As Filed with the Securities and Exchange
Commission on December 30, 1997
1933 Act File No. 2-25984
1940 Act File No. 811-1467
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 61 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 40 [X]
(Check appropriate box or boxes.)
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
----------------------------------------
(Exact Name of Registrant)
625 Fourth Avenue South, Minneapolis, Minnesota 55415
-----------------------------------------------------
(Address of Principal Executive Offices)
(612) 340-7215
------------------------------
(Registrant's Telephone Number)
Otis F. Hilbert, Secretary
The Lutheran Brotherhood Family of Funds
625 Fourth Avenue South
Minneapolis, Minnesota 55415
--------------------------------------------------
(Name and Address of Agent for Service of Process)
Approximate date of proposed public offering:
It is proposed that this filing will become effective under Rule 485 (check
appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[X] On December 30, 1997, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (c)(1)
[ ] On [DATE] pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
Form N-1A Item No. Caption or Location
Part A in Prospectuses
- ------------------- -------------------
1. Cover Page Same
2. Synopsis Summary of Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objectives and
Policies; Investment
Limitations; Investment Risks;
The Funds and Their Shares
5. Management of the Fund Fund Management; Fund
Administration
Management's Discussion Not Applicable
of Fund Performance
6. Capital Stock and Other Securities Multiple Class System;
Dividends and Capital Gains;
Taxes; The Funds and their
Shares
7. Purchase of Securities Being Buying Shares of The Lutheran
Offered Brotherhood Family of Funds;
Net Asset Value Multiple Class
System; Receiving Your Order;
Certificates and Statements
8. Redemption or Repurchase Redeeming Shares
9. Legal Proceedings Not Applicable
Caption or Location
Form N-1A Item No. Statement of
Part B Additional Information
- ------------------- ----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information
13. Investment Objectives and Investment Policies and
Policies Restrictions; Additional
Information Concerning Certain
Investment Techniques;
Brokerage Transactions
14. Management of the Registrant Fund Management
15. Control Persons and Principal Fund Management
Holders of Securities
16. Investment Advisory and Other Investment Advisory Services
Services Administration Services;
Distribution and Shareholder
Services
17. Brokerage Allocation and Other Brokerage Transactions
Practices
18. Capital Stock and Other General Information
Securities
19. Purchase, Redemption and Pricing Purchasing Shares; Sales
of Securities Being Offered Change; Net Asset Value;
Redeeming Shares
20. Tax Status Tax Status
21. Underwriters Distribution and Shareholder
Services
22. Calculations of Performance Data Calculation of Performance Data
23. Financial Statements Financial Statements
<PAGE>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
LUTHERAN BROTHERHOOD FUND
LUTHERAN BROTHERHOOD HIGH YIELD FUND
LUTHERAN BROTHERHOOD INCOME FUND
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
LUTHERAN BROTHERHOOD MONEY MARKET FUND
CLASS A AND CLASS B SHARES
PROSPECTUS December 30 1997
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND ("LB Opportunity Growth
Fund") seeks long term growth of capital by investing primarily in a
professionally managed diversified portfolio of smaller capitalization
common stocks. See page P-16
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND ("LB Mid Cap Growth Fund")
seeks to achieve long term growth of capital by investing primarily in a
professionally managed diversified portfolio of common stocks of companies
with medium market capitalizations. See page P-16.
LUTHERAN BROTHERHOOD WORLD GROWTH FUND ("LB World Growth Fund") seeks
high total return from long-term growth of capital by investing primarily in
a professionally managed diversified portfolio of common stocks of
established, non-U.S. companies. See page P-17.
LUTHERAN BROTHERHOOD FUND ("LB Fund") seeks growth of capital and
income by investing in a professionally managed diversified portfolio of
common stocks and other securities issued by leading companies. See page P-
19.
LUTHERAN BROTHERHOOD HIGH YIELD FUND ("LB High Yield Fund") seeks high
current income by investing primarily in a professionally managed
diversified portfolio of high yield, high risk securities. The Fund will
also consider growth of capital as a secondary investment objective. See
page P-19.
LUTHERAN BROTHERHOOD INCOME FUND ("LB Income Fund") seeks high current
income while preserving principal, with possible long term growth of
capital, by investing primarily in a professionally managed diversified
portfolio of debt securities and dividend paying common and preferred
stocks. See page P-20.
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND ("LB Municipal Bond Fund")
seeks to provide high current income exempt from federal income tax by
investing primarily in a professionally managed diversified portfolio of
municipal bonds. See page P-20.
LUTHERAN BROTHERHOOD MONEY MARKET FUND ("LB Money Market Fund") seeks
to provide current income consistent with stability of principal. See page
P-20.
Lutheran Brotherhood Research Corp. ("LB Research"), an indirect
wholly-owned subsidiary of Lutheran Brotherhood, serves as investment
adviser for the funds listed above (each, a "Fund"). Lutheran Brotherhood
and LB Research personnel have developed skills in the investment advisory
business over the past 27 years, and have extensive skill in managing over
$20.5 billion in assets as of September 30, 1997, including $9.4 billion in
mutual fund assets. Lutheran Brotherhood Securities Corp. ("LB Securities")
serves as distributor for The Lutheran Brotherhood Family of Funds. LB
Research currently engages Rowe Price-Fleming International, Inc. ("Price-
Fleming" or "Sub-advisor") as investment sub-advisor for LB World Growth
Fund.
Each Fund is a diversified series of The Lutheran Brotherhood Family of
Funds (the "Trust"), an open-end management investment company.
Each Fund offers three classes of shares: Class A shares, Class B
shares and Institutional Class shares. The shares offered by this Prospectus
are the Class A shares and Class B shares. Class B shares of the LB Money
Market Fund are offered solely in exchange for Class B shares of other
Funds. The Institutional Class shares are offered through a separate
prospectus and are offered to Lutheran institutions, Lutheran church
organizations and to certain other institutional investors as may be
determined by the Trust from time to time, subject in each case to a minimum
investment of $100,000. As of October 31, 1997, all of the then outstanding
shares of each Fund were redesignated as Class A shares and, immediately
thereafter, shares held by Lutheran institutions and church organizations
with accounts of at least $100,000 were automatically converted to
Institutional Class shares. A copy of the prospectus for the Institutional
Class shares may be obtained by writing LB Securities or by calling toll
free (800) 328-4552.
This Prospectus sets forth concisely the information a prospective
investor ought to know about the Funds before investing. It should be
retained for future reference. A Statement of Additional Information about
the Funds dated December 30, 1997 has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference in this
Prospectus. It is available, at no charge, upon request by writing LB
Securities or by calling toll free (800) 328-4552. The SEC maintains a web
site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference herein and other information
regarding the Funds.
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 ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN LB MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
PAGE
Summary of Fund Expenses.......................................P-4
Financial Highlights.......................................... P-8
Investment Objectives and Policies............................ P-16
Investment Limitations........................................ P-27
Investment Risks.............................................. P-28
Buying Shares of The Lutheran Brotherhood Family of Funds .....P-32
Net Asset Value of Your Shares................................ P-34
Multiple Class System......................................... P-34
Distribution and Shareholder Servicing Plans.................. P-37
Receiving Your Order.......................................... P-38
Certificates and Statements................................... P-38
Redeeming Shares.............................................. P-38
Dividends and Capital Gains................................... P-41
Taxes......................................................... P-41
Optimum Account............................................... P-43
IRAs and Other Tax-Deferred Plans............................. P-44
Fund Performance.............................................. P-44
The Funds and Their Shares.......... ......................... P-45
Fund Management............................................... P-45
Fund Administration........................................... P-48
Description of Debt Ratings................................... P-48
How to Invest................................................. P-51
Addresses..................................................... P-51
<PAGE>
SUMMARY OF FUND EXPENSES
LB OPPORTUNITY GROWTH FUND
LB MID CAP GROWTH FUND
LB WORLD GROWTH FUND
LB FUND
LB HIGH YIELD FUND
LB INCOME FUND
LB MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
LB MONEY MARKET FUND (3)
CLASS A SHARES CLASS B SHARES CLASS A SHARES CLASS B SHARES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4%(1) None None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) None None None None
Maximum Deferred Sales Charge
(as a percentage of net asset value at time of
purchase or redemption, whichever is lower) None 5%(2) None None
Redemption Fees (as a percentage
of amount redeemed, if applicable) None None None None
Exchange Fees None None None None
</TABLE>
1. Initial sales charges for the Class A shares vary from 0% to 4% of the
public offering price, depending upon the amount of your investment. For a
complete description of sales charges for the Class A shares, see "Multiple
Class System - - Class A Shares."
2. The maximum 5% contingent deferred sales charge on Class B shares applies
to redemptions during the first year after purchase. The contingent deferred
sales charge declines thereafter and no contingent deferred sales charge is
imposed after the fifth year. For a complete description of contingent
deferred sales charges for the Class B shares, see "Multiple Class System -
Class B shares."
3. Holders of Class A shares of the LB Money Market Fund may elect the
OPTIMUM ACCOUNT(R) package, which is subject to a one-time new account fee of
$25 and a monthly administrative fee of $5. Exchanges of Class A shares of
the LB Money Market Fund for shares of other Funds incur the normal initial
sales charge for those Funds' shares, unless the Class A shares of the LB
Money Market Fund shares were previously acquired through an exchange of
shares from other Funds for which a sales charge was previously paid.
ANNUAL FUND OPERATING EXPENSES
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (1) 0.43% 0.43%
12b-1 Fees (2) -- 0.75%
Other Expenses(3) 0.86% 0.86%
Total Fund Operating Expenses (after waiver)(1) 1.29% 2.04%
- --------------------------------------------------------------------------
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver)(4) 0.21% 0.21%
12b-1 Fees (2) -- 0.75%
Other Expenses (3)(4) 1.74% 1.74%
Total Fund Operating Expenses (after waiver)(4) 1.95% 2.70%
- --------------------------------------------------------------------------
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (5) 0.75% 0.75%
12b-1 Fees (2) -- 0.75%
Other Expenses(3) 1.07% 1.07%
Total Fund Operating Expenses (after waiver)(5) 1.82%
- --------------------------------------------------------------------------
LUTHERAN BROTHERHOOD FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (6) 0.34% 0.34%
12b-1 Fees(2) -- 0.75%
Other Expenses(3) 0.54% 0.54%
Total Fund Operating Expenses (after waiver) (6) 0.88% 1.63%
- --------------------------------------------------------------------------
LUTHERAN BROTHERHOOD HIGH YIELD FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (7) 0.34% 0.34%
12b-1 Fees (2) -- 0.75%
Other Expenses(3) 0.50% 0.50%
Total Fund Operating Expenses (after waiver) (7) 0.84% 1.59%
- --------------------------------------------------------------------------
LUTHERAN BROTHERHOOD INCOME FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (8) 0.30% 0.30%
12b-1 Fees (2) -- 0.75%
Other Expenses(3) 0.50% 0.50%
Total Fund Operating Expenses (after waiver) (8) 0.80% 1.55%
- --------------------------------------------------------------------------
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (9) 0.28% 0.28%
12b-1 Fees (2) -- 0.75%
Other Expenses(3) 0.42% 0.42%
Total Fund Operating Expenses (after waiver) (9) 0.70% 1.45%
- --------------------------------------------------------------------------
LUTHERAN BROTHERHOOD MONEY MARKET FUND
CLASS A CLASS B
------- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (10) 0.15% 0.15%
12b-1 Fees (2) -- --
Other Expenses (3) 0.80%(3) 0.80%(3)
Total Fund Operating Expenses (after waiver) (10) 0.95% 0.95%
- ---------------------
(1) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the average
daily net assets of LB Opportunity Growth Fund. Without the waiver,
Management Fees and Total Operating Expenses would be 0.68% and 1.54% for the
Class A shares and 0.68% and 2.29% for the Class B shares.
(2) The offering of Class A and Class B shares of the Funds commenced on
October 31, 1997. 12b-1 Fees and Shareholder Servicing Fees are based on
estimated fees. Because the 12b-1 Fee is an annual fee charged against the
assets of the Fund, long term shareholders may indirectly pay more than the
economic equivalent of the maximum front end sale charge permitted under
applicable rules.
(3) Includes a 0.25% shareholder servicing fee for each of the Class A
and Class B shares.
(4) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the average
daily net assets of LB Mid Cap Growth Fund. LB Research has further
undertaken, until October 31, 1998, and thereafter until further notice to
the LB Mid Cap Growth Fund, to waive its advisory fee and, if necessary, to
bear certain expenses associated with operating LB Mid Cap Growth Fund in
order to limit the Fund's total operating expenses for the Class A shares and
Class B shares to an annual rate of 1.95% and 2.70%, respectively of the
average net assets of the relevant class. Without the waivers, Management
Fees and Total Fund Operating Expenses for LB Mid Cap Growth Fund would be
0.70% and 2.44% for the Class A shares and 0.70% and 3.19% for the Class B
shares.
(5) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the average
daily net assets of LB World Growth Fund. Without the waivers, Management
Fees and Total Fund Operating Expenses for LB World Growth Fund would be
1.00% and 2.07% for the Class A shares and 1.00% and 2.82% for Class B
shares.
(6) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fees equal to 0.25% of the
average daily net assets of the LB Fund. Effective January 31, 1997, LB
Research has also voluntarily agreed to temporarily waive a portion of its
advisory fees equal to 0.05% of the average daily net assets of the LB Fund.
The temporary waiver of advisory fees may be discontinued at any time.
Without the waivers, Management Fees and Total Operating Expenses would have
been 0.63% and 1.17% for the Class A shares and 0.63% and 1.92% for the Class
B shares. See "Fund Management."
(7) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fees equal to 0.25% of the
average daily net assets of the LB High Yield Fund. Effective January 31,
1997, LB Research has also voluntarily agreed to temporarily waive a portion
of its advisory fees equal to 0.05% of the average daily net assets of the LB
High Yield Fund. The temporary waiver of advisory fees may be discontinued
at any time. Without the waivers, Management Fees and Total Operating
Expenses would have been 0.63% and 1.13% for the Class A shares and 0.63% and
1.88% for the Class B shares. See "Fund Management."
(8) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fees equal to 0.25% of the
average daily net assets of the LB Income Fund. Effective January 31, 1997,
LB Research has also voluntarily agreed to temporarily waive a portion of its
advisory fees equal to 0.05% of the average daily net assets of the LB Income
Fund. The temporary waiver of advisory fees may be discontinued at any time.
Without the waivers, Management Fees and Total Operating Expenses would have
been 0.59% and 1.09% for the Class A shares and 0.59% and 1.84% for the Class
B shares. See "Fund Management."
(9) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fees equal to 0.25% of the
average daily net assets of the LB Municipal Bond Fund. Effective January
31, 1997, LB Research has also voluntarily agreed to temporarily waive a
portion of its advisory fees equal to 0.05% of the average daily net assets
of the LB Municipal Bond Fund. The temporary waiver of advisory fees may be
discontinued at any time. Without the waivers, Management Fees and Total
Operating Expenses would have been 0.57% and 0.99% for the Class A shares and
0.57% and 1.74% for the Class B shares. See "Fund Management."
(10) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the average
daily net assets of LB Money Market Fund. LB Research has further undertaken,
until October 31, 1998 and thereafter until further notice to the Fund, to
limit the LB Money Market Fund's total operating expenses for the Class A
shares and Class B shares to 0.95%, of the average net assets of each class
by means of a voluntary waiver of its advisory fee. Management Fees and Total
Fund Operating Expenses would be 0.50% and 1.30%, of average net assets of
each of the Class A shares and Class B shares without such waivers.
EXAMPLE:
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT, INCLUDING, FOR
THE CLASS A SHARES, THE MAXIMUM APPLICABLE INITIAL SALES CHARGES AND ASSUMING
(1) 5% ANNUAL RETURN AND (2) REDEMPTION AT THE END OF EACH TIME PERIOD:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
LB Opportunity Growth Fund
Class A shares $53 $79 $108 $189
Class B shares(1) $71 $94 $120 $192
LB Mid Cap Growth Fund
Class A shares $59 $99 $141 $258
Class B shares(1) $77 $114 $153 $261
LB World Growth Fund
Class A shares $58 $95 $135 $245
Class B shares(1) $76 $110 $147 $248
LB Fund
Class A shares $49 $67 $87 $144
Class B shares(1) $67 $81 $99 $146
LB High Yield Fund
Class A shares $48 $66 $85 $140
Class B shares(1) $66 $80 $97 $142
LB Income Fund
Class A shares $48 $65 $83 $135
Class B shares(1) $66 $79 $94 $137
LB Municipal Bond Fund
Class A shares $47 $61 $77 $124
Class B shares(1) $65 $76 $89 $126
LB Money Market Fund
Class A shares $10 $30 $53 $117
Class B shares(2) $60 $60 $63 $117
YOU WOULD PAY THE FOLLOWING EXPENSES ON THE SAME INVESTMENT, ASSUMING NO
REDEMPTION:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
LB Opportunity Growth Fund
Class A shares $53 $79 $108 $189
Class B shares(1) $21 $64 $110 $192
LB Mid Cap Growth Fund
Class A shares $59 $99 $141 $258
Class B shares(1) $27 $84 $143 $261
LB World Growth Fund
Class A shares $58 $95 $135 $245
Class B shares(1) $26 $80 $137 $248
LB Fund
Class A shares $49 $67 $87 $144
Class B shares(1) $17 $51 $89 $146
LB High Yield Fund
Class A shares $48 $66 $85 $140
Class B shares(1) $16 $50 $87 $142
LB Income Fund
Class A shares $48 $65 $83 $135
Class B shares(1) $16 $49 $84 $137
LB Municipal Bond Fund
Class A shares $47 $61 $77 $124
Class B shares(1) $15 $46 $79 $126
LB Money Market Fund
Class A shares $10 $30 $53 $117
Class B shares(2) $10 $30 $53 $117
(1) Ten-year figures assume conversion of Class B shares to Class A shares at
the end of five years.
(2) Class B shares of the LB Money Market Fund are offered solely in exchange
for Class B shares of other Funds of The Lutheran Brotherhood Family of
Funds. The example set forth above assumes that no Class B shares of any
other Funds that are subject to a CDSC were previously held. See "Multiple
Class System - Class B Shares" for more information.
THE EXAMPLE SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF PAST OR FUTURE
RETURN OR EXPENSES. ACTUAL RETURN OR EXPENSES MAY BE GREATER OR LESS THAN
SHOWN.
The purpose of the table above is to assist the investor in understanding
the various costs and expenses that an investor will bear directly or
indirectly. Actual expense levels for the current and future years may vary
from the amounts shown. The table does not reflect charges for optional
services elected by certain shareholders. For more complete information and
descriptions of various costs and expenses, see "Multiple Class System" and
"Fund Administration".
