________ Zip_______________
Telephone_____________ Federal Tax Identification Number__________
Income Tax Year End____________________________
(month) (day)
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation
[ ] Other (Specify)______________________________________________
Nature of Business (Describe)____________________________________
Plan Sequence No._____ Enter 001 if this is the first qualified
plan the Employer has ever maintained, enter 002 if it is the
second, etc.
For a plan which covers only the owner of the business, please
provide the following information about the owner:
Social Security No.___________ Date Business Established_________
Date of Birth_________________ Marital Status____________________
Home Address_____________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A. [ ] This is the initial adoption of a profit sharing plan by the
Employer. The Effective Date of this Plan is _________, 19__.
NOTE: The effective date is usually the first day of the
Plan Year in which this Adoption Agreement is signed.
Option B. [ ] This is an amendment and restatement of an existing profit
sharing plan (a Prior Plan). The Prior Plan was initially
effective on __________, 19__. Effective Date of this amendment
and restatement is ___________, 19__.
NOTE: The effective date is usually the first day of the Plan
Year in which the Adoption Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan
after completing ___________ (enter 0, 1 or 2) Years of Eligibility
Service.
NOTE: If more than 1 year is selected, the immediate 100% vesting
schedule of Section 5, Option C will automatically apply. If left
blank, the Years of Eligibility Service required will be deemed to
be 0.
PART B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan
after attaining age ____ (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
PART C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the
Plan, except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by
the terms of a collective bargaining agreement between Employee
representatives (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 the Employer under which retirement benefits were
the subject of good faith bargaining unless the agreement
provides that such Employees are to be included in the Plan,
and except those Employees who are non-resident aliens pursuant
to Section 410(b)(3)(C) of the Code and who received no earned
income from the Employer which constitutes income from sources
within the United States.
<PAGE>
STANDARDIZED PROFIT SHARING PLAN __________________________________ Page 2 of 4
ADOPTION AGREEMENT
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
PART A. CONTRIBUTION FORMULA:
For each Plan Year the Employer will contribute an amount to be
determined from year to year.
PART B. Allocation Formula: (Check Option 1 or 2)
Option 1. [ ] Pro Rata Formula. Employer Contributions and Forfeitures shall
be allocated to the Individual Accounts of qualifying
Participants in the ratio that each qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all qualifying Participants for the Plan Year.
Option 2. [ ] Integrated Formula. Employer Contributions and Forfeitures
shall be allocated as follows (Start with Step 3 if this Plan
is not a Top-Heavy Plan):
Step 1. Employer Contributions and Forfeitures shall first be
allocated pro rata to qualifying Participants in the
manner described in Section 4, Part B, Option 1. The
percent so allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 1 shall be allocated to
each qualifying Participant's Individual Account in
the ratio that each qualifying Participant's
Compensation for the Plan Year in excess of the
integration level bears to all qualifying Participants'
Compensation in excess of the integration level, but
not in excess of 3%.
Step 3. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 2 shall be allocated to
each qualifying Participant's Individual Account in the
ratio that the sum of each qualifying Participant's
total Compensation and Compensation in excess of the
integration level bears to the sum of all qualifying
Participants' total Compensation and Compensation in
excess of the integration level, but not in excess of
the profit sharing maximum disparity rate as described
in Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 3 shall be allocated pro
rata to qualifying Participants in the manner described
in Section 4, Part B, Option 1.
The integration level shall be (Choose one):
OPTION 1. [ ] The Taxable Wage Base
OPTION 2. [ ] $_______________ (a dollar amount less than
the Taxable Wage Base)
OPTION 3. [ ] ________________ % of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the
Taxable Wage Base.
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
VESTED PERCENTAGE
YEARS OF -------------------------------------------------------------------------------
VESTING SERVICE Option A [] Option B [] Option C [] Option D [] (Complete if chosen)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 0% 0% 100% ___%
2 0% 20% 100% ___% (not less than 20%)
3 100% 40% 100% ___% (not less than 40%)
4 100% 60% 100% ___% (not less than 60%)
5 100% 80% 100% ___% (not less than 80%)
6 100% 100% 100% ___% (not less than 100%)
- --------------------------------------------------------------------------------------------------------
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
</TABLE>
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age __ (not to exceed
65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be
age 59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. ____ Hours of Service (no more than 1,000) shall be required to
constitute a Year of Vesting Service or a Year of Eligibility
Service.
Part B. ____ Hours of Service (no more than 500) must be exceeded to avoid
a Break in Vesting Service or a Break in Eligibility Service.
NOTE: The number of hours in Part A must be greater than the number
of hours in Part B.
<PAGE>
STANDARDIZED PROFIT SHARING PLAN __________________________________ Page 3 of 4
ADOPTION AGREEMENT
SECTION 8. OTHER OPTIONS
Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a
box is not checked for a question, the answer will
be deemed to be "No."
A. Loans: Will loans to Participants pursuant to
Section 6.08 of the Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will
Participants be permitted to direct the
investment of their Individual Accounts
pursuant to Section 5.14 of the Plan? [ ] Yes [ ] No
C. In-Service Withdrawals: Will Participants be
permitted to make withdrawals during service
pursuant to Section 6.01(A)(3) of the Plan?
NOTE: If the Plan is being adopted to amend
and replace a Prior Plan which permitted
in-service withdrawals you must answer "Yes."
Check here if such withdrawals will be
permitted only on account of hardship [ ]. [ ] Yes [ ] No
SECTION 9. JOINT AND SURVIVOR ANNUITY
PART A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply (Choose only one Option)?