FINANCIAL HIGHLIGHTS
The tables below for each of the Funds, to the extent and for the periods
indicated in its report, have been examined by Price Waterhouse LLP,
independent accountants, whose reports are included in the Annual Reports to
Shareholders for the fiscal year ended October 31, 1997. The tables should be
read in conjunction with the financial statements and notes thereto that
appear in such reports, which are incorporated by reference into the
Statement of Additional Information. Shares of the Fund had no class
designations until October 31, 1997, when designations were assigned based on
the sales charges, Rule 12b-1 fees and shareholder servicing fees applicable
to shares sold thereafter. The financial data below only covers periods prior
to the adoption of class designations and therefore do not reflect the Rule
12b-1 fees of 0.75% per year applicable to the Class B shares and the
shareholder servicing fees of 0.25% per year applicable to the Class A and
Class B shares, which will adversely affect performance results for periods
after October 31, 1997.
LB OPPORTUNITY GROWTH FUND
CLASS A SHARES
<TABLE>
<CAPTION>
For the Period
January 8, 1993
Year Ended Year Ended Year Ended Year Ended (effective date) to
(For a share outstanding throughout 10/31/97 10/31/96 10/31/95 10/31/94 October 31, 1993
the period)(a) ----------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $13.62 $13.83 $10.76 $10.66 $ 8.43
------ ------ ------ ------ ------
Investment Operations:
Net Investment Loss .................. (0.07) (0.11) (0.09) (0.06) (0.07)
Net Realized and Unrealized Gain
(Loss) on Investment................. .91 2.63 3.16 0.16 2.30
------ ------ ------ ------ ------
Total from Investment Operations......... .84 2.52 3.07 0.10 2.23
------ ------ ------ ------ ------
Less Distributions:
Distributions from Net Realized
Gain on Investments.................. (1.49) (2.73) -- -- --
------ ------ ------ ------ ------
Net Asset Value, End of Period........... $12.97 $13.62 $13.83 $10.76 $10.66
====== ====== ====== ====== ======
Total Investment Return at Net Asset
Value(%)(b) (7.52)% 21.27% 28.53% 0.94% 26.45%
Net Assets, End of Period (in millions).. $311.4 $265.8 $165.7 $99.6 $40.8
Ratio of Expenses to Average Net
Assets (%) 1.29% 1.28% 1.43% 1.66% 2.33%(c)
Ratio of Net Investment Loss to
Average Net Assets (%)................. (0.60%) -0.92% -0.88% -0.83% -1.76%(c)
Portfolio Turnover (%)................... 136% 176% 213% 64% 97%
Average commission rate(d)............... $0.0524 $0.0488 N/A N/A N/A
- - ---------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Average commission rate is based on total broker commissions incurred in connection with execution of portfolio
transactions during the period, divided by the sum of all portfolio shares purchased and sold during the period that
were subject to a commission. Broker commissions are treated as capital items that increase the cost basis of
securities purchased, or reduce the proceeds of securities sold.
</TABLE>
LB Mid Cap Growth Fund
CLASS A SHARES
<TABLE>
<CAPTION>
For the period from
May 30, 1997
(effective date)
to October 31, 1997
------------------
<S> <C>
(For a share outstanding throughout the period) (a)
Net Asset Value, Beginning of Period ...................... $ 9.25
--------
Investment Operations:
Net Investment Loss ....................................... (0.02)
Net Realized and Unrealized Gain
(Loss) on Investments ................................... 1.10
--------
Total from Investment Operations .......................... 1.08
--------
Net Asset Value, End of Period ............................ $ 10.33
========
Total Investment Return at
Net Asset Value (b) ...................................... 11.68%
Net Assets, End of Period ($ in millions) ................. $ 14.6
Ratio of Expenses to Average
Net Assets ............................................... 1.95%(c)
Ratio of Net Investment Loss to
Average Net Assets ....................................... (0.84%)(c)
Portfolio Turnover Rate ................................... 94%
Average commission rate (d) ............................... $ 0.0588
- - ----------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(c) Computed on an annualized basis.
(d) Average commission rate is based on total broker commissions incurred in connection with execution of
portfolio transactions during the period, divided by the sum of all portfolio shares purchased and sold during the
period that were subject to a commission. Broker commissions are treated as capital items that increase the cost basis
of securities purchased, or reduce the proceeds of securities sold.
</TABLE>
LB WORLD GROWTH FUND
CLASS A SHARES
<TABLE>
<CAPTION>
For the Period From
September 5, 1995
Year Ended Year Ended (effective date) to
(For a share outstanding throughout the period)(a) October 31, 1997 October 31, 1996 October 31, 1995
---------------- ---------------- -------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $9.48 $8.44 $8.50
----- ----- -----
Income From Investment Operations:
Net Investment Income............................ 0.02 0.04 0.01
Net Realized and Unrealized Gain (Loss)
on Investments................................ 0.67 1.02 (0.07)
----- ----- -----
Total from Investment Operations...................... 0.69 1.06 (0.06)
----- ----- -----
Less Distributions from:
Net Investment Income............................ (0.04) (0.02) --
Net Realized Gains on Investments................ (0.04) -- --
----- ----- -----
Total Distributions................................... (0.08) (0.02) --
----- ----- -----
Net Asset Value, End of Period........................ $10.09 $9.48 $8.44
===== ===== =====
Total Investment Return at Net Asset Value(b)......... 7.38% 12.53% -0.71%
Net Assets, End of Period (in millions)............... $75.1 $52.9 $14.0
Ratio of Expenses to Average Net Assets............... 1.82% 1.95%(d) 1.95%(c,d)
Ratio of Net Investment Income to Average Net Assets.. 0.17% 0.67%(d) 1.60%(c,d)
Portfolio Turnover Rate............................... 17% 11% 0%
Average commission rate(e)............................ $0.0226 $0.0216 N/A
- ------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Effective September 5, 1995 through October 31, 1996, Lutheran Brotherhood Research Corp. (LBRC) had voluntarily
undertaken to limit the Fund's expense ratio at 1.95%. Had LBRC not undertaken such action, the ratio of expenses to
average net assets would have been 2.13% and 2.89%, and the ratio of net investment income to average net assets would
have been 0.49% and 0.66%, respectively, for the year ended October 31, 1996 and for the period from September 5, 1995
to October 31, 1995.
(e) Average commission rate is based on total broker commissions incurred in connection with execution of portfolio
transactions during the period, divided by the sum of all portfolio shares purchased and sold during the period that
were subject to a commission. Broker commissions are treated as capital items that increase the cost basis of
securities purchased, or reduce the proceeds of securities sold.
</TABLE>
LB FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended Years ended January 31,
throughout the period)(a) Ended Ended Ended Ended Oct. 31 --------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 1993 1993 1992 1991 1990 1989
--------- -------- -------- -------- ------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 23.07 $ 21.19 $17.67 $18.85 $18.53 $19.14 $17.10 $15.83 $15.97 $14.44
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Net Investment Income...... 0.19 0.20 0.22 0.19 0.29 0.27 0.32 0.37 0.36 0.47
Net Realized and Unrealized
Gain Loss on Investments. 5.68 3.33 3.52 (0.20) 1.04 1.42 3.90 1.34 1.32 1.54
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations 5.87 3.53 3.74 (0.01) 1.33 1.69 4.22 1.71 1.68 2.01
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income... (0.20) (0.20) (0.22) (0.20) (0.28) (0.27) (0.31) (0.38) (0.32) (0.48)
Net Realized Gain on
Investments............. (1.76) (1.45) -- (0.97) (0.73) (2.03) (1.87) (0.06) (1.50) --
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions........ (1.96) (1.65) (0.22) (1.17) (1.01) (2.30) (2.18) (0.44) (1.82) (0.48)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value End of
Period.................. $26.98 $ 23.07 $21.19 $17.67 $18.85 $18.53 $19.14 $17.10 $15.83 $15.97
======= ======= ====== ====== ====== ====== ====== ====== ====== ======
Total Investment Return a
Net Asset Value(%)(b)... 26.99% 17.61% 21.34% -0.11% 7.41% 9.47% 24.67% 10.92% 9.77% 14.26%
Net Assets, End of Period
(in millions)........... $ 989.8 $ 768.8 $645.5 $548.6 $527.3 $460.9 $380.3 $303.4 $273.3 $275.9
Ratio of Expenses to
Average Net Assets (%).. 0.88%(e) 0.97% 1.02% 1.04% 1.01%(c) 0.97% 1.00% 1.05% 1.04% 1.08%
Ratio of Net Investment
Income to Average Net
Assets (%).............. 0.76%(e) 0.94% 1.15% 1.10% 2.15%(c) 1.44% 1.69% 2.21% 1.99% 3.24%
Portfolio Turnover (%)..... 54% 91% 127% 234% 237% 249% 175% 148% 145% 89%
Average commission rate(d) $0.0599 $0.0664 N/A N/A N/A N/A N/A N/A N/A N/A
- - ----------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Average commission rate is based on total broker commissions incurred in connection with execution of portfolio
transactions during the period, divided by the sum of all portfolio shares purchased and sold during the period that
were subject to a commission. Broker commissions are treated as capital items that increase the cost basis of
securities purchased, or reduce the proceeds of securities sold.
(e) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB Fund. Had LB Research not undertaken such action, the ratio of expenses to average net assets
would have been 0.92% and the ratio of net investment income to average net assets would have been 0.72%.
</TABLE>
LB HIGH YIELD FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share Year Year Year Year ended Years ended January 31,
outstanding throughout Ended Ended Ended Ended Oct. 31 -----------------------------------------
the period)(a) 10/31/97 10/31/96 10/31/95 10/31/94 1993 1993 1992 1991 1990 1989
----------- ------- -------- -------- ------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.21 $ 9.03 $ 8.86 $ 9.73 $ 9.12 $ 8.45 $ 6.72 $ 7.93 $ 9.72 $ 9.86
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Investment Operations:
Net Investment Income . 0.85 0.84 0.83 0.83 0.61 0.88 0.93 0.92 1.12 1.14
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.41 0.17 0.24 (0.86) 0.60 0.68 1.72 (1.21) (1.76) (0.17)
------ ------ ----- ------ ------ ----- ------ ------ ------ ------
Total from Investment
Operations............ 1.26 1.01 1.07 (0.03) 1.21 1.56 2.65 (0.29) (0.64) 0.97
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income. (0.86) (0.83) (0.85) (0.82) (0.60) (0.89) (0.92) (0.92) (1.15) (1.11)
Net Realized Gain
on Investments........ (0.03) -- (0.05) (0.02) -- -- -- -- -- --
------ ----- ------ ------ ------ ------ ------ ------ ------ ----
Total Distributions.... (0.89) (0.83) (0.90) (0.84) (0.60) (0.89) (0.92) (0.92) (1.15) (1.11)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value End
of Period............. $ 9.58 $ 9.21 $ 9.03 $ 8.86 $ 9.73 $ 9.12 $ 8.45 $ 6.72 $ 7.93 $ 9.72
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Investment
Return at Net
Asset Value(%)(b)..... 14.43% 11.64% 12.93% -0.47% 13.72% 19.51% 41.59% -3.98% -7.52% 10.52%
Net Assets, End of
Period (in millions).. $862.9 $703.1 $594.3 $499.6 $440.3 $330.2 $217.0 $137.0 $149.6 $126.5
Ratio of Expenses to
Average Net Assets (%). 0.84%(d) 0.91% 0.93% 0.95% 0.94%(c) 0.99% 1.16% 1.23% 1.19% 1.21%
Ratio of Net Investment
Income to Average
Net Assets (%)........ 9.14%(d) 9.23% 9.53% 8.92% 8.72%(c) 10.04% 11.95% 12.51% 12.23% 11.72%
Portfolio Turnover..... 113% 104% 71% 50% 66% 86% 145% 120% 86% 73%
- - -------------------
* For the period April 3, 1987 (effective date) to January 31, 1988.
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB High Yield Fund. Had LB Research not undertaken such action, the ratio of expenses to average
net assets would have been 0.88% and the ratio of net investment income to average net assets would have been 9.10%.
</TABLE>
LB INCOME FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended
throughout the period)(a) Ended Ended Ended Ended Oct. 31
10/31/97 10/31/96 10/31/95 10/31/94 1993
--------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period....... $ 8.50 $ 8.72 $ 8.01 $ 9.43 $ 9.10
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income...... 0.55 0.57 0.59 0.58 0.47
Net Realized and
Unrealized Gain (Loss)
on Investments............ 0.11 (0.19) 0.69 (1.19) 0.33
------ ------ ------ ------ -----
Total from Investment
Operations................ 0.66 0.38 1.28 (0.61) 0.80
------ ------ ------ ------ ----
Less Distributions from:
Net Investment Income..... (0.55) 0.60) (0.57) (0.56) (0.47)
Net Realized Gain on
Investments............... -- -- -- (0.25) --
------ ------ ----- ------ -----
Total Distributions........ (0.55) (0.60) (0.57) (0.81) (0.47)
------ ------ ------ ------ ------
Net Asset Value End of
Period.................... $ 8.61 8.50 $ 8.72 $ 8.01 $ 9.43
====== ===== ====== ====== ======
Total Investment Return
at Net Asset
Value(%)(b).............. 8.05% 4.56% 16.53% -6.81% 8.97%
Net Assets, End of
Period (in millions)..... $778.0 $871.0 $942.1 $907.2 $1,042.2
Ratio of Expenses to
Average Net Assets (%)... 0.80%(e) 0.83% 0.83% 0.82% 0.80%(c,d)
Ratio of Net Investment
Income to Average
Net Assets (%)........... 6.44%(e) 6.61% 7.01% 6.77% 6.87%(c,d)
Portfolio Turnover (%).... 97% 142% 131% 155% 84%
</TABLE>
<TABLE>
<CAPTION>
(For a share outstanding Years ended January 31,
throughout the period)(a) -------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........$ 8.79 $ 8.35 $ 8.47 $ 8.52 $ 8.62
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income....... 0.66 0.72 0.78 0.82 0.80
Net Realized and
Unrealized Gain (Loss)
on Investments............. 0.31 0.44 (0.11) (0.06) (0.10)
------ ------ ------ ------ ------
Total from Investment
Operations................. 0.97 1.16 0.67 0.76 0.70
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income...... (0.66) (0.72) (0.79) (0.81) (0.80)
Net Realized Gain on
Investments................ -- -- -- -- --
------ ------ ------ ----- ------
Total Distributions......... (0.66) (0.72) (0.79) (0.81) (0.80)
------ ------ ------ ------ ------
Net Asset Value End of
Period.....................$ 9.10 $ 8.79 $ 8.35 $ 8.47 $ 8.52
====== ====== ====== ====== ======
Total Investment Return
at Net Asset
Value(%)(b)................ 11.50% 14.48% 8.39% 9.18% 8.69%
Net Assets, End of
Period (in millions).......$944.6 $819.5 $736.5 $719.8 $725.5
Ratio of Expenses to
Average Net Assets (%)..... 0.90% 0.97% 1.02% 1.02% 1.03%
Ratio of Net Investment
Income to Average
Net Assets (%)............. 7.40% 8.38% 9.35% 9.53% 9.52%
Portfolio Turnover (%)...... 104% 117% 118% 113% 68%
- - ------------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) During the nine month period ended October 31, 1993, Lutheran Brotherhood Research Corp. (LBRC) undertook a
voluntary reduction of the Fund's investment advisory fee equal to 0.10% of average daily net assets. Had LBRC not
undertaken such action, the ratio of expenses to average net assets would have been 0.90% and the ratio of net
investment income to average net assets would have been 6.77%.
(e) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB Income Fund. Had LB Research not undertaken such action, the ratio of expenses to average net
assets would have been 0.84% and the ratio of net investment income to average net assets would have been 6.40%.
</TABLE>
LB MUNICIPAL BOND FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended
throughout the period)(a) Ended Ended Ended Ended Oct. 31
10/31/97 10/31/96 10/31/95 10/31/94 1993
-------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 8.60 $ 8.58 $ 7.88 $ 9.00 $ 8.52
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income.......... 0.45 0.44 0.45 0.46 0.37
Net Realized and Unrealized Gain
(Loss) on Investments....... 0.24 0.01 0.70 (0.96) 0.51
------ ------ ------ ------ ------
Total from Investment Operations. 0.69 0.45 1.15 0.50 0.88
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income....... (0.44) (0.43) (0.45) (0.46) (0.37)
Net Realized Gain on
Investments............... -- -- -- (0.16) (0.03)
------ ------ ------ ------ ------
Total Distributions............ (0.44) (0.43) (0.45) (0.62) (0.40)
------ ------ ------ ------ ------
Net Asset Value End of Period.. $ 8.85 $ 8.60 $ 8.58 $ 7.88 $ 9.00
====== ===== ====== ====== ======
Total Investment Return at
Net Asset Value(%)(b)....... 8.28% 5.33% 14.97% -5.93% 10.73%
Net Assets, End of
Period (in millions)........ $591.9 $609.5 $628.7 $595.2 $629.7
Ratio of Expenses to Average
Net Assets (%).............. 0.70%(e) 0.74% 0.74% 0.75% 0.74%(c,d)
Ratio of Net Investment Income
to Average Net Assets (%)... 5.13%(e) 5.14% 5.43% 5.44% 5.69%(c,d)
Portfolio Turnover (%)......... 18% 33% 36% 38% 46%
</TABLE>
<TABLE>
<CAPTION>
(For a share outstanding
throughout the period)(a) YEARS ENDED JANUARY 31,
-----------------------------------------
1993 1992 1991 1990 1989
------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 8.45 $ 8.32 $ 8.15 $ 8.18 $ 8.09
------ ----- ----- ----- -----
Investment Operations:
Net Investment Income.......... 0.53 0.56 0.58 0.58 0.60
Net Realized and Unrealized Gain
(Loss) on Investments....... 0.28 0.29 0.16 (0.02) 0.07
------ ----- ----- ----- -----
Total from Investment Operations. 0.81 0.85 0.74 0.56 0.67
------ ----- ----- ----- -----
Less Distributions from:
Net Investment Income......... (0.52) (0.56) (0.57) (0.59) (0.58)
Net Realized Gain on
Investments................. (0.22) (0.16) -- -- --
------ ----- ----- ----- -----
Total Distributions.............. (0.74) (0.72) (0.57) (0.59) (0.58)
------ ----- ----- ----- -----
Net Asset Value End of Period.... $ 8.52 $ 8.45 $ 8.32 $ 8.15 $ 8.18
====== ===== ===== ===== =====
Total Investment Return at
Net Asset Value(%)(b)......... 9.96% 10.64% 9.54% 7.02% 8.70%
Net Assets, End of
Period (in millions).......... $532.6 $448.4 $382.5 $348.2 $306.5
Ratio of Expenses to Average
Net Assets (%)................ 0.80% 0.83% 0.86% 0.86% 0.92%
Ratio of Net Investment Income
to Average Net Assets (%)..... 6.22% 6.65% 7.06% 7.04% 7.37%
Portfolio Turnover (%)........... 77% 78% 68% 60% 70%
- - ------------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) During the nine month period ended October 31, 1993, Lutheran Brotherhood Research Corp. (LBRC) undertook a
voluntary reduction of the Fund's investment advisory fee equal to 0.05% of average daily net assets. Had LBRC not
undertaken such action, the ratio of expenses to average net assets would have been 0.79% and the ratio of net
investment income to average net assets would have been 5.64%.
(e) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB Municipal Bond Fund. Had LB Research not undertaken such action, the ratio of expenses to
average net assets would have been 0.74% and the ratio of net investment income to average net assets would have been
5.09%.
</TABLE>
LB MONEY MARKET FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended
throughout the period)(a) Ended Ended Ended Ended Oct. 31
10/31/97 10/31/96 10/31/95 10/31/94 1993
------- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Net asset Value,
Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income.... 0.05 0.05 0.05 0.03 0.02
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income.... (0.05) (0.05) (0.05) (0.03) (0.02)
------ ------ ------ ------ ------
Net Asset Value,
End of Period. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Investment Return
at Net Asset Value (%)(b) 4.74% 4.63% 4.95% 2.89% 1.63%
Net Assets, End of
Period (in millions).. $469.2 $417.6 $341.1 $276.9 $275.1
Ratio of Expenses to
Average Net Assets (%)(d). 0.95% 1.01% 1.10% 1.10% 1.10%(c)
Ratio of Net Investment
Income to Average Net
Assets (%)(d). 4.64% 4.53% 4.85% 2.85% 2.16%(c)
</TABLE>
<TABLE>
<CAPTION>
(For a share outstanding
throughout the period)(a) Years ended January 31,
--------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income.......... 0.03 0.05 0.07 0.08 0.07
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income.......... (0.03) (0.05) (0.07) (0.08) (0.07)
------ ------ ------ ------ ------
Net Asset Value, End of Period. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Investment Return at Net
Asset Value (%)(b).......... 2.77% 5.10% 7.40% 8.44% 7.01%
Net Assets, End of
Period (in millions)........ $317.0 $412.3 $473.4 $423.5 $309.3
Ratio of Expenses to Average
Net Assets (%).............. 1.10%(d) 1.08% 1.07% 1.09% 1.07%
Ratio of Net Investment Income
to Average Net Assets (%)... 2.76%(d) 5.01% 7.16% 8.10% 6.83%
- - ----------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total return is based on the change in net asset value during the period and assumes reinvestment of all
distributions.
(c) Computed on an annualized basis.
(d) Effective February 1, 1992 through March 31, 1996, Lutheran Brotherhood Research Corp. (LBRC) had voluntarily
undertaken to limit the Fund's expense ratio to 1.10% of annual average daily net assets. Effective April 1, 1996, LBRC
voluntarily lowered the expense limit prospectively to 0.95% of average daily net assets. Had LBRC not undertaken such
action to limit expenses, the ratio of expenses to average net assets would have been 1.05%, 1.07%, 1.18%, 1.36%, 1.44%
and 1.23% and the ratio of net investment income to average net assets would have been 4.35%, 4.47%, 4.77%, 2.59%,
1.82% and 2.63%, respectively, for the years ended October 31, 1997, 1996, 1995, and 1994, the nine month period ended
October 31, 1993 and the year ended January 31, 1993.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
Each of the Funds in The Lutheran Brotherhood Family of Funds has a
separate investment objective and investment policies for the pursuit of
that objective. The investment objective of each Fund is fundamental and may
not be changed without the approval of shareholders of that Fund. Except as
otherwise indicated in this Prospectus, the investment policies of each Fund
may be changed from time to time by the Board of Trustees of the Trust.
There is no assurance that any of the Funds will achieve its investment
objective, but it will strive to do so by following the policies set forth
below.
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
The investment objective of the LB Opportunity Growth Fund is to
achieve long term growth of capital.
The Fund will pursue its objective by seeking realized and unrealized
capital gains through the active management of a portfolio consisting
primarily of common stocks. Such active management may involve a high level
of portfolio turnover. The Fund will invest primarily in common stocks of
domestic and foreign companies that in the opinion of LB Research have a
potential for above average sales and earnings growth that is expected to
lead to capital appreciation. The Fund's investment adviser believes that
over a long period of time, smaller companies that have a competitive
advantage will be able to grow faster than larger companies, leading to a
higher rate of growth in capital. For a description of the risks associated
with investments in such companies, see "Investment Risks--LB Opportunity
Growth Fund Investment Risks".
The Fund may also invest in bonds and preferred stocks, convertible
bonds, convertible preferred stocks, warrants, American Depository Receipts
(ADR's) and other debt or equity securities. In addition, the Fund may
invest in U.S. Government securities or cash. The Fund will not use any
minimum level of credit quality. At no time will the Fund invest more than
5% of its net assets in debt obligations. Debt obligations may be rated less
than investment grade, which is defined as having a quality rating below
"Baa", as rated by Moody's Investors Service, Inc. ("Moody's"), or below
"BBB", as rated by Standard & Poor's Corporation ("S&P"). For a description
of Moody's and S&P's ratings, see "Description of Debt Ratings". Securities
rated below investment grade are considered to be speculative and involve
certain risks, including a higher risk of default and greater sensitivity to
interest rate and economic changes.
LB Research will use fundamental investment research techniques to
seek out those companies that have a competitively superior product or
service in an unsaturated market with large potential for growth. These will
often be companies with shorter histories and less seasoned operations. Many
of such companies will have market capitalizations that are less than $1
billion, with lower daily trading volume in their stocks and less overall
liquidity than larger, more well established companies. LB Research
anticipates that the common stocks of such companies may increase in market
value more rapidly than the stocks of other companies.
The Fund will focus primarily on companies that possess superior
earnings prospects over a three to five year time horizon. The stocks that
the Fund invests in may be traded on national exchanges or in the over-the-
counter market ("OTC"). There will be no limit on the proportion of the
Fund's investment portfolio that may consist of OTC stocks.
The Fund may dispose of securities held for a short period if the
Fund's investment adviser believes such disposition to be advisable. While
LB Research does not intend to select portfolio securities for the specific
purpose of trading them within a short period of time, LB Research does
intend to use an active method of management which will result in the sale
of some securities after a relatively brief holding period. This method of
management necessarily results in higher cost to the Fund due to the fees
associated with portfolio securities transactions. A higher portfolio
turnover rate may also result in taxes on realized capital gains to be borne
by shareholders. However, it is LB Research's belief that this method of
management can produce added value to the Fund and its shareholders that
exceeds the additional costs of such transactions. The annual portfolio
turnover rates of the Fund for the fiscal years ended October 31, 1997 and
October 31, 1996 were 136% and 176%, respectively.
For more information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
The investment objective of the LB Mid Cap Growth Fund is to achieve
long term growth of capital.
The Fund will pursue its objective by investing primarily in a
professionally managed diversified portfolio of common stocks of companies
with medium market capitalizations LB Research defines companies with
medium market capitalizations ("mid cap companies") as those with market
capitalizations that fall within the capitalization range of companies
included in the Standard & Poor's MidCap 400 Index at the time of the
Portfolio's investment. The Fund will seek to invest in companies that have
a track record of earnings growth or the potential for continued above
average growth. The Fund will normally invest at least 65% of its total
assets in common stocks of mid cap companies. LB Research will use both
fundamental and technical investment research techniques to seek out these
companies.
The stocks that the Fund invests in may be traded on national
exchanges or in the over-the-counter market ("OTC"). There will be no limit
on the proportion of the Fund's investment portfolio that may consist of OTC
stocks.
Many mid cap companies have lower daily trading volume in their stocks
and less overall liquidity than larger, more well established companies. The
common stocks of such companies may have greater price volatility than the
stocks of other larger companies. For a description of these and other risks
associated with investments in such companies, see "Investment Risks -- LB
Mid Cap Growth Fund Investment Risks".
The Fund may also invest in other types of securities, including
bonds, preferred stocks, convertible bonds, convertible preferred stocks,
warrants, American Depository Receipts (ADR's), common stocks of companies
falling outside the medium market capitalization range, and other debt or
equity securities. In addition, the Fund may invest in U.S. Government
securities or cash. The Fund will not use any minimum level of credit
quality. At no time will the Fund invest more than 5% of its net assets in
debt obligations. Debt obligations may be rated less than investment grade,
which is defined as having a quality rating below "Baa", as rated by Moody's
Investors Service, Inc. ("Moody's), or below "BBB", as rated by Standard &
Poor's Corporation ("S&P"). For a description of Moody's and S&P's ratings,
see "Description of Debt Ratings". Securities rated below investment grade
(sometimes referred to as "high yield" or "junk bonds") are considered to be
speculative and involve certain risks, including a higher risk of default
and greater sensitivity to interest rate and economic changes.
The Fund may dispose of securities held for a short period if the
Fund's investment adviser believes such disposition to be advisable. While
LB Research does not intend to select portfolio securities for the specific
purpose of trading them within a short period of time, LB Research does
intend to use an active method of management which will result in the sale
of some securities after a relatively brief holding period. This method of
management necessarily results in higher cost to the Fund due to the fees
associated with portfolio securities transactions. A higher portfolio
turnover rate may also result in taxes on realized capital gains to be borne
by shareholders. However, it is LB Research's belief that this method of
management can produce added value to the Fund and its shareholders that
exceeds the additional costs of such transactions. The annual portfolio
turnover rate of the Fund for the period ended October 31, 1997 was 94%.
For more information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
The investment objective of the LB World Growth Fund is to seek total
return from long-term growth of capital. The Fund will pursue its objective
principally through investments in common stocks of established, non- U.S.
companies. Total return consists of capital appreciation or depreciation,
dividend income, and currency gains or losses.
The Fund intends to diversify investments broadly among countries and
to normally have at least three different countries represented in the Fund.
The Fund may invest in countries of the Far East and Western Europe as well
as South Africa, Australia, Canada and other areas (including developing
countries). As a temporary defensive measure, the Fund may invest
substantially all of its assets in one or two countries.
In seeking its objective, the Fund will invest primarily in common
stocks of established foreign companies which have the potential for growth
of capital. In order to increase total return, the Fund may also invest in
bonds and preferred stocks, convertible bonds, convertible preferred stocks,
warrants, American Depository Receipts (ADR's) and other debt or equity
securities. In addition, the Fund may invest in U.S. Government securities
or cash. The Fund will not use any minimum level of credit quality. At no
time will the Fund invest more than 5% of its net assets in debt obligations
or other securities that may be converted to debt obligations. Debt
obligations may be rated less than investment grade, which is defined as
having a quality rating below "Baa", as rated by Moody's Investors Service,
Inc. ("Moody's"), or below "BBB", as rated by Standard & Poor's Corporation
("S&P"). Debt obligations rated "Baa" or "BBB" are considered to have
speculative characteristics. For a description of Moody's and S&P's ratings,
see "Description of Debt Ratings". Securities rated below investment grade
are considered to be speculative and involve certain risks, including a
higher risk of default and greater sensitivity to interest rate and economic
changes.
In determining the appropriate distribution of investments among
various countries and geographic regions, the Sub-advisor considers the
following factors: prospects for relative economic growth between foreign
countries; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range
of individual investment opportunities available to international investors.
In analyzing companies for investment, the Sub-advisor looks for one
or more of the following characteristics: an above-average earnings growth
per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management;
and general operating characteristics which will enable the companies to
compete successfully in their market place. While current dividend income is
not a prerequisite in the selection of portfolio companies, the companies in
which the Fund invests normally will have a record of paying dividends, and
will generally be expected to increase the amounts of such dividends in
future years as earnings increase.
The Fund's investments also may include, but are not limited to,
European Depository Receipts ("EDRs"), other debt and equity securities of
foreign issuers, and the securities of foreign investment funds or trusts
(including passive foreign investment companies). For a discussion of the
risks involved in foreign investing see the section of this Prospectus
entitled "Foreign Issuers".
The Fund may engage in certain forms of options and futures
transactions that are commonly known as derivative securities transactions.
These derivative securities transactions are identified and described in the
sections of this Prospectus entitled "Put and Call Options" and "Financial
Futures and Options on Futures."
The Fund may use foreign currency exchange-related securities
including foreign currency warrants, principal exchange rate linked
securities, and performance indexed paper. The Fund does not expect to hold
more than 5% of its total assets in foreign currency exchange-related
securities.
The Fund will normally conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or through entering into forward
contracts to purchase or sell foreign currencies. The Fund will generally
not enter into a forward contract with a term of greater than one year.
The Fund will generally enter into forward foreign currency exchange
contracts only under two circumstances. First, when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
Second, when Sub-advisor believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency,
it may enter into a forward contract to sell or buy the former foreign
currency (or another currency which acts as a proxy for that currency)
approximating the value of some or all of the Fund's securities denominated
in such foreign currency. Under certain circumstances, the Fund may commit a
substantial portion of the entire value of its portfolio to the consummation
of these contracts. Sub-advisor will consider the effect such a commitment
of its portfolio to forward contracts would have on the investment program
of the Fund and the flexibility of the Fund to purchase additional
securities. Although forward contracts will be used primarily to protect the
Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted and the
Fund's total return could be adversely affected as a result.
For a discussion of foreign currency contracts and the risks involved
therein, see the section of this Prospectus entitled, "Investment Risks."
The Fund will not generally trade in securities for short-term
profits, but, when circumstances warrant, securities may be purchased and
sold without regard to the length of time held. The annual portfolio
turnover rate of the Fund for the fiscal year ended October 31, 1997 and
October 31, 1996 were 17% and 11%, respectively.
For more information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD FUND
The investment objective of the LB Fund is to seek growth of capital
and income.
The Fund seeks to achieve its objective by investing in securities
issued by leading companies. The Fund may invest in the common stocks and
other securities of leading companies, including corporate bonds, notes,
preferred stock, and warrants. The Fund may also invest in U.S. Government
securities and cash. For purposes of the Fund's investment objective,
companies are deemed "leading" in terms of market share, asset size, cash
flow and other fundamental factors.
LB Research will use fundamental investment research techniques to
seek out those companies that have a leading position within their industry
or within the capital markets generally. LB Research will focus upon market
shares, growth in sales and earnings, market capitalization and asset size
and competitive dominance. These will often be mature companies with a
lengthy history and seasoned operations. Many of them will have market
capitalizations in excess of $1 billion.
The Fund may dispose of securities held for a short period if the
Fund's investment adviser believes such disposition to be advisable. LB
Research intends to use an active method of management and may select
portfolio securities for the specific purpose of trading them within a short
period of time, which will result in the sale of some securities after a
relatively brief holding period. This method of management necessarily
results in higher cost to the Fund due to the fees associated with portfolio
securities transactions. However, it is LB Research's belief that this
method of management can produce added value to the Fund and its
shareholders that exceeds the additional costs of such transactions. The
annual portfolio turnover rates of the Fund for the fiscal years ended
October 31, 1997 and October 31, 1996 were 54% and 91%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD HIGH YIELD FUND
The investment objective of the LB High Yield Fund is to obtain high
current income and, secondarily, growth of capital.
The Fund seeks to achieve its investment objectives by investing
primarily in a diversified portfolio of professionally managed high yield,
high risk securities, many of which involve greater risks than higher
quality investments. The Fund may invest in high yield, high risk bonds,
notes, debentures and other income producing debt obligations and dividend
paying preferred stocks. These securities are commonly known as "junk
bonds". High yield, high risk securities will ordinarily carry a quality
rating "Ba" or lower by Moody's, "BB" or lower by S&P, or, if not rated,
such securities will be of comparable quality as determined by the Fund's
investment adviser. The Fund will use no minimum level of quality rating and
may purchase and hold securities in default. Securities having a quality
rating of Ba or BB and lower are considered to be speculative. See
"Investment Risks - LB High Yield Fund Investment Risks". For a description
of Moody's and S&P's ratings, see "Description of Debt Ratings".
The Fund may also invest in common stocks, warrants to purchase
stocks, bonds or preferred stock convertible into common stock, and other
equity securities. Investments in such securities will be made in pursuit of
the income and capital growth objectives of the Fund, but at no time will
the Fund invest more than 20% of its total assets in equity securities.
As a nonfundamental policy, during normal market conditions the Fund
will maintain at least 65% of its total assets, taken at market value, in
lower rated securities. The Fund may invest, without limit, in short-term
money market instruments when, in the opinion of LB Research, short-term
investments provide a better opportunity for achieving the Fund's objectives
than do longer term investments. When making short-term investments for such
purpose, the Fund will not be limited to a minimum quality level and may use
unrated instruments.
The Fund does not intend to engage in short-term trading but may
dispose of securities held for a short time if LB Research believes such
disposition to be advisable. The annual portfolio turnover rates of the Fund
for the fiscal years ended October 31, 1997 and October 31, 1996 were 113%
and 104%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD INCOME FUND
The investment objective of the LB Income Fund is to seek high current
income while preserving principal. The Fund's secondary investment objective
is to obtain long-term growth of capital in order to maintain investors'
purchasing power.
The Fund seeks to achieve its investment objectives by investing
primarily in debt securities such as bonds, notes, debentures, mortgage-
backed securities, other income producing debt obligations, and preferred
stocks rated "Baa" or higher by Moody's or "BBB" or higher by S&P. If not
rated, such securities will be of comparable quality in the opinion of LB
Research. Securities rated BBB or Baa, although considered to be investment
grade or higher, have speculative characteristics. If a portfolio security's
quality rating drops below investment grade after the Fund has acquired the
security, the Fund may continue to hold the security in its portfolio. A
description of the ratings that are given to debt securities by Moody's and
S&P and the standards applied by them in assigning these ratings may be
found at end of this Prospectus.
The Fund may from time to time invest in debt securities that are not
rated as investment grade. For a description of the risks of investing in
such securities, see the section of this Prospectus entitled "Investment
Risks of High Yield Securities". The Fund may also invest in common stock
and bonds and preferred stock that are convertible into common stock. No
more than 10% of the Fund's total assets will be invested in common stock
and no more than 25% of the value of the total assets will be invested in
all securities described in this paragraph.