OPTION 1. [ ] Yes
OPTION 2. [ ] No
NOTE You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
PART B. Survivor Annuity Percentage: (Complete only if your answer in
Section 9, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to ___% (at least 50% but no more than
100%) of the amount paid to the Participant prior to his or her
death.
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of
the Code, which provides post-retirement medical benefits allocated
to separate accounts for key employees as defined in Section
419A(d)(3) of the Code or an individual medical account, as defined
in Section 415(1)(2) of the Code) in addition to this Plan (other
than a paired standardized money purchase pension plan using Basic
Plan Document No. 03) may not rely on the opinion letter issued by
the National Office of the Internal Revenue Service as evidence
that this Plan is qualified under Section 401 of the Code. If the
Employer who adopts or maintains multiple plans wishes to obtain
reliance that the Employer's plan(s) are qualified, application for
a determination letter should be made to the appropriate Key
District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing.
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer___________________ Date Signed____________
(Type Name)______________________________________________________
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one Option
[ ]OPTION A. FINANCIAL ORGANIZATION AS TRUSTEE OR CUSTODIAN
CHECK ONE: [] Custodian, [] Trustee without full trust powers,
or [] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization___________________________________________
Signature _______________________________________________________
(Type Name) _____________________________________________________
[ ]OPTION B. INDIVIDUAL TRUSTEE(S)
Signature___________________Signature____________________________
(Type Name)_________________(Type Name)__________________________
<PAGE>
STANDARDIZED PROFIT SHARING PLAN __________________________________ Page 4 of 4
ADOPTION AGREEMENT
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor_______________________________________
Address_________________________________________________________
Telephone Number________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - MORE THAN ONE PLAN
If you maintain or ever maintained another qualified plan (other
than a paired standardized money purchase pension plan using Basic
Plan Document No. 03) in which any Participant in this Plan is (or
was) a Participant or could become a participant, you must complete
this section. You must also complete this section if you maintain a
welfare benefit fund, as defined in Section 419(e) of the Code, or
an individual medical account, as defined in Section 415(1)(2) of
the Code, under which amounts are treated as annual additions with
respect to any Participant in this Plan.
PART A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan:
1. [ ] The provisions of Sections 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans will
limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.) ________________
____________________________________________________________
PART B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of Section
415(e) of the Code. Such language must preclude Employer
discretion. (Complete)___________________________________________
PART C. Compensation will mean all of each Participant's (Choose one):
OPTION 1. [] Section 3121(a) wages
OPTION 2. [] Section 3401(a) wages
OPTION 3. [] 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
PART D. The limitation year is the following 12-consecutive month
period: ________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
Plan Description: Prototype Standardized Profit Sharing Plan
FFN: 50295842702-001 Case: 9201728 EIN: 04-3076053 Washington, DC 20224
BPD: 02 Plan: 001 Letter Serial No: D260701a
Person to Contact: Ms. Arrington
CAPITAL GROWTH MANAGEMENT
Telephone Number (202) 622-8173
P O BOX 449
Refer Reply to E:EP:Q:ICU
BOSTON, MA 02117
Date 11/03/92
</TABLE>
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one or
more employees who are covered by this plan, other than a specified paired plan
within the meaning of section 7 of Rev. Proc. 89-9, 1989-1 C.B. 780; or (2)
after December 31, 1985, the employer maintains a welfare benefit fund defined
in Code section 419(e), which provides postretirement medical benefits allocated
to separate accounts for key employees as defined in Code section 419A(d)(3).
An employer that has adopted a standardized plan may not rely on this opinion
letter with respect to: (1) whether any amendment or series of amendments to the
plan satisfies the nondiscrimination requirements of section 1.401(a)(4)-5(a) of
the regulations, except with respect to plan amendments granting past service
that meet the safe harbor described in section 1.401(a)(4)-5(a)(5) and are not
part of a pattern of amendments that significantly discriminates in favor of
highly compensated employees; or (2) whether the plan satisfies the effective
availability requirement of section 1.401(a)(4)-4(c) of the regulations with
respect to any benefit, right or feature.
An employer that has adopted a standardized plan as an amendment to a plan other
than a standardized plan may not rely on this opinion letter with respect to
whether a benefit, right or other feature that is prospectively eliminated
satisfies the current availability requirements of section 1.401(a)-4 of the
regulations.
SIMDETLTR/PS001
<PAGE>
CAPITAL GROWTH MANAGEMENT
FFN: 50295842702-001
Page 2
The employer may request a determination (1) as to whether the plan, considered
with all related qualified plans and, if appropriate, welfare benefit funds,
satisfies the requirements of Code section 401(a)(16) as to limitations on
benefits and contributions in Code section 415; (2) regarding the
nondiscriminatory effect of grants of past service, and (3) with respect to
whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for purposes of section
401(a) of the Code unless the terms of the plan, as adopted or amended, that
pertain to the requirements of sections 401(a)(4), 401(a)(5), 401(a)(17),
401(l), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986
or subsequent legislation, (a) are made effective retroactively to the first day
of the first plan year beginning after December 31, 1988 (or such other date on
which these requirements first became effective with respect to this plan), or
(b) are made effective no later than the first day on which the employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the plan
constitute such an interpretation.
Because you submitted this plan for approval after March 31, 1991, the continued
and interim reliance provisions of section 13 of Rev. Proc. 89-9, 1989-1 C.B.
780, are not applicable. However, solely for purposes of section 17.03 of Rev.
Proc. 89-9, you are deemed to have submitted this plan prior to March 31, 1991,
and therefore the extended reliance provisions of section 17.03 are applicable.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ John Swieca
---------------------
Chief, Employee Plans Qualifications Branch
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