Debt securities may bear fixed or variable rates of interest. They may
involve equity features such as conversion or exchange rights, warrants for
the acquisition of common stock of the same or a different issuer,
participation based on revenues, sales or profits, or the purchase of common
stock in a unit transaction (where corporate debt securities and common
stock are offered as a unit).
The Fund may engage in short-term trading and dispose of securities
held for a short time if LB Research believes such disposition to be
advisable. This method of management necessarily results in higher cost to
the Fund due to the fees associated with portfolio securities transactions.
However, it is LB Research's belief that this method of management can
produce added value to the Fund and its shareholders that exceeds the
additional costs of such transactions. The annual portfolio turnover rates
of the Fund for the fiscal years ended October 31, 1997 and October 31, 1996
were 97% and 142%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
The investment objective of the LB Municipal Bond Fund is to provide
its shareholders with a high level of current income which is exempt from
federal income tax.
The Fund seeks to achieve its investment objective by investing in a
diversified portfolio of municipal bonds. Municipal bonds are debt
obligations issued by or on behalf of states (including the District of
Columbia), territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities, the interest from
which is exempt from federal income tax. At least 80% of the Fund's total
assets will be invested in municipal bonds unless LB Research determines
that market conditions call for a temporary defensive posture.
The Fund does not generally intend to purchase securities if, as a
result of such purchase, more than 25% of the value of its total assets
would be invested in the securities of governmental subdivisions located in
any one state, territory or possession of the United States. The Fund may
invest more than 25% of the value of its total assets in industrial
development bonds. As to industrial development bonds, the Fund may invest
up to 25% of its total assets in securities issued in connection with the
financing of projects with similar characteristics, such as toll road
revenue bonds, housing revenue bonds or electric power project revenue
bonds, or in industrial development revenue bonds which are based, directly
or indirectly, on the credit of private entities in any one industry. This
may make the Fund more susceptible to economic, political or regulatory
occurrences affecting a particular industry or sector and increase the
potential for fluctuation of net asset value.
Municipal Bonds: Municipal bonds are generally issued to finance
public works, such as bridges and highways, housing, mass transportation
projects, schools and hospitals. Municipal bonds are also issued to repay
outstanding obligations, to raise funds for general operating expenses and
to make loans to other public institutions and facilities. The two principal
classifications of municipal bonds are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge and
ability to raise taxes to repay the principal and interest. Revenue bonds
are repayable only from the income earned from the facility financed by the
bond or other specific source of revenue. For example, income earned by a
housing development can be used to repay the bonds that raised the funds for
its construction.
Industrial Development Bonds: Industrial development bonds are
considered municipal bonds if the interest paid on them is exempt from
federal income tax. Industrial development bonds which qualify as municipal
bonds are almost always revenue bonds. They are issued by or on behalf of
public authorities to raise money for privately-operated housing facilities,
sports facilities, convention or trade show centers, airports, mass transit,
port facilities, parking areas, air or water pollution control facilities
and certain local facilities for water supply, gas, electricity or sewage
disposal.
Municipal Bonds Suitable for Investment: The Fund generally restricts
its investments to municipal bonds rated Aaa, Aa, A or Baa by Moody's, or
AAA, AA, A or BBB by S&P. Municipal bonds in the lowest rated category have
speculative characteristics. The Fund also may invest in municipal bonds
(but not industrial development bonds) that are not rated by Moody's or S&P
but, in the opinion of LB Research, would qualify for Standard & Poor's BBB
or Moody's Baa rating. Subsequent to its purchase by the Fund, an issue of
municipal bonds may cease to be rated or its rating may be reduced below the
minimums required for purchase by the Fund. Neither event requires the
elimination of such obligation from the Fund's portfolio, but LB Research
will consider such an event in its determination of whether the Fund should
continue to hold such obligation in its
portfolio.
The annual portfolio turnover rates of the Fund for the fiscal years
ended October 31, 1997 and October 31, 1996 were 18% and 33%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD MONEY MARKET FUND
The LB Money Market Fund's investment objective is current income
consistent with stability of principal.
The Fund pursues this investment objective by investing in a portfolio
of money market instruments that mature in 397 days or less in order to
obtain current income and maintain a stable principal. The dollar-weighted
average maturity of money market instruments held by the LB Money Market
Fund will be 90 days or less. The policy of the Fund is generally to hold
instruments until maturity. However, the Fund may attempt to increase yield
by trading portfolio securities to take advantage of short-term market
variations.
Permissible LB Money Market Fund investments include, but are not
limited to: U.S. Treasury bills and all other marketable obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities;
instruments of domestic and foreign banks and savings and loans; prime
commercial paper; variable amount demand master notes; repurchase
agreements; instruments secured by the obligations described above and
asset-backed securities.
The Fund will not purchase a security (other than U.S. Government
obligations) unless the security (i) is rated by at least two nationally
recognized statistical rating organizations (NRSROs) with the highest rating
assigned to short-term debt securities (or, if rated by only one NRSRO by
that NRSRO, or if not rated, is determined to be of comparable quality), or
(ii) is rated by at least two such NRSROs within the two highest ratings
assigned to short-term debt securities (or, if rated by only one NRSRO by
that NRSRO, or if not rated, is determined to be of comparable quality) and
not more than 5% of the assets of the Fund would be invested in such
securities. In addition, the Fund may not invest more than 1% of its total
assets or $1 million (whichever is greater) in the securities of a single
issuer included in clause (ii) above. Determinations of comparable quality
are made by LB Research in accordance with procedures established by the
Board of Trustees.
U.S. Government Obligations: The types of U.S. Government obligations
in which the Fund may invest include, but are not limited to: direct
obligations of the U.S. Treasury, such as U.S. Treasury bills, bonds and
notes; and instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities which are backed by the full faith and credit
of the United States, the credit of the agency or instrumentality (a
governmental agency organized under federal charter with government
supervision) issuing the obligations, or the issuer's right to borrow from
the U.S. Treasury. These U.S. Government obligations may include notes,
bonds and discount notes issued by following agencies: Federal Land Banks;
Central Bank for Cooperatives; Federal Intermediate Credit Banks; Federal
Home Loan Banks; Farmers Home Administration; and Federal National Home
Mortgage Association.
Bank Instruments: The Fund invests only in instruments of domestic and
foreign banks and savings and loans if they have capital and surplus of over
$100,000,000 or the principal amount of the instrument in which the Fund is
investing is insured by the Federal Deposit Insurance Corporation (FDIC),
including domestic or Eurodollar certificates of deposit, demand and time
deposits, savings shares and bankers' acceptances.
Asset-Backed Securities: Asset-backed securities represent interests
in pools of consumer loans such as credit card receivables, leases on
equipment such as computers and other financial instruments. These
securities provide a flow-through of interest and principal payments as
payments are received on the loans or leases and may be supported by letters
of credit or similar guarantees of payment by a financial institution. These
securities are subject to the risks of non-payment of the underlying loans
as well as the risks of prepayment. An interest in a bank sponsored master
trust which holds the receivables for a major international credit card is
an example of an asset backed security; an interest in a trust which holds
the customer receivable for a large consumer products company is another
example.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
ADDITIONAL INVESTMENT PRACTICES
Various of the Funds may purchase the following securities or may
engage in the following transactions.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreement transactions in
pursuit of its investment objective. A repurchase agreement consists of a
purchase and a simultaneous agreement to resell for later delivery at an
agreed upon price and rate of interest U.S. Government obligations. The Fund
or its custodian will take possession of the obligations subject to a
repurchase agreement. If the original seller of a security subject to a
repurchase agreement fails to repurchase the security at the agreed upon
time, the Fund could incur a loss due to a drop in the market value of the
security during the time it takes the Fund to either sell the security or
take action to enforce the original seller's agreement to repurchase the
security. Also, if a defaulting original seller filed for bankruptcy or
became insolvent, disposition of such security might be delayed by pending
court action. The Fund may only enter into repurchase agreements with banks
and other recognized financial institutions such as broker/dealers which are
found by LB Research (or the Sub-advisor) to be creditworthy.
RESTRICTED SECURITIES
Subject to the limitations on illiquid securities noted above, the
Funds may buy or sell securities that meet the requirements of Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). Securities may be
resold pursuant to Rule 144A under certain circumstances only to qualified
institutional buyers as defined in the rule, and the markets and trading
practices for such securities are relatively new and still developing;
depending on the development of such markets, such Rule 144A Securities may
be deemed to be liquid as determined by or in accordance with methods
adopted by the Trustees. Under such methods the following factors are
considered, among others: the frequency of trades and quotes for the
security, the number of dealers and potential purchasers in the market,
market making activity, and the nature of the security and marketplace
trades. Investments in Rule 144A Securities could have the effect of
increasing the level of a Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities. Also, a Fund may be adversely impacted by the subjective
valuation of such securities in the absence of an active market for them.
REVERSE REPURCHASE AGREEMENTS
Each of the Funds except the LB Money Market Fund also may enter into
reverse repurchase agreements, which are similar to borrowing cash. A
reverse repurchase agreement is a transaction in which the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker or dealer, in return for a percentage of the
instrument's market value in cash, with an agreement that at a stipulated
date in the future the Fund will repurchase the portfolio instrument by
remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not assure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time. The Fund will engage in reverse
repurchase agreements which are not in excess of 60 days to maturity and
will do so to avoid borrowing cash and not for the purpose of investment
leverage or to speculate on interest rate changes.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued and
delayed delivery basis. When-issued and delayed delivery transactions arise
when U.S. Government obligations and other types of securities are bought by
the Fund with payment and delivery taking place in the future. The
settlement dates of these transactions, which may be a month or more after
entering into the transaction, are determined by mutual agreement of the
parties. There are no fees or other expenses associated with these types of
transactions other than normal transaction costs. To the extent a Fund
engages in when-issued and delayed delivery transactions, it will do so for
the purpose of acquiring portfolio instruments consistent with its
investment objective and policies and not for the purpose of investment
leverage or to speculate on interest rate changes. On the settlement date,
the value of such instruments may be less than the cost thereof. When
effecting when-issued and delayed delivery transactions, cash, cash
equivalents or high grade debt obligations of a dollar amount sufficient to
make payment for the obligations to be purchased will be segregated at the
trade date and maintained until the transaction has been settled.
LENDING SECURITIES
Consistent with applicable regulatory requirements, each of the Funds
may from time to time lend the securities it holds to broker-dealers,
provided that such loans are made pursuant to written agreements and are
continuously secured by collateral in the form of cash, U.S. Government
securities, irrevocable standby letters of credit or other liquid securities
in an amount at all times equal to at least the market value of the loaned
securities plus the accrued interest and dividends. For the period during
which the securities are on loan, the lending Fund will be entitled to
receive the interest and dividends, or amounts equivalent thereto, on the
loaned securities and a fee from the borrower or interest on the investment
of the cash collateral. The right to terminate the loan will be given to
either party subject to appropriate notice. Upon termination of the loan,
the borrower will return to the Fund securities identical to the loaned
securities.
The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly increasing in
value. In such event, if the borrower fails to return the loaned security,
the existing collateral might be insufficient to purchase back the full
amount of the security loaned, and the borrower would be unable to furnish
additional collateral. The borrower would be liable for any shortage, but
the lending Fund would be an unsecured creditor with respect to such
shortage and might not be able to recover all or any thereof. However, this
risk may be minimized by a careful selection of borrowers and securities to
be lent and by monitoring collateral.
No Fund will lend securities to broker-dealers affiliated with LB
Research or the Sub-advisor. LB Research believes that this will not affect
the Fund's ability to maximize its securities lending opportunities. No Fund
may lend any security or make any other loan if, as a result, more than one-
third of its total assets would be lent to other parties.
PUT AND CALL OPTIONS (ALL FUNDS EXCEPT THE LB MONEY MARKET FUND)
Selling ("Writing" Covered Call Options: Certain of the Funds may from
time to time sell ("write") covered call options on any portion of its
portfolio as a hedge to provide partial protection against adverse movements
in prices of securities in those Funds and, subject to the limitations
described below, for the non- hedging purpose of attempting to create
additional income. A call option gives the buyer of the option, upon payment
of a premium, the right to call upon the writer to deliver a specified
amount of a security on or before a fixed date at a predetermined ("strike")
price. As the writer of a call option, a Fund assumes the obligation to
deliver the underlying security to the holder of the option on demand at the
strike price.
If the price of a security hedged by a call option falls below or
remains below the strike price of the option, a Fund will generally not be
called upon to deliver the security. A Fund will, however, retain the
premium received for the option as additional income, offsetting all or part
of any decline in the value of the security. If the price of a hedged
security rises above or remains above the strike price of the option, the
Fund will generally be called upon to deliver the security. In this event, a
Fund limits its potential gain by limiting the value it can receive from the
security to the strike price of the option plus the option premium.
Buying Call Options: Certain of the Funds may also from time to time
purchase call options on securities in which those Funds may invest. As the
holder of a call option, a Fund has the right to purchase the underlying
security or currency at the exercise price at any time during the option
period (American style) or at the expiration of the option (European style).
A Fund generally will purchase such options as a hedge to provide protection
against adverse movements in the prices of securities which the Fund intends
to purchase. In purchasing a call option, a Fund would realize a gain if,
during the option period, the price of the underlying security increased by
more than the amount of the premium paid. A Fund would realize a loss equal
to all or a portion of the premium paid if the price of the underlying
security decreased, remained the same, or did not increase by more than the
premium paid.
Buying Put Options: Certain of the Funds may from time to time
purchase put options on any portion of its portfolio. A put option gives the
buyer of the option, upon payment of a premium, the right to deliver a
specified amount of a security to the writer of the option on or before a
fixed date at a predetermined ("strike") price. A Fund generally will
purchase such options as a hedge to provide protection against adverse
movements in the prices of securities in the Fund. In purchasing a put
option, a Fund would realize a gain if, during the option period, the price
of the security declined by an amount in excess of the premium paid. A Fund
would realize a loss equal to all or a portion of the premium paid if the
price of the security increased, remained the same, or did not decrease by
more than the premium paid.
Options on Foreign Currencies: The LB World Growth Fund may also write
covered call options and purchase put and call options on foreign currencies
as a hedge against changes in prevailing levels of currency exchange rates.
Selling Put Options: The Funds may not sell put options, except in the
case of a closing purchase transaction (see Closing Transactions).
Index Options: As part of its options transactions, certain of the
Funds may also purchase and sell call options and purchase put options on
stock and bond indices. Options on securities indices are similar to options
on a security except that, upon the exercise of an option on a securities
index, settlement is made in cash rather than in specific securities.
Closing Transactions: Certain of the Funds may dispose of options
which they have written by entering into "closing purchase transactions".
Those Funds may dispose of options which they have purchased by entering
into "closing sale transactions". A closing transaction terminates the
rights of a holder, or the obligation of a writer, of an option and does not
result in the ownership of an option.
A Fund realizes a profit from a closing purchase transaction if the
premium paid to close the option is less than the premium received by the
Fund from writing the option. The Fund realizes a loss if the premium paid
is more than the premium received. The Fund may not enter into a closing
purchase transaction with respect to an option it has written after it has
been notified of the exercise of such option.
A Fund realizes a profit from a closing sale transaction if the
premium received to close out the option is more than the premium paid for
the option. A Fund realizes a loss if the premium received is less than the
premium paid.
Spreads and Straddles: Certain of the Funds may also engage in
"straddle" and "spread" transactions in order to enhance return, which is a
speculative, non-hedging purpose. A straddle is established by buying both a
call and a put option on the same underlying security, each with the same
exercise price and expiration date. A spread is a combination of two or more
call options or put options on the same security with differing exercise
prices or times to maturity. The particular strategies employed by a Fund
will depend on LB Research's or the Sub-advisor's perception of anticipated
market movements.
Negotiated Transactions: Certain of the Funds will generally purchase
and sell options traded on a national securities or options exchange. Where
options are not readily available on such exchanges, a Fund may purchase and
sell options in negotiated transactions. A Fund effects negotiated
transactions only with investment dealers and other financial institutions
deemed creditworthy by its investment adviser. Despite the investment
adviser's or sub-advisor's best efforts to enter into negotiated options
transactions with only creditworthy parties, there is always a risk that the
opposite party to the transaction may default in its obligation to either
purchase or sell the underlying security at the agreed upon time and price,
resulting in a possible loss by the Fund. This risk is described more
completely in the section of this Prospectus entitled, "Risks of
Transactions in Options and Futures". Options written or purchased by a Fund
in negotiated transactions are illiquid and there is no assurance that a
Fund will be able to effect a closing purchase or closing sale transaction
at a time when its Investment Adviser or Sub-advisor believes it would be
advantageous to do so. In the event the Fund is unable to effect a closing
transaction with the holder of a call option written by the Fund, the Fund
may not sell the security underlying the option until the call written by
the Fund expires or is exercised. The underlying securities on such
transactions will also be considered illiquid and are subject to the Fund's
15% illiquid securities limitations.
Limitations: A Fund will not purchase any option if, immediately
thereafter, the aggregate cost of all outstanding options purchased and held
by the Fund would exceed 5% of the market value of the Fund's total assets.
A Fund will not write any option if, immediately thereafter, the aggregate
value of the Fund's securities subject to outstanding options would exceed
30% of the market value of the Fund's total assets.
FINANCIAL FUTURES AND OPTIONS ON FUTURES (ALL FUNDS EXCEPT THE LB MONEY
MARKET FUND)
Selling Futures Contracts: Certain of the Funds may sell financial
futures contracts ("futures contracts") as a hedge against adverse movements
in the prices of securities in those Funds. Such contracts may involve
futures on items such as U.S. Government Treasury bonds, notes and bills,
government mortgage-backed securities; corporate and municipal bond indices;
and stock indices. A futures contract sale creates an obligation for the
Fund, as seller, to deliver the specific type of instrument called for in
the contract at a specified future time for a specified price. In selling a
futures contract, the Fund would realize a gain on the contract if, during
the contract period, the price of the securities underlying the futures
contract decreased. Such a gain would be expected to approximately offset
the decrease in value of the same or similar securities in the Fund. The
Fund would realize a loss if the price of the securities underlying the
contract increased. Such a loss would be expected to approximately offset
the increase in value of the same or similar securities in the Fund.
Futures contracts have been designed by and are traded on boards of
trade which have been designated "contract markets" by the Commodity Futures
Trading Commission ("CFTC"). These boards of trade, through their clearing
corporations, guarantee performance of the contracts. Although the terms of
some financial futures contracts specify actual delivery or receipt of
securities, in most instances these contracts are closed out before the
settlement due date without the making or taking of delivery of the
securities. Other financial futures contracts, such as futures contracts on
a securities index, by their terms call for cash settlements. The closing
out of a futures contract is effected by entering into an offsetting
purchase or sale transaction.
When a Fund sells a futures contract, or a call option on a futures
contract, it is required to make payments to the commodities broker which
are called "margin" by commodities exchanges and brokers.
The payment of "margin" in these transactions is different than
purchasing securities "on margin". In purchasing securities "on margin" an
investor pays part of the purchase price in cash and receives an extension
of credit from the broker, in the form of a loan secured by the securities,
for the unpaid balance. There are two categories of "margin" involved in
these transactions: initial margin and variation margin. Initial margin does
not represent a loan between a Fund and its broker, but rather is a "good
faith deposit" by a Fund to secure its obligations under a futures contract
or an option. Each day during the term of certain futures transactions, a
Fund will receive or pay "variation margin" equal to the daily change in the
value of the position held by the Fund.
Buying Futures Contracts: Certain of the Funds may also purchase
financial futures contracts as a hedge against adverse movements in the
prices of securities which they intend to purchase. A futures contract
purchase creates an obligation by a Fund, as buyer, to take delivery of the
specific type of instrument called for in the contract at a specified future
time for a specified price. In purchasing a futures contract, a Fund would
realize a gain if, during the contract period, the price of the securities
underlying the futures contract increased. Such a gain would approximately
offset the increase in cost of the same or similar securities which a Fund
intends to purchase. a Fund would realize a loss if the price of the
securities underlying the contract decreased. Such a loss would
approximately offset the decrease in cost of the same or similar securities
which a Fund intends to purchase.
Options on Futures Contracts: Certain of the Funds may also sell
("write") covered call options on futures contracts and purchase put and
call options on futures contracts in connection with hedging strategies. A
Fund may not sell put options on futures contracts. An option on a futures
contract gives the buyer of the option, in return for the premium paid for
the option, the right to assume a position in the underlying futures
contract (a long position if the option is a call and a short position if
the option is a put). The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of securities
underlying the futures contract to the extent of the premium received for
the option. The purchase of a put option on a futures contract constitutes a
hedge against price declines below the exercise price of the option and net
of the premium paid for the option. The purchase of a call option
constitutes a hedge, net of the premium, against an increase in cost of
securities which a Fund intends to purchase.
Currency Futures Contracts and Options: The LB World Growth Fund may
also sell and purchase currency futures contracts (or options thereon) as a
hedge against changes in prevailing levels of currency exchange rates. Such
contracts may be traded on U.S. or foreign exchanges. The Fund will not use
such contracts or options for leveraging purposes.
Limitations: Certain of the Funds may engage in futures transactions,
and transactions involving options on futures, only on regulated commodity
exchanges or boards of trade. A Fund will not enter into a futures contract
or purchase or sell related options if immediately thereafter (a) the sum of
the amount of initial margin deposits on the Fund's existing futures and
related options positions and premiums paid for options with respect to
futures and options used for non-hedging purposes would exceed 5% of the
market value of the Fund's total assets or (b) the sum of the then aggregate
value of open futures contracts sales, the aggregate purchase prices under
open futures contract purchases, and the aggregate value of futures
contracts subject to outstanding options would exceed 30% of the market
value of the Fund's total assets. In addition, in instances involving the
purchase of futures contracts or call options thereon, a Fund will maintain
cash or cash equivalents, less any related margin deposits, in an amount
equal to the market value of such contracts. "Cash and cash equivalents" may
include cash, government securities, or liquid high quality debt
obligations.
HYBRID INVESTMENTS (ALL FUNDS EXCEPT THE LB MONEY MARKET FUND)
As part of its investment program and to maintain greater flexibility,
the Fund may invest in hybrid instruments (a potentially high risk
derivative) which have the characteristics of futures, options and
securities. Such instruments may take a variety of forms, such as debt
instruments with interest or principal payments determined by reference to
the value of a currency, security index or commodity at a future point in
time. The risks of such investments would reflect both the risks of
investing in futures, options, currencies and securities, including
volatility and illiquidity. Under certain conditions, the redemption value
of a hybrid instrument could be zero. The Fund does not expect to hold more
than 5% of its total assets in hybrid instruments. For a discussion of
hybrid investments and the risks involved therein, see the Trust's Statement
of Additional Information under "Additional Information Concerning Certain
Investment Techniques".
RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES
There are certain risks involved in the use of futures contracts,
options on securities and securities index options, and options on futures
contracts, as hedging devices. There is a risk that the movement in the
prices of the index or instrument underlying an option or futures contract
may not correlate perfectly with the movement in the prices of the assets
being hedged. The lack of correlation could render a Fund's hedging strategy
unsuccessful and could result in losses. The loss from investing in futures
transactions is potentially unlimited.
There is a risk that LB Research or the Sub-advisor could be incorrect
in their expectations about the direction or extent of market factors such
as interest rate movements. In such a case a Fund would have been better off
without the hedge. In addition, while the principal purpose of hedging is to
limit the effects of adverse market movements, the attendant expense may
cause a Fund's return to be less than if hedging had not taken place. The
overall effectiveness of hedging therefore depends on the expense of hedging
and LB Research's or the Sub-advisor's accuracy in predicting the future
changes in interest rate levels and securities price movements.
A Fund will generally purchase and sell options traded on a national
securities or options exchange. Where options are not readily available on
such exchanges a Fund may purchase and sell options in negotiated
transactions. When a Fund uses negotiated options transactions it will seek
to enter into such transactions involving only those options and futures
contracts for which there appears to be an active secondary market. There is
nonetheless no assurance that a liquid secondary market such as an exchange
or board of trade will exist for any particular option or futures contract
at any particular time. If a futures market were to become unavailable, in
the event of an adverse movement, a Fund would be required to continue to
make daily cash payments of maintenance margin if it could not close a
futures position. If an options market were to become unavailable and a
closing transaction could not be entered into, an option holder would be
able to realize profits or limit losses only by exercising an option, and an
option writer would remain obligated until exercise or expiration. In
addition, exchanges may establish daily price fluctuation limits for options
and futures contracts, and may halt trading if a contract's price moves
upward or downward more than the limit in a given day. On volatile trading
days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for a Fund to enter into new positions or
close out existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could prevent
prompt liquidation of unfavorable positions, and potentially could require a
Fund to continue to hold a position until delivery or expiration regardless
of changes in its value. As a result, a Fund's access to other assets held
to cover its options or futures positions could also be impaired.
When conducting negotiated options transactions there is a risk that
the opposite party to the transaction may default in its obligation to
either purchase or sell the underlying security at the agreed upon time and
price. In the event of such a default, a Fund could lose all or part of
benefit it would otherwise have realized from the transaction, including the
ability to sell securities it holds at a price above the current market
price or to purchase a security from another party at a price below the
current market price.
The Funds intend to continue to meet the requirements of federal law
to be treated as a regulated investment company. For taxable years of a Fund
that began on or prior to August 5, 1997, one of these requirements is that
a Fund realize less than 30% of its annual gross income from the sale of
securities held for less than three months. Accordingly, the extent to which
a Fund may engage in futures contracts and related options may be materially
limited by this 30% test. Options activities of a Fund may increase the
amount of gains from the sale of securities held for less than three months,
because gains from the expiration of, or from closing transactions with
respect to, call options written by a Fund will be treated as short-term
gains and because the exercise of call options written by the Fund would
cause it to sell the underlying securities before it otherwise might. For
each taxable year of a Fund beginning after August 5, 1997, a Fund will no
longer be subject to the 30% test described above.
Finally, if a broker or clearing member of an options or futures
clearing corporation were to become insolvent, a Fund could experience
delays and might not be able to trade or exercise options or futures
purchased through that broker or clearing member. In addition, a Fund could
have some or all of its positions closed out without its consent. If
substantial and widespread, these insolvencies could ultimately impair the
ability of the clearing corporations themselves.
TEMPORARY DEFENSIVE INVESTMENTS
The LB Opportunity Growth Fund, LB World Growth Fund, LB Fund, LB Mid
Cap Growth Fund, LB High Yield Fund, LB Income Fund, and LB Municipal Bond
Fund, may hold up to 100% of their assets in cash or short-term debt
securities for temporary defensive position when, in the opinion of LB
Research or the Sub-advisor such a position is more likely to provide
protection against unfavorable market conditions than adherence to the
Funds' other investment policies. The types of short-term instruments in
which the Funds may invest for such purposes include short-term money market
securities such as repurchase agreements and securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, certificates of
deposit, Eurodollar certificates of deposit, commercial paper and banker's
acceptances issued by domestic and foreign corporations and banks. When
investing in short-term money market obligations for temporary defensive
purposes, a Fund will invest only in securities rated at the time of
purchase Prime-1 or Prime-2 by Moody's, A-1 or A-2 by S&P, F-1 or F-2 by
Fitch Investors Service, Inc., or unrated instruments that are determined by
LB Research or the Sub-advisor to be of a comparable level of quality. When
a Fund adopts a temporary defensive position its investment objective may
not be achieved.
INVESTMENT LIMITATIONS
In seeking to lessen investment risk, each Fund operates under certain
investment restrictions. The restrictions in the following paragraphs may
not be changed with respect to any Fund except by a vote of a majority of
the outstanding voting securities of that Fund.
No Fund may, with respect to 75% of its total assets, purchase the
securities of any issuer (except Government Securities, as such term is
defined in the Investment Company Act of 1940) if, as a result, the Fund
would own more than 10% of the outstanding voting securities of such issuer
or the Fund would have more than 5% of its total assets invested in the
securities of such issuer. The LB Opportunity Growth Fund, LB Mid Cap Growth
Fund, LB World Growth Fund, LB Fund, LB High Yield Fund, LB Income Fund, and
LB Money Market Fund may not invest in a security if the transaction would
result in 25% or more of the Fund's total assets being invested in any one
industry.
A Fund other than the LB Money Market Fund may borrow (through reverse
repurchase agreements or otherwise) up to one-third of its total assets. If
a Fund borrows money its share price will be subject to greater fluctuation
until the borrowing is paid off. If a Fund makes additional investments
while borrowings are outstanding, this may be considered a form of leverage.
If borrowings, including reverse repurchase agreements, exceed 5% of a
Fund's total assets, such Fund will not purchase portfolio securities.
For further information on these and other investment restrictions,
including nonfundamental investment restrictions which may be changed
without a shareholder vote, see the Statement of Additional Information.
INVESTMENT RISKS
Special risks are associated with investments in some of the Funds,
beyond the standard level of risks. These risks are described below. An
investor should take into account his or her investment objectives and
ability to absorb a loss or decline in his or her investment when
considering an investment in such Funds. Investors in certain of the Funds
assume an above average risk of loss, and should not consider an investment
those Funds to be a complete investment program.
LB OPPORTUNITY GROWTH FUND INVESTMENT RISKS
The LB Opportunity Growth Fund is aggressively managed and invests
primarily in the stocks of smaller, less seasoned companies many of which
are traded on an over-the-counter basis, rather than on a national exchange.
These companies represent a relatively higher degree of risk than do the
stocks of larger, more established companies. The companies the LB
Opportunity Growth Fund invests in also tend to be more dependent on the
success of a single product line and have less experienced management. They
tend to have smaller market shares, smaller capitalization, and less access
to sources of additional capital. As a result, these companies tend to have
less ability to cope with problems and market downturns and their shares of
stock tend to be less liquid and more volatile in price.
LB MID CAP GROWTH FUND INVESTMENT RISKS
Stocks in mid cap companies entail greater risk than the stocks of
larger, well-established companies. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial
resources, and less competitive strength than larger companies. Also, mid
cap companies usually reinvest a high portion of their earnings in their own
businesses and therefore lack a predictable dividend yield. Since investors
frequently buy these stocks because of their expected above average earnings
growth, earnings levels that fail to meet expectations often result in sharp
price declines of such stocks.
In addition, in many instances, the frequency and volume of trading of
mid cap companies is substantially less than is typical of larger companies.
Therefore, the securities of such companies may be subject to wider price
fluctuations. The spreads between the bid and asked prices of the securities
of these companies in the over-the-counter market typically are larger than
the spreads for more actively-traded companies. As a result, the Fund could
incur a loss if it determined to sell such a security shortly after its
acquisition. When making large sales, the Fund may have to sell portfolio
holdings at discounts from quoted prices or may have to make a series of
small sales over an extended period of time due to the trading volume of
such securities. Investors should be aware that, based on the foregoing
factors, an investment in the Fund may be subject to greater price
fluctuations than an investment in a fund that invests primarily in larger
more established companies.
LB WORLD GROWTH FUND INVESTMENT RISKS
The Fund, may invest in stocks of foreign issuers and in "ADRs" "EDRs"
of foreign stocks. When investing in foreign stocks, ADRs and EDRs, the Fund
assumes certain additional risks that are not present with investments in
stocks of domestic companies. These risks include political and economic
developments such as possible expropriation or confiscatory taxation that
might adversely affect the market value of such stocks, ADRs and EDRs. In
addition, there may be less publicly available information about such
foreign issuers than about domestic issuers, and such foreign issuers may
not be subject to the same accounting, auditing and financial standards and
requirements as domestic issuers.
OTHER RISKS OF FOREIGN INVESTING INCLUDE:
Foreign Securities: Investments in securities of foreign issuers may
involve risks that are not present with domestic investments. While
investments in foreign securities are intended to reduce risk by providing
further diversification, such investments involve sovereign risk in addition
to credit and market risks. Sovereign risk includes local political or
economic developments, potential nationalization, withholding taxes on
dividend or interest payments, and currency blockage (which would prevent
cash from being brought back to the United States). Compared to United
States issuers, there is generally less publicly available information about
foreign issuers and there may be less governmental regulation and
supervision of foreign stock exchanges, brokers and listed companies. Fixed
brokerage commissions on foreign securities exchanges are generally higher
than in the United States. Foreign issuers are not generally subject to
uniform accounting and auditing and financial reporting standards, practices
and requirements comparable to those applicable to domestic issuers.
Securities of some foreign issuers are less liquid and their prices are more
volatile than securities of comparable domestic issuers. In some countries,
there may also be the possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, difficulty in enforcing
contractual and other obligations, political or social instability or
revolution, or diplomatic developments which could affect investments in
those countries. Settlement of transactions in some foreign markets may be
delayed or less frequent than in the United States, which could affect the
liquidity of investments. For example, securities which are listed on
foreign exchanges or traded in foreign markets may trade on days (such as
Saturday) when the Fund does not compute its price or accept orders for the
purchase, redemption or exchange of its shares. As a result, the net asset
value of the Fund may be significantly affected by trading on days when
shareholders cannot make transactions. Further, it may be more difficult for
the Trust's agents to keep currently informed about corporate actions which
may affect the price of portfolio securities. Communications between the
U.S. and foreign countries may be less reliable than within the U.S.,
increasing the risk of delayed settlements or loss of certificates for
portfolio securities.
Investments by the Fund in foreign companies may require the Fund to
hold securities and funds denominated in a foreign currency. Foreign
investments may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. Thus, the Fund's net asset value per
share will be affected by changes in currency exchange rates. Changes in
foreign currency exchange rates may also affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to shareholders of
the Fund. They generally are determined by the forces of supply and demand
in foreign exchange markets and the relative merits of investment in
different countries, actual or perceived changes in interest rates or other
complex factors, as seen from an international perspective. Currency
exchange rates also can be affected unpredictably by intervention by U.S. or
foreign governments or central banks or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad. In
addition, the Fund may incur costs in connection with conversions between
various currencies. Investors should understand and consider carefully the
special risks involved in foreign investing. These risks are often
heightened for investments in emerging or developing countries.
Developing Countries: Investing in developing countries involves
certain risks not typically associated with investing in U.S. securities,
and imposes risks greater than, or in addition to, risks of investing in
foreign, developed countries. These risks include: the risk of
nationalization or expropriation of assets or confiscatory taxation;
currency devaluations and other currency exchange rate fluctuations; social,
economic and political uncertainty and instability (including the risk of
war); more substantial government involvement in the economy; higher rates
of inflation; less government supervision and regulation of the securities
markets and participants in those markets; controls on foreign investment
and limitations on repatriation of invested capital and on the Fund's
ability to exchange local currencies for U.S. dollars; unavailability of
currency hedging techniques in certain developing countries; the fact that
companies in developing countries may be smaller, less seasoned and newly
organized companies; the difference in, or lack of, auditing and financial
reporting standards, which may result in unavailability of material
information about issuers; the risk that it may be more difficult to obtain
and/or enforce a judgment in a court outside the United States; and greater
price volatility, substantially less liquidity and significantly smaller
market capitalization of securities markets.
American Depository Receipts (ADRs) and European Depository Receipts
(EDRs): ADRs are dollar-denominated receipts generally issued by a domestic
bank that represents the deposit of a security of a foreign issuer. ADRs may
be publicly traded on exchanges or over-the-counter in the United States.
EDRs are receipts similar to ADRs and are issued and traded in Europe. ADRs
and EDRs may be issued as sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its securities traded in the
form of ADRs or EDRs. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are
generally similar, the issuers of unsponsored ADRs or EDRs are not obligated
to disclose material information in the United States and, therefore, the
import of such information may not be reflected in the market value of such
securities.
Currency Fluctuations: Investment in securities denominated in foreign
currencies involves certain risks. A change in the value of any such
currency against the U.S. dollar will result in a corresponding change in
the U.S. dollar value of a Fund's assets denominated in that currency. Such
changes will also affect a Fund's income. Generally, when a given currency
appreciates against the dollar (the dollar weakens) the value of a Fund's
securities denominated in that currency will rise. When a given currency
depreciates against the dollar (the dollar strengthens) the value of a
Fund's securities denominated in that currency would be expected to decline.
INVESTMENT RISKS OF HIGH YIELD SECURITIES (LB HIGH YIELD FUND, LB INCOME
FUND, AND LB MID CAP GROWTH FUND)
Investment in high yield, high risk securities (sometimes referred to
as "junk bonds") involves a greater degree of risk than investment in higher
quality securities. Investment in high yield, high risk securities involves
increased financial risk due to the higher risk of default by the issuers of
bonds and other debt securities having quality rating of "Ba" or lower by
Moody's or "BB" or lower by Standard & Poor's. The higher risk of default
may be due to higher debt leverage ratios, a history of low profitability or
losses, or other fundamental factors that weaken the ability of the issuer
to service its debt obligations.
In addition to the factors of issuer creditworthiness described above,
high yield, high risk securities generally involve a number of additional
market risks. These risks include:
Youth and Growth of High Yield, High Risk Market: The high yield, high
risk bond market is relatively new. While many of the high yield issues
currently outstanding have endured an economic recession, there can be no
assurance that this will be true in the event of increased interest rates or
widespread defaults brought about by a more severe and sustained economic
downturn.
Sensitivity to Interest Rate and Economic Changes: The market value of
high yield, high risk securities have been found to be less sensitive to
interest rate changes on a short-term basis than higher-rated investments,
but more sensitive to adverse economic developments or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may be more likely to experience
financial stress which would impair their ability to service their principal
and interest payment obligations or obtain additional financing. In the
event the issuer of a bond defaults on payments, the LB High Yield Fund may
incur additional expenses in seeking recovery. In periods of economic change
and uncertainty, market values of high yield, high risk securities and the
LB High Yield Fund's assets value may become more volatile. Furthermore, in
the case of zero coupon or payment-in-kind high yield, high risk securities,
market values tend to be more greatly affected by interest rate changes than
securities which pay interest periodically and in cash. Changes in the
market value of securities owned by the LB High Yield Fund will not affect
cash income but will affect the net asset value of the Fund's shares.
Payment Expectations: High yield, high risk securities, like higher
quality securities, may contain redemption or call provisions, which allow
the issuer to redeem a security in the event interest rates drop. In this
event, the LB High Yield Fund would have to replace the issue with a lower
yielding security, resulting in a decreased yield for investors.
Liquidity and Valuation: High yield, high risk securities at times
tend to be more thinly traded and are less likely to have an estimated
retail secondary market than investment grade securities. This may adversely
impact the LB High Yield Fund's ability to dispose of particular issues and
to accurately value securities in the LB High Yield Fund's portfolios. Also,
adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease market values and liquidity, especially
on thinly traded issues.
Taxation: High yield, high risk securities structured as zero coupon
or payment-in-kind issues may require the LB High Yield Fund to report
interest on such securities as income even though the LB High Yield Fund
receives no cash interest on such securities until the maturity or payment
date. The LB High Yield Fund may be required to sell other securities to
generate cash to make any required dividend distribution.
LIMITING INVESTMENT RISK
LB Research believes that the risks of investing in high yield, high
risk securities can be reduced by the use of professional portfolio
management techniques including:
Credit Research: LB Research will perform it owns credit analysis in
addition to using recognized rating agencies and other sources, including
discussions with the issuer's management, the judgment of other investment
analysts and its own judgment. The adviser's credit analysis will consider
such factors as the issuer's financial soundness, its responsiveness to
changes in interest rates and business conditions, its anticipated cash
flow, asset values, interest or dividend coverage and earnings.
Diversification: The LB High Yield Fund invests in widely diversified
portfolio of securities to minimize the impact of a loss in any single
investment and to reduce portfolio risk. As of October 31, 1997, the LB High
Yield Fund held securities of 178 corporate issuers, and the LB High Yield
Fund's holdings had the following credit quality characteristics:
<TABLE>
<CAPTION>
Percentage of
Investment Net Assets
---------- -------------
<S> <C>
Short-term securities
AAA equivalent........................................ 2.6%
Government obligations..................................... --
Corporate obligations
AAA/Aaa............................................... --
AA/Aa................................................. --
A/A................................................... --
BBB/Baa............................................... 2.3%
BB/Ba................................................. 10.6%
B/B................................................... 50.6%
CCC/Caa............................................... 9.3%
CC/Ca................................................. --
D/D................................................... --
Not rated............................................. 7.7%
Other Net Assets...................................... 16.9%
-----
Total...................................................... 100.0%
=====
</TABLE>
Economic and Market Analysis: LB Research will analyze current
developments and trends in the economy and in the financial markets. The LB
High Yield Fund may invest in higher quality securities in the event that
investment in high yield, high risk securities is deemed to present
unacceptable market or financial risk.
BUYING SHARES OF THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
INITIAL PURCHASES
The Funds are a family of mutual funds offering investment
opportunities to members of Lutheran Brotherhood and to Lutheran
institutions, Lutheran church organizations, trusts, and employee benefit
plans. Lutheran Brotherhood membership is open to any person who is (1)
baptized in the Christian faith or affiliated with a Lutheran church
organization and (2) professes to be a Lutheran, or to any non-Lutheran who
is a spouse, dependent child, or grandchild of a member or qualified
proposed member.
To make your first purchase of the Class A or Class B shares of the
Funds:
o complete and sign an account application included in this booklet;
o enclose a check made payable to the Lutheran Brotherhood Family of
Funds
o mail your application and check to Lutheran Brotherhood Securities
Corp., 625 Fourth Avenue S., Minneapolis, MN 55415.
SUBSEQUENT PURCHASES
To purchase additional shares of any of The Lutheran Brotherhood
Family of Funds, send a check payable to the Fund to the "LB Family of
Funds" together with a completed To Invest By Mail form. You may also buy
additional Fund shares through:
o your LB Securities representative;
o the Systematic Investment Plan (SIP), under which you authorize
automatic monthly payments to the Fund from your checking account;
o the automatic Payroll Deduction Plan;
o Invest-by-Phone; or
o Federal Reserve or bank wire.
INVEST-BY-PHONE
The Fund's Invest-by-Phone service allows you to telephone LB
Securities to request the purchase of Fund shares. You may elect this
feature on your account application or you may complete an Account Features
Request permitting LB Securities to accept your telephoned requests. When LB
Securities receives your telephoned request, it will draw funds directly
from your preauthorized bank account at a commercial or savings bank or
credit union. The bank or credit union must be a member of the Automated
Clearing House system. To use this service, you may call 800-328-4552 before
4:00 p.m. (Eastern time). Funds will be withdrawn from your bank or credit
union account and shares will be purchased for you at the price next
calculated by the Fund after receipt of funds from your bank. This service
may also be used to redeem shares. See "Redeeming Shares."
FEDERAL RESERVE OR BANK WIRE
You may purchase shares by Federal Reserve or bank wire directly to
Norwest Bank Minnesota, N.A. This method will result in a more rapid
investment in Fund shares. To wire Funds:
Notify LB Securities of a pending wire, call: (800) 328-4552
Wire to: Norwest Bank of Minneapolis, NA
Norwest Bank
6th Street and Marquette Avenue
Minneapolis, MN 55479
ABA Routing #: 091000019
Account #: 00-003-156
Account Name: Lutheran Brotherhood Securities Corp.
Use text message to indicate:
Transfer for --shareholder name(s), fund number and account number, LB
Representative name and number.
Your LB Securities representative can explain any of these investment plans.
MINIMUM INVESTMENTS REQUIRED
Minimum investments required for purchases of Class A or Class B
shares of each of The Lutheran Brotherhood Family of Funds are outlined
below.
<TABLE>
<CAPTION>
First Additional
Purchase Purchases
--------- -----------
<S> <C> <C>
Lutheran Brotherhood Opportunity Growth Fund $ 500(1) $ 50
Lutheran Brotherhood Mid Cap Growth Fund $ 500(1) $ 50
Lutheran Brotherhood World Growth Fund $ 500(1) $ 50
Lutheran Brotherhood Fund $ 500(1) $ 50
Lutheran Brotherhood High Yield Fund $ 500(1) $ 50
Lutheran Brotherhood Income Fund $ 500(1) $ 50
Lutheran Brotherhood Municipal Bond Fund $ 500(2) $ 50
Lutheran Brotherhood Money Market Fund $1,500(3) $100
</TABLE>
- - ----------------------
(1 ) $50 initial purchase under Systematic Investment Plan, payroll
deduction plans, and for tax-deferred retirement plans.
(2) $50 initial purchase under Systematic Investment Plan and payroll
deduction plans.
(3) $100 initial purchase under Systematic Investment Plan and payroll
deduction plans.
EXCHANGING SHARES BETWEEN FUNDS
Shareholders of any of the Funds of The Lutheran Brotherhood Family of
Funds may exchange their shares for available shares of the same class of
any of the other Funds at any time on the basis of the relative net asset
values of the respective shares to be exchanged, subject to minimum
investment requirements. Shares of one class may not be exchanged for shares
of another class.
If you exchange Class A shares of a Fund for which you have previously
paid an initial sales charge for Class A shares of another Fund, you will
not be charged an initial sales charge for the exchange. You may also
exchange Class A shares of LB Money Market Fund that you previously acquired
through an exchange for Class A shares of other Funds for which you paid an
initial sales charge at relative net asset value. However, if you exchange
Class A shares of the LB Money Market Fund that were not previously acquired
through an exchange for Class A shares of any other Fund, you will be
subject to the initial sales charge applicable to an initial investment in
the Class A shares of such Fund.
If you exchange Class B shares of one Fund for Class B shares of
another Fund, you will not be charged any contingent deferred sales charge
("CDSC") that would otherwise be due at the time of the exchange. Instead,
the period of time you held the Class B shares that are being exchanged will
be combined with the period of time that you hold the acquired Class B
shares for purposes of calculating any CDSC that may be payable when you
subsequently redeem the acquired Class B shares. If you exchange Class B
shares of a Fund for Class B shares of the LB Money Market Fund, the period
of time you hold the Class B shares of LB Money Market Fund will not be
counted for purposes of calculating any CDSC. If you subsequently exchange
the LB Money Market Fund Class B shares into Class B shares of another Fund,
you may include the period of time that you held Class B shares of a Fund
prior to an exchange into Class B shares of LB Money Market Fund for
purposes of calculating any CDSC.
Each exchange constitutes a sale of shares requiring the calculation
of a capital gain or loss for tax reporting purposes. To obtain an exchange
form or to receive more information about making exchanges between Funds,
contact your LB Securities representative. This exchange offer may be
modified or terminated in the future. If the exchange offer is materially
modified or terminated, you will receive at least 60 days prior notice.
TELEPHONE EXCHANGES
You may make the type of exchanges between Funds described above by
telephone unless otherwise indicated on the account application. You may
make an unlimited number of telephone exchanges. Telephone exchanges must be
for a minimum amount of $500. Telephone exchanges may be made into new or
existing Fund or LB Money Market Fund accounts, and all accounts involved in
telephone exchanges must have the same ownership registration. To request a
telephone exchange, call toll-free (800) 328-4552.
The Funds reserve the right to refuse a wire or telephone redemption
or exchange if it is reasonably believed to be unauthorized. Procedures for
redeeming or exchanging Fund shares by wire or telephone may be modified or
terminated at any time by the Funds. When requesting a redemption or
exchange by telephone, shareholders should have available the correct
account registration and account number or tax identification number. All
telephone redemptions and exchanges are recorded and written confirmations
are subsequently mailed to an address of record. Neither the Funds nor LB
Securities will be liable for following redemption or exchange instructions
received by telephone, which are reasonably believed to be genuine, and the
shareholder will bear the risk of loss in the event of unauthorized or
fraudulent telephone instructions. The Funds and LB Securities will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. The Funds and/or LB Securities may be liable for any losses due
to unauthorized or fraudulent instructions in the absence of following these
procedures.
WHAT YOUR SHARES WILL COST
The offering price of the Fund is the next determined net asset value
(which will fluctuate) plus any applicable sales charge. See "Multiple Class
System" below.
NET ASSET VALUE OF YOUR SHARES
LB Money Market Fund seeks to maintain a stable $1.00 net asset value
pursuant to procedures established by the Board of Trustees in connection
with the amortized cost method of portfolio valuation. The net asset value
for the other seven Funds varies with the value of their investments. Each
Fund determines its net asset value for a particular class by adding the
value of Fund assets attributable to such class, subtracting the Fund's
liabilities attributable to such class, and dividing the result by the
number of shares of that class outstanding.
The Funds determine their net asset value on each day the New York
Stock Exchange is open for business, or any other day as required under the
rules of the Securities and Exchange Commission. The calculation is made as
of the close of regular trading of the New York Stock Exchange (currently
4:00 p.m. Eastern time) after the Fund has declared any applicable
dividends.
MULTIPLE CLASS SYSTEM
SUMMARY
The Trust has adopted a system of multiple classes of shares for each
of the Funds (the "Multiple Class System"). The Multiple Class System
permits you to choose the class of shares that you believe to be the most
advantageous for you, given the amount of your purchase, the length of time
you anticipate holding the shares and other factors. You will be able to
determine whether in your particular circumstances it is more advantageous
to incur an initial sales charge through purchase of Class A shares and be
subject to lower ongoing charges or to have your entire initial purchase
price invested in Class B shares of the Fund with the investment being
subject thereafter to higher ongoing Rule 12b-1 distribution fees for the
first five years that such shares are held and a CDSC if the shares are
redeemed within the first five years after purchase.
The major differences between the two classes of shares offered by
this prospectus are as follows:
<TABLE>
<CAPTION>
Class A Class B
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales Charges(a) Initial sales charge at time of investment CDSC of 5% to 1% applies to any shares
of up to 4.0% depending on amount of redeemed within first five years
investment(b) following their purchase. There is no
CDSC after five years
- ------------------------------------------------------------------------------------------------------------------
Rule 12b-1 Distribution Fee(C) None 0.75% for first five years(d); Class B
shares convert automatically to Class A
shares after five years
- - ----------------------------------------------------------------------------------------------------------------
Shareholder Servicing Fee 0.25% each year(d) 0.25% each year(d)
- - ----------------------------------------------------------------------------------------------------------------
- - --------------
(a) Class A shares purchases of $500,000 or more are not subject to an initial sales charge.
(b) Class A shares of the LB Money Market Fund are not subject to such charges.
(c) Class B shares of the LB Money Market Fund are not subject to a Rule 12b-1 distribution fee.
(d) As a percentage of average daily net assets.
</TABLE>
In deciding which class of shares to purchase, you should consider the
amount of the investment, the length of time the investment is expected to
be held, the initial sales charge or CDSC and the ongoing shareholder
servicing fee and Rule 12b-1 distribution fee, among other factors.
Class A shares are sold at net asset value plus an initial sales
charge of up to 4.0% of the public offering price. Because of the sales
charge, not all of an investor's purchase amount is invested. Class B
shareholders pay no initial sales charge. For Class B shareholders,
therefore, the entire purchase amount is immediately invested in the
applicable Fund, but a CDSC of up to 5.0% will apply to shares redeemed
within five years of purchase.
If you qualify for a reduced initial sales charge for the purchase of
Class A shares, you might elect that option to take advantage of the lower
ongoing fees that characterize Class A shares compared with Class B shares
(because no Rule 12b-1 distribution fees are assessed for the Class A
shares). All purchases of $100,000 or more must be made in Class A shares or
if the purchaser is qualified, in Institutional Class shares.
Class A and Class B shares are assessed an annual shareholder
servicing fee of 0.25% of average daily net assets for as long as the shares
are held. Class B shares (except for the Class B shares of the LB Money
Market Fund) are also assessed an annual distribution fee of 0.75% of
average daily net assets, but automatically convert into Class A shares at
the end of five years following the date of purchase. See "Distribution and
Shareholder Servicing Plans" below.
CLASS A SHARES
Initial Sales Charges. Initial sales charges apply to purchases of
Class A shares of each Fund except the LB Money Market Fund. These sales
charges vary from 0% to 4% of the offering price, depending upon the amount
purchased, including the value of existing investments. The larger your
purchase, the smaller the sales charge. Offering prices in this table apply
to purchases by an individual or by an individual together with spouse and
children under the age of 21. The LB Money Market Fund has no initial sales
charge.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A AS A
PERCENTAGE OF PERCENTAGE OF
AMOUNT INVESTED OFFERING PRICE AMOUNT INVESTED
- - --------------- -------------- ---------------
<S> <C> <C>
$500,000 or more 0% 0%
$250,000 and above but less than $500,000 1% 1%
$100,000 and above but less than $250,000 2% 2%
$50,000 and above but less than $100,000 3% 3.1%
$25,000 and above but less than $50,000 .75% 3.9%
Less than $25,000 4% 4.2%
</TABLE>
Reduction in Initial Sales Charges. Ways to reduce the initial sales
charge assessed on the purchase of Class A shares include:
Cumulative Discount: All current holdings of shares of LB Opportunity
Growth Fund, LB Mid Cap Growth Fund, LB World Growth Fund, LB Fund, LB High
Yield Fund, LB Income Fund, or LB Municipal Bond Fund, will be aggregated to
permit you to enjoy any initial sales charge reduction allowed for larger
sales of Class A shares. The Funds will combine purchases, including the
value of existing investments, made by you, your spouse and your children
under age 21, of both Class A and Class B shares when it calculates your
initial sales charge. You must inform LB Securities that you qualify for
this discount.
Reinvestment of Dividends: Class A and Class B shares purchased by
automatic reinvestment of dividends will not be subject to any sales
charges.
Thirteen-month Letter of Intent: If you intend to accumulate $25,000
or more, including the value of existing investments, in Class A or Class B
shares of one or more of the Funds (except the LB Money Market Fund) within
the next 13 months, you may sign a letter of intent and receive a reduced
sales charge on purchases of any Class A shares.
Reinvestment upon Redemption: If you redeem any or all of your Class A
or Class B shares of LB Opportunity Growth Fund, LB Mid Cap Growth Fund, LB
World Growth Fund, LB Fund, LB High Yield Fund, LB Income Fund, or LB
Municipal Bond Fund shares or received cash dividends from one of the Funds,
you may reinvest the amount in Class A shares of any of these seven Funds
without paying a sales charge. You must make your reinvestment within 90
days after redeeming your Class A shares or Class B shares.
Funds from Lutheran Brotherhood and Other Life Insurance and
Annuities: If Class A shares of any Fund are purchased with lump sum
proceeds (does not apply to periodic payments) that are payable in the form
of death benefits from any life insurance or annuity contract, insured
endowment benefits, or matured annuity benefits issued by Lutheran
Brotherhood, and are purchased within 90 days of the issuance of such
benefits, the sales charge, if any, for such Class A shares will be reduced
to one-half of the usual charge for such a purchase. If additional Class A
shares are also purchased with benefits payable under similar contracts or
policies of other insurance companies, and such benefits have become payable
as a result of the same occurrence for which the Lutheran Brotherhood
benefits became payable, the sales charge, if any, for such additional
purchase will also be reduced to one-half of the usual charge for such a
purchase. To qualify for the reduction in sales charge, either such purchase
must be made within 90 days of the date that such benefits were issued.
Purchases by Tax-exempt Organizations: Class A shares of any Fund are
available at one-half of the regular sales charge, if any, if purchased by
organizations qualifying for tax-exemption under Sections 501(c)(3) and
501(c)(13) of the Internal Revenue Code. Section 501(c)(3) generally would
include organizations such as community chests, churches, universities and
colleges, libraries and other foundations or organizations operated
exclusively for charitable purposes. Section 501(c)(13) would generally
include companies such as cemetery companies and other companies owned and
operated exclusively for the benefit of their members and also includes not-
for-profit companies.
Automatic Conversion of Class A Shares to Institutional Class Shares.
Class A shares, including any shares representing reinvestments of dividends
or capital gains distributions with respect to such shares, will
automatically convert to Institutional Class shares if the shareholder
becomes ineligible to hold Class A shares. Lutheran institutions and
Lutheran church organizations with accounts of at least $100,000 are not
eligible to hold Class A shares. Consequently, any such account in Class A
shares would be subject to automatic conversion to Institutional Class
shares. The Fund will provide such Class A shareholders with prior notice of
any such automatic conversion. Any automatic conversion will take place on
the basis of relative net asset values of the two
classes.
Institutional Class shares are offered to Lutheran institutions,
Lutheran church organizations and certain other institutional investors as
may be determined by the Trust from time to time, subject in each case to a
minimum investment in each Fund of $100,000. There is no sales load imposed
in connection with the purchase of Institutional Class shares and such
shares are not subject to any Rule 12b-1 fee or shareholder servicing fee.
Because the sales charges and expenses vary between the Class A shares,
Class B shares and Institutional Class shares, performance will vary with
respect to each class. A copy of the Institutional Class prospectus may be
obtained by writing LB Securities or by calling toll free (800) 328-4552.
CLASS B SHARES
Contingent Deferred Sales Charges. The public offering price of Class
B shares is the net asset value per share of the Class B shares next
determined after the purchase order and funds are received. No sales charge
is imposed at the time of purchase. Therefore, the applicable Fund will
receive the full amount of the investor's purchase payment. However, a CDSC
may be imposed upon redemptions of Class B shares as described below.
Investments in Class B shares of $100,000 or more per purchase will not be
accepted. Because of the reduced sales charges available on such purchases,
Class A shares (or Institutional Class shares if the investor is eligible)
must be purchased instead. Class B shares of the LB Money Market Fund are
offered solely in exchange for Class B shares of other Funds of The Lutheran
Brotherhood Family of Funds.
Class B shares that are redeemed will not be subject to a CDSC to the
extent that the value of such shares represents (1) reinvestment of
dividends or capital gains distributions, (2) capital appreciation of shares
redeemed or (3) shares held more than five years. The amount of any
applicable CDSC will be calculated by multiplying the net asset value of
shares subject to the charge at the time of purchase or redemption,
whichever is less, by the applicable percentage shown in the table below:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge as
a Percentage of the Lower of Net
Asset Value at Purchase or
Redemption During Redemption
----------------- -----------------------------------
<S> <C>
1st Year Since Purchase........... 5%
2nd Year Since Purchase........... 4
3rd Year Since Purchase........... 3
4th Year Since Purchase........... 2
5th Year Since Purchase........... 1
</TABLE>
In determining the applicability and rate of any CDSC, it will be
assumed that a redemption of Class B shares is made first of shares
representing reinvestment of dividends and capital gains distributions and
then of the remaining shares held by the shareholder for the longest period
of time. These determinations will result in any CDSC being imposed at the
lowest possible rate. The holding period for purposes of applying a CDSC on
shares of a Fund acquired through an exchange from another Fund will include
the holding period of the shares from which such shares were exchanged.
However, if you exchange Class B shares of any other Fund for Class B shares
of the LB Money Market Fund, the CDSC will stop declining during the period
your investment is in the LB Money Market Fund Class B shares. For federal
income tax purposes, the amount of the CDSC will reduce the gain or increase
the loss, as the case may be, on the amount realized on redemption. The
amount of any CDSC will be paid to LB Securities.
Contingent Deferred Sales Charge Waivers
The CDSC will be waived for a total or partial redemption made due to
the death or disability (caused by injury or the sudden onset of a life
threatening illness) of a sole individual shareholder (but not for shares
held in joint accounts or "family," "living" or other trusts) and for excess
contribution returns and redemptions from an IRA/TSCA when the shareholder
is age 70 1/2 or older.
Conversion of Class B Shares to Class A Shares
Your Class B shares will automatically convert into Class A shares
of the same Fund at the end of five years following the issuance of the
Class B shares and consequently will no longer be subject to the higher
expenses borne by Class B shares. In addition, all of the Class B shares of
such Fund held by you at the end of such period that represent the
reinvestment of dividends or capital gains distributions will also be
automatically converted to Class A shares at such time. Holding periods of
shares of a Fund that are exchanged for Class B shares of another Fund will
be counted toward the five-year period. Holding periods of Class B shares of
the LB Money Market Fund will not be counted toward the five-year period.
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS
The Trust has adopted a Distribution Plan (the "12b-1 Plan") under
Rule 12b-1 of the 1940 Act with respect to the Class B shares of each Fund
except for the LB Money Market Fund. Under the provisions of the 12b-1 Plan,
the Funds each pay LB Securities at an annual rate of .75% of the average
daily net assets of its Class B shares. The fees collected under the 12b-1
Plan are used by LB Securities to finance activities primarily intended to
result in the sale of the Class B shares of the Fund. Payments to LB
Securities under the 12b-1 Plan are not directly tied to expenses and
payments under the 12b-1 Plan may be more or less than actual expenses
incurred by LB Securities. The excess of fees received over expenditures may
constitute a "profit" to LB Securities.
In addition, the Trust has adopted shareholder servicing plans for the
Class A and Class B shares of each of the Funds (the "Shareholder Servicing
Plans"). The Shareholder Servicing Plans permit the Funds to pay a
shareholder servicing fee for shareholder support services to shareholders
such as, among other things, assisting in designating and changing dividend
options, account designations and addresses and answering inquiries
regarding account status and history, the manner in which purchases and
redemptions may be effected, assisting the LB Securities field force and
other financial intermediaries in responding to shareholders, recruiting,
training and assisting in qualifying the field force, providing the field
force with educational material and technology equipment to assist
shareholders, providing the field force with various benefits, and making
available facilities to enable shareholders to obtain information concerning
their investments. Pursuant to the Shareholder Servicing Plans, each Fund
pays LB Securities a fee of .25% of the average daily net assets of the
Class A and Class B shares. Collectively, the 12b-1 Plan and the Shareholder
Servicing Plans are referred to as the Plans.
A rule of the National Association of Securities Dealers, Inc.
("NASD") effectively limits the annual expenditures which any of the Funds
may incur under the Plans to 1%, of which 0.75% may be used to pay
distribution expenses and 0.25% may be used to pay shareholders services
fees. The NASD Rule also effectively limits the aggregate amount which each
of the Funds may pay for distribution costs to 6.25% of gross share sales of
a class since the inception of any asset-based sales charge plus interest at
the prime rate plus 1% on unpaid amounts thereof (less any contingent
deferred sales charges received by LB Securities). This limitation does not
apply to shareholder service fees.
RECEIVING YOUR ORDER
Shares of the Funds are issued on days on which the New York Stock
Exchange is open. The net asset value of the shares you are buying will be
determined at the close of the regular trading session of the New York Stock
Exchange after your order is received.
Your order will be considered received when your check or other
payment is received in good order by the home office of LB Securities. The
Funds reserve the right to reject any purchase request.
CERTIFICATES AND STATEMENTS
As transfer agent for the Funds, LB Securities will maintain a share
account for you. Share certificates will not be issued. Systematic
Investment Plan, Systematic Withdrawal Plan and Systematic Exchange Plan
transactions, as well as dividend transactions (including dividends
reinvested to other funds) will be confirmed on the quarterly consolidated
statement. All other transactions will be reported as they occur.
REDEEMING SHARES
One of the advantages of owning shares in The Lutheran Brotherhood
Family of Funds is the rapid access you have to your investment. Once your
request for redemption has been received at the home office of LB
Securities, your shares will be redeemed at the next computed net asset
value on any day on which the New York Stock Exchange is open for business,
or any other day as required under the rules of the Securities and Exchange
Commission. That net asset value may be more or less than the net asset
value at the time you bought the shares. Class B shares are subject to a
CDSC if such shares are redeemed during the five years following purchase of
such shares. See "Multiple Class System -- Class B Shares."
You may redeem your shares at any time you choose. The redemption
method you choose will determine exactly when you will receive your funds.
All eight Lutheran Brotherhood funds allow you to redeem your shares:
o in writing;
o through Redeem-by-Phone; or
o through the Fund's systematic withdrawal plan.
The LB Money Market Fund also allows you to redeem Class A shares by
writing a check, or by using your VISA debit card.
WRITTEN REQUESTS
To redeem all or some of your shares, send a written request to:
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Your Signature: Your signature on the redemption request must be
guaranteed by:
o a trust company or commercial bank;
o a savings association;
o a credit union; or
o a securities broker, dealer, exchange, association, or clearing
agency.
The Fund will not accept signatures that are notarized by a notary
public.
Receiving Your Check: Normally, each Fund will mail you a check within
one business day after it receives a proper redemption request, but in no
event more than three days, unless the Fund has not received payment for the
shares to be redeemed. (See "Redemption before Purchase Instruments Clear.")
REDEEM BY PHONE
If you have completed an Account Features Request, you may redeem
shares with a net asset value of at least $1,000 and have them transmitted
electronically to your commercial bank by the third business day after your
redemption request. This feature is NOT available on IRA or other Tax
Deferred Plans.
SYSTEMATIC WITHDRAWAL
Shareholders owning or buying shares with a net asset value of at
least $5,000 may order automatic monthly, quarterly, semiannual or annual
redemptions in any amount. The proceeds will be sent to the shareholder or
other designated payee, or may be deposited in the shareholder's commercial
bank, savings bank or credit union.
Income dividends and capital gains distributions will continue to be
reinvested in additional Fund shares. Shares will be redeemed as necessary
to make automatic payments to the shareholder.
You may, at any time, elect to have Federal income taxes withheld from
your IRA or TSCA distributions, or change the amount currently being
withheld. To make the election, please complete and return a Redemption
form, or the Systematic Withdrawal section or the IRA/TSCA Distributions
section of the Account Features Application which includes the IRS required
Substitute W4P.
Shareholders who are making automatic withdrawals ordinarily should
not purchase Fund shares, but rather should terminate withdrawals in order
to avoid sales charges.
WRITING A CHECK
Redeeming by check allows you to continue earning daily income
dividends until your check clears. This service is offered for Class A
shares of LB Money Market Fund only.
Establishing check writing privilege: Upon opening your Class A share
LB Money Market Account, State Street Bank will automatically establish an
LB Money Market Fund checking account for you.
Using your LB Money Market checking account: With a LB Money Market
Fund checking account, you may redeem your shares simply by writing a check
in any amount of $250 or more. However, you may not write a check for the
entire balance of your account. If you redeem shares by check before State
Street Bank has collected your payment for shares purchased by check, State
Street Bank will return your check marked "insufficient funds."
The check may be cashed or deposited like any other check. When it
is received by State Street Bank for payment, the bank will present the
check to the Fund and redeem enough of your shares to cover the amount. The
redemption will be made at the net asset value on the date that State Street
Bank presents the check. Your canceled checks and a statement will be sent
to you each month.
When you open a LB Money Market Fund checking account, you will be
subject to State Street Bank's checking account rules and regulations. State
Street Bank and the LB Money Market Fund have the right to modify or
terminate checking account privileges or to charge for establishing or
maintaining a checking account. There are no current charges for
establishing or maintaining a checking account.
VISA DEBIT CARDS
At your request, and subject to approval State Street Bank will issue
a VISA debit card to you. This service is offered for Class A shares of LB
Money Market Fund only.
With a VISA debit card, you authorize the redemption of your shares by
using the card. The VISA debit card may be used to purchase merchandise or
services from merchants honoring VISA or to obtain cash advances (which a
bank may limit to $5,000 per account per day for merchandise and services,
$600 per account for cash advances) from any bank honoring VISA.
Redeeming your shares: a) VISA Purchases. Purchase transactions are
escrowed, or held against your current Money Market account balance. At
month end the total escrowed purchases are redeemed from your Money Market
account. b) Cash Advances. Enough shares will be redeemed from your LB Money
Market Fund account on the date the cash advance advice reaches State Street
Bank. You will continue to earn daily income dividends on Fund shares up to
the date they are redeemed.
Rules and fees: When you receive a LB Money Market Fund VISA debit
card, you will be subject to State Street Bank's VISA account regulations.
State Street Bank charges an annual VISA fee of $25 to cover its fees and
administrative costs. State Street also charges a fee of $1.50 each time an
Automated Teller Machine (ATM) is used. In addition to that fee, the bank
that owns the ATM machine may also charge a fee for each transaction. Enough
shares will be redeemed automatically from your account to pay the fee. Lost
or stolen cards should be reported immediately to State Street Bank at
toll-free (800) 543-6325.
State Street Bank and the LB Money Market Fund have the right to
modify or terminate the VISA debit card privilege or to impose additional
charges for establishing or maintaining a VISA account upon 30 days prior
written notice.
Statements: In addition to the quarterly LB Money Market Fund account
statement, you will receive a monthly statement from State Street Bank
listing VISA transactions.
DIVIDENDS ON REDEMPTION
If you redeem all your shares, the redemption proceeds will include
all dividends to which you have become entitled since they were last paid.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
If you redeem shares purchased by check before State Street Bank has
collected your payment for such shares, State Street Bank reserves the right
to hold payment on such redemption until it is reasonably satisfied that the
investment has been collected (which could take up to 15 days from the
purchase date).
UNDELIVERABLE MAIL
If mail from LB Securities to a shareholder is returned as
undeliverable on two or more consecutive occasions, LB Securities will not
send any future mail to the shareholder unless it receives notification of a
correct mailing address for the shareholder. Any dividends that would be
payable by check to such shareholders will be held in escrow by LB
Securities until LB Securities receives notification of the shareholder's
correct mailing address or until it becomes escheatable under the applicable
state law.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the
Funds may redeem shares in any account if the net asset value of shares in
the account falls below a certain minimum. The required minimum net asset
value for Class A and Class B share accounts is $500 for all Funds except LB
Money Market Fund, which has a minimum net asset value for Class A and Class
B share accounts of $1,000.
Before shares are redeemed to close an account, the shareholder is
notified in writing and allowed 60 days to purchase additional shares.
Shares will not be redeemed if the account's value drops below the minimum
only because of market fluctuations.
BACKUP WITHHOLDING
When you sign your account application you will be asked to certify
that your social security or taxpayer identification number is correct and
that you are not subject to 31% backup withholding for failure to report
income to the IRS. If you violate IRS regulations, the IRS can generally
require the Funds to withhold 31% of your taxable distributions and
redemptions.
FOR MORE INFORMATION
For more information about the Fund or your shares, see your LB
Securities representative or call toll-free: at (800) 328-4552.
DIVIDENDS AND CAPITAL GAINS
DIVIDENDS
Each Fund declares and pays dividends from net income at regular
intervals. LB High Yield Fund, LB Income Fund, and LB Municipal Bond Fund
declare and pay dividends monthly. LB Fund declares and pays dividends
quarterly. LB Opportunity Growth Fund, LB Mid Cap Growth Fund and LB World
Growth Fund each declare and pay dividends annually in years that the
relevant Fund has accumulated enough net income to require the payment of a
dividend. LB Money Market Fund declares dividends daily and pays accumulated
dividends monthly. Dividends are determined in the same manner and are paid
in the same amount, regardless of class, except for such differences as are
attributable to differential class expenses.
Unless you ask to receive all or a portion of your dividends in cash,
they will automatically be reinvested in shares of the Fund. You may also
choose to have your dividends reinvested into an existing account in another
Fund within The Lutheran Brotherhood Family of Funds. On the dividend
payable date, your dividend will be invested in the designated Fund account
at net asset value. In order to receive your dividends in cash, you must
notify LB Securities in writing or indicate this choice in the appropriate
place on your account application. Your request to receive all or a portion
of your dividends and other distributions in cash must be received by LB
Securities at least ten days
before the record date of the dividend or other distribution.
STATEMENTS
You will receive quarterly statements of dividends and capital gains
paid the previous quarter.
CAPITAL GAINS
The Funds distribute their realized gains in accordance with federal
tax regulations. Distributions from any net realized capital gains will
usually be declared in December.
TAXES
As with any investment, you should consider the tax implications of an
investment in the Funds. The following discussion is only a short summary of
the important tax considerations generally affecting the Funds and their
shareholders. In particular, the following discussion does not address the
taxation of foreign shareholders in the Funds. You should consult with your
tax advisor with specific reference to your own tax situation.
FUNDS' TAX STATUS
The Funds expect to pay no federal income tax because they intend to
meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to
such companies.
SHAREHOLDERS' TAX POSITION
Except for dividends you receive from LB Municipal Bond Fund, unless
you are otherwise exempt, you will be required to pay federal income tax on
any dividends and other distribution that you receive. This applies whether
you receive dividends or distributions in cash or as additional shares. To
the extent any of the Funds earn interest from U.S. Government obligations,
a number of states may allow pass-through treatment and permit shareholders
to exclude a portion of their dividends from state income tax. For corporate
shareholders, dividends paid to shareholders may qualify for the 70%
dividends received deduction to the extent the Fund earns dividend income
from domestic corporations. The Funds will mail annually to each shareholder
advice as to the tax status of each year's dividends and distributions.
You will not be required to pay federal income tax on (i) the
conversion of Class B shares to Class A shares at the end of the five-year
period following issuance of the Class B shares or (ii) the automatic
conversion of Class A shares to Institutional Class shares that occurs when
the shareholder is no longer eligible to hold Class A shares.
You will not be required to pay federal income tax on any LB Municipal
Bond Fund dividends you receive which represent net interest received on
tax-exempt municipal bonds. The portion of that Fund's distributions
representing net interest income from taxable temporary investments, market
discount on tax-exempt municipal bonds, and net short-term capital gains
realized by the Fund, if any, will be taxable to shareholders as ordinary
income. Most of that Fund's income is expected to be free of federal income
tax. This applies whether you receive dividends in cash or as additional
shares. The Fund's income, however, is not necessarily free from state
income taxes. State laws differ on this issue and shareholders are advised
to consult their own tax advisers. The Fund will provide to shareholders an
annual breakdown of the percentage of its income from each state.
Information on the tax status of dividends will be provided annually. You
should also note that income that is not subject to federal income tax may
nonetheless have to be considered along with other adjusted gross income in
determining whether any Social Security payments received by you are subject
to federal income tax. If the LB Municipal Bond Fund holds certain "private
activity bonds" issued after August 7, 1986, shareholders will need to
include as an item of tax preference for purposes of the federal alternative
minimum tax that portion of the dividends paid by that Fund derived from
interest received on such bonds. The maximum federal alternative minimum tax
rate is 28% for individuals. In addition, corporations will need to take
into account all exempt-interest dividends paid by that Fund in determining
certain adjustments for the federal alternative minimum tax and the
environmental tax.
Dividends and certain interest income earned by a Fund from foreign
securities may be subject to foreign withholding taxes or other income
taxes. In the event that more than 50% of the value of a Fund's total assets
at the close of its taxable year consists of stock or securities in foreign
corporations, a Fund may elect, for U.S. income tax purposes, to treat
certain foreign taxes paid by it as paid by its shareholders. Should a Fund
make that election, a pro rata portion of such foreign taxes paid by the
Fund will constitute income to you (in addition to taxable dividends
actually received by you), and you may be entitled to claim an offsetting
tax credit or itemized deduction for that amount of foreign taxes.
For federal income tax purposes, all dividends paid by the Fund that
are derived from taxable net investment income and net short-term capital
gains are taxable as ordinary income whether reinvested or received in cash
unless you are exempt from taxation or entitled to tax deferral.
Distributions paid by the Fund from net long-term capital gains (including
such distributions paid by the LB Municipal Bond Fund), whether received in
cash or reinvested in additional shares, are taxable as long-term capital
gain. The capital gain holding period for this purpose is determined by the
length of time the Fund has held the security and not the length of time you
have held shares in the Fund. For non-corporate taxpayers, however, net
capital gain (i.e., the excess of net long-term capital gain over net short-
term capital loss) will be taxed at a maximum marginal rate of 28%.
The Taxpayer Relief Act of 1997 (the "Act") alters the taxation of net
capital gain income. Under the Act, individuals, trusts and estates that
hold capital investments for more than 18 months may be taxed at a maximum
long-term capital gain rate of 20% on the sale or exchange of those
investments. Individuals, trusts and estates that hold certain assets for
more than 12 months but not more than 18 months may be taxed at a maximum
mid-term capital gain rate of 28% on the sale or exchange of those
investments. Net short-term capital gains remain taxable as ordinary income.
The Act allows the Internal Revenue Service to prescribe regulations on how
the Act's new capital gain rates will apply to sales of capital assets by
"pass-thru entities," which include regulated investment companies such as
the Funds. To date regulations have not yet been prescribed, and it remains
unclear how the Act's new rates will apply to capital gain dividends or
undistributed capital gains, including for example the extent, if any, to
which capital gain dividends or undistributed capital gains from the Funds
will be taxed to individuals at the new rates for mid-term capital gains
rather than the long-term capital gain rates. Investors are urged to consult
their own tax advisors with respect to the new rules contained in the Act.
OPTIMUM ACCOUNT(R)
LB Securities offers Optimum Account to all LB Money Market Fund Class
A shareholders. The features of Optimum Account include the following:
o VISA Debit Card Privilege. You can use the VISA card to purchase
merchandise or obtain cash advances. Purchase transactions are
escrowed, or held against your current Money Market Account
balance. At month end the total escrowed purchases are redeemed
from your money market account. Although the escrowed shares are
not available for use, they do continue to earn interest. All
cash advances are redeemed from your account immediately.
o Checkwriting Privileges. You can write as many checks as you want
with no minimum and at no charge per check. Checks will be
returned to you for recordkeeping. State Street Bank will redeem
enough shares from your LB Money Market Fund account to cover the
checks you write on the date the check reaches the Bank.
o Tax-free Money Market Fund. You have access to Tax-Free
Instruments Trust, a money market fund with dividends exempt from
federal income tax.
o Discount Brokerage. You can use Optimum Account Discount
Brokerage Services for direct purchases of general securities.
o Automatic Settlement. Purchase and sale transactions for general
securities placed through Optimum Account Discount Brokerage
Services will clear automatically through your LB Money Market
Fund account.
o Automatic Purchases and Redemptions. You may arrange to have your
Social Security or payroll check automatically invested in your
LB Money Market Fund account. You can also arrange to have Class
A shares of LB Money Market Fund redeemed to pay Lutheran
Brotherhood insurance premiums.
o Toll-free Telephone Exchange. You can call toll-free to effect
exchanges among accounts with the same class of shares in The
Lutheran Brotherhood Family of Funds and Tax-Free Instruments
Trust. You may also transfer money from your local bank account
to any mutual fund in The Lutheran Brotherhood Family of Funds.
o Monthly Consolidated Statement. In lieu of an immediate
confirmation of LB Money Market Fund financial transactions, you
will receive your monthly Optimum Account statement. The monthly
statement will report all activity in your accounts held in The
Lutheran Brotherhood Family of Funds, Tax-Free Instruments Trust,
Optimum Account Discount Brokerage Account, and VISA Debit cards.
o Toll-free Customer Service. You can initiate the transactions
described above and receive up-to-the-minute information on your
account by calling the Optimum Account Customer Service
Representatives toll-free (800) 421-3997.
o Newsletter. Money management tips and information about Optimum
Account will be sent to you on a regular basis through the
quarterly newsletter offered to Optimum Account holders.
In the future, LB Securities may offer additional features to
shareholders in Optimum Account. In addition, LB Securities may, from time
to time, offer certain items of nominal value to any shareholder or investor
deciding to participate in Optimum Account.
There is a one-time new account fee of $25 for the Optimum Account
package. This fee is waived for LB Money Market Fund Class A shareholders
who already have the LB Money Market Fund VISA debit card when they add the
features of Optimum Account. A monthly administrative fee of $5.00 is
charged. These fees will be automatically redeemed from your LB Money Market
Fund account each month.
IRAS AND OTHER TAX-DEFERRED PLANS
Shares of the Fund may be selected as investments for Individual
Retirement Accounts, the qualified Lutheran Brotherhood prototype plans for
the self-employed, qualified pension and profit-sharing plans and tax-
sheltered custodial accounts (403(b) plans). There are additional fees and
procedural requirements for such plans. See your LB Securities registered
representative for more details.
FUND PERFORMANCE
From time to time, quotations of the Funds' performance in terms of
yield or total return may be included in advertisements, sales literature,
or shareholder reports. Total return and yield information for the Funds are
computed separately for each class of shares of the Funds. Any variations in
shareholder servicing fees, Rule 12b-1 fees or sales charges among the
classes offered now or in the future by the Funds will have an impact on
such performance data. Shares of the Funds had no class designations until
October 31, 1997 when designations were assigned based upon the sales
charges, Rule 12b-1 fees and shareholder servicing fees. Performance data
for periods prior to that date do not reflect Rule 12b-1 fees for the Class
B shares and shareholder servicing fees for the Class A and B shares, which
will adversely affect performance after that date. However, historical
performance has been restated to reflect the revised initial sales charge
schedule for the Class A shares and the CDSC for the Class B shares that are
effective October 31, 1997. All performance data for periods after October
31, 1997 will reflect Rule 12b-1 fees, shareholder servicing fees, and such
sales charges. All performance figures are based on historical results and
are not intended to indicate future performance. Performance data or
rankings for a given class of shares should be interpreted carefully by
investors who hold or may invest in a different class of shares.
"Total returns" are based on the change in value of an investment in a
Fund for a specified period. "Average annual total return" is the average
annual compounded rate of return of an investment in a Fund at the maximum
public offering price, if applicable, assuming the investment has been held
for one year, five years and ten years as of a stated ending date. (If the
Fund has not been in operation for at least ten years, the life of the Fund
will be used where applicable.) Average annual return quotations assume a
constant rate of growth. Actual performance fluctuates and will vary from
the quoted results for periods of time within the quoted periods.
"Cumulative total return" represents the cumulative change in value of an
investment in a Fund over a stated period. Average annual total return may
be accompanied with nonstandard total return information computed in the
same manner, but for differing periods and with or without annualizing the
total return or taking sales charges into account. These calculations assume
that all dividends and capital gains distributions during the period were
reinvested in shares of a Fund.
The yield of the LB High Yield Fund, LB Income Fund, LB Municipal Bond
Fund and LB Money Market Fund refers to the income generated by an
investment in the Fund. A Fund's yield is computed by dividing the net
investment income, after recognition of all recurring charges, per share
earned during the most recent month or other specified 30-day period by the
applicable maximum offering price per share on the last day of such period
and annualizing the result. The yield of the LB Money Market Fund refers to
the income generated by an investment in that Fund over a specified seven-
day period. The LB Municipal Bond Fund's tax-equivalent yield is a
hypothetical current yield that the Fund's actual current yield is
comparable to when the shareholder is assumed to pay federal income tax on
the entire hypothetical yield at a specific tax rate. Yields for a Fund are
expressed as annualized percentages. The "effective yield" of the LB Money
Market Fund is expressed similarly but, when annualized, the income earned
by an investment in that Fund is assumed to be reinvested and will reflect
the effects of compounding.
The average annual total return and yield results take initial sales
charges (for the Class A shares) and the CDSC (for the Class B shares) into
account, if applicable, but do not take into account recurring and
nonrecurring charges for optional services which only certain shareholders
elect and which involve nominal fees. Where sale charges are not applicable
and therefore not taken into account in the calculation of average annual
total return and yield, the results will be increased. Any voluntary waiver
of fees or assumption of expenses will also increase performance results.
The Funds' performance reported from time to time in advertisements
and sales literature may be compared to generally accepted indices or
analyses such as those provided by Lipper Analytical Service, Inc., Standard
& Poor's and Dow Jones. Performance ratings reported periodically in
financial publications such as "Money Magazine", "Forbes", "Business Week",
"Fortune", "Financial Planning" and the "Wall Street" Journal will be used.
THE FUNDS AND THEIR SHARES
All the Funds in The Lutheran Brotherhood Family of Funds, except the
LB World Growth Fund and LB Mid Cap Growth Fund, were organized in 1993 as
series of The Lutheran Brotherhood Family of Funds, a Delaware business
trust. Each of those Funds is the successor to a fund of the same name that
previously operated as a separate corporation or trust pursuant to a
reorganization that was effective as of November 1, 1993. The LB World
Growth Fund and LB Mid Cap Growth Fund began operating as a series of the LB
Family of Funds on September 5, 1995 and May 30, 1997, respectively. The
fiscal year end of the Trust and each Fund is October 31. Prior to October
31, 1997, the shares of the Funds had no specific class designations. As of
that date, Class A, Class B and Institutional Class shares were authorized
by the Board of Trustees of the Trust. The Trust has reserved the right to
create other classes of shares in the future.
The rights of holders of shares may be modified by the Trustees at any
time, so long as such modifications do not have a material, adverse effect
on the rights of any shareholder. On any matter submitted to the
shareholders, the holder of each Fund share is entitled to one vote per
share (with proportionate voting for fractional shares) regardless of the
relative net asset value thereof.
Shares of a Fund when issued are fully paid and nonassessable by the
Trust. Shares of a Fund represent an identical interest in the same
portfolio of investments of the Fund and have the same rights, privileges
and preferences, except with respect to: (a) the designation of each class;
(b) the sales charge applicable to each class; (c) the Rule 12b-1
distribution fees and shareholder servicing fees borne by each class; (d)
the expenses allocable exclusively to each class, if any; and (e) voting
rights on matters exclusively affecting a single class.
The differences in Rule 12b-1 fees and shareholder servicing fees borne by
each class will result in different net asset values (except for LB Money
Market Fund) and dividends for the Class A and B shares. The Board of
Trustees authorized the creation of such shares by adopting a Multiple Class
Plan pursuant to Rule 18f-3 of the 1940 Act. Rule 18f-3 and the Trust's
Master Trust Agreement require shareholders of specific classes of shares to
vote on certain matters on a class-by-class basis.
Under the Trust's Master Trust Agreement, no annual or regular meeting
of shareholders is required. Thus, there will ordinarily be no shareholder
meetings unless required by the Investment Company Act of 1940. The Trustees
may fill vacancies on the Board or appoint new Trustees provided that
immediately after such action at least two-thirds of the Trustees have been
elected by shareholders. Under the Master Trust Agreement, any Trustee may
be removed by vote of two-thirds of the outstanding Trust shares or by
three-fourths of the Trustees; holders of 10% or more of the outstanding
shares of the Trust can require that the Trustees call a meeting of
shareholders for purposes of voting on the removal of one or more Trustees.
In connection with such meetings called by shareholders, the relevant Fund
or Funds will assist shareholders in shareholder communications.
FUND MANAGEMENT
BOARD OF TRUSTEES
The Board of Trustees of the Trust is responsible for the management
and supervision of the Funds' business affairs and for exercising all powers
except those reserved to the shareholders.
INVESTMENT ADVISER
Investment decisions for each of the Funds, except the LB World Growth
Fund, are made by LB Research, subject to the overall direction of the Board
of Trustees. LB Research provides investment research and supervision of the
Funds' investments and conducts a continuous program of investment
evaluation and appropriate disposition and reinvestment of the Funds'
assets. LB Research assumes the expense of providing the personnel to
perform its advisory functions. Lutheran Brotherhood, the indirect parent
company of LB Research, also serves as the investment adviser for LB Series
Fund, Inc.
Michael A. Binger, Assistant Vice President of LB Research, has been
the portfolio manager of LB Opportunity Growth Fund since October 31, 1994.
Mr. Binger has been with LB Research since 1987.
James M. Walline, Vice President of LB Research and Vice President of
the Funds has been the portfolio manager of LB Fund since October 31, 1994.
Mr. Walline has been with LB Research since 1969.
Brian Thorkelson, Assistant Vice President of LB Research, serves as
the portfolio manager of LB Mid Cap Growth Fund. Mr. Thorkelson has been
with LB Research since 1989, previously serving as a securities analyst for
LB Research and Lutheran Brotherhood.
Paul Ocenasek, Assistant Vice President of LB Research, serves as the
portfolio manager of LB High Yield Fund. Mr. Ocenasek joined LB Research in
1987, previously serving as a fixed-income analyst and bond portfolio
manager
Charles E. Heeren, Vice President of LB Research has been the
portfolio manager of LB Income Fund since 1987. Mr. Heeren has been with LB
Research since 1976.
Janet I. Grangaard, Assistant Vice President of LB Research, has been
portfolio manager of LB Municipal Bond Fund since January 1, 1994. Prior to
that time she served as associate portfolio manager of that Fund. Ms.
Grangaard has been with LB Research since 1988.
Gail R. Onan, Assistant Vice President of LB Research, has been the
portfolio manager of LB Money Market Fund since January 1, 1994. Prior to
that time she served as associate portfolio manager of that Fund. Ms. Onan
has been with LB Research since 1986.
LB Research has engaged Rowe Price-Fleming International, Inc.
("Price-Fleming") as investment sub-advisor for Lutheran Brotherhood World
Growth Fund. Price-Fleming was founded in 1979 as a joint venture between T.
Rowe Price Associates, Inc. and Robert Fleming Holdings Limited. Price-
Fleming is one of the world's largest international mutual fund asset
managers with approximately $31 billion under management as of October 31,
1997 in its offices in Baltimore, London, Tokyo and Hong Kong. Price-Fleming
has an investment advisory group that has day-to-day responsibility for
managing the Fund and developing and executing the Fund's investment
program. The members of the advisory group are listed below.
Martin G. Wade, Christopher Alderson, Peter Askew, David Boardman,
Richard J. Bruce, Mark T.J. Edwards, John R. Forde, Robert C. Howe, James
B.M. Seddon, Benedict R.F. Thomas, and David J.L. Warren.
Martin Wade joined Price-Fleming in 1979 and has 28 years of
experience with Fleming Group (Fleming Group includes Robert Fleming
Holdings Ltd. and/or Jardine Fleming International Holdings Ltd.) in
research, client service and investment management, including assignments in
the Far East and the United States.
Peter Askew joined Price-Fleming in 1988 and has 21 years of
experience managing multicurrency fixed income portfolios. Christopher
Alderson joined Price-Fleming in 1988, and has ten years of experience with
the Fleming Group in research and portfolio management, including an
assignment in Hong Kong. David Boardman joined Price-Fleming in 1988 and
has 22 years experience in managing multicurrency fixed income portfolios.
Richard J. Bruce joined Price-Fleming in 1991 and has seven years of
experience in investment management with the Fleming Group in Tokyo. Mark
J.T. Edwards joined Price-Fleming in 1986 and has 16 years of experience in
financial analysis, including three years in Fleming European research. John
R. Ford joined Price-Fleming in 1982 and has 17 years of experience with
Fleming Group in research and portfolio management, including assignments in
the Far East and the United States. Robert C. Howe joined Price-Fleming in
1986 and has 17 years of experience in economic research in Japan. James
B.M. Seddon joined Price-Fleming in 1987 and has ten years of experience in
investment management. Benedict R.F. Thomas joined Price-Fleming in 1988 and
has eight years of portfolio management experience, including assignments in
London and Baltimore. David J.L. Warren joined Price-Fleming in 1984 and has
17 years experience in equity research, fixed income research and portfolio
management, including an assignment in Japan.
LB Research and Price-Fleming personnel may invest in securities for
their own account pursuant to a code of ethics that establishes procedures
for personal investing and restricts certain transactions.
LB Research receives an annual investment advisory fee from each Fund. The
advisory contract between LB Research and the Trust provides for the
following advisory fees: LB Opportunity Growth Fund pays an advisory fee
equal to .75% of average daily net assets up to $100 million, .65% of
average daily net assets over $100 million but not over $250 million, .60%
of average daily net assets over $250 million but not over $500 million,
.55% of average daily net assets over $500 million but not over $1 billion,
and .50% of average daily net assets over $1 billion. LB Mid Cap Growth Fund
pays an advisory fee equal to .70% of average daily net assets up to $100
million, .65% of average daily net assets over $100 million but not over
$250 million, .60 % of average daily net assets over $250 million but not
over $500 million, .55% of average daily net assets over $500 million but
not over $1 billion and .50% of average daily net assets over $1 billion. LB
World Growth Fund pays and advisory fee equal to 1.25% of average daily net
assets up to $20 million, 1.10% of average daily net assets over $20 million
but not over $50 million, and 1.00% of average daily net assets over $50
million. LB Fund pays an advisory fee equal to .65% of average daily net
assets of $500 million or less, .60% of average daily net assets over $500
million but not over $1 billion, and .55% of average daily net assets over
$1 billion. LB High Yield Fund pays an advisory fee equal to .65% of average
daily net assets of $500 million or less, .60% of average daily net assets
over $500 million but not over $1 billion, and .55% of average daily assets
over $1 billion. LB Income Fund pays an advisory fee equal to .60% of
average daily net assets of $500 million or less, .575% of average daily net
assets over $500 million but not over $1 billion, and .55% of average daily
net assets over $1 billion. LB Municipal Bond Fund pays an advisory fee
equal to .575% of average daily net assets of $500 million or less, .5625%
of average daily net assets over $500 million but not over $1 billion, and
.55% of average daily net assets over $1 billion. LB Money Market Fund pays
an advisory fee equal to .50% of average daily net assets of $500 million or
less, .475% of average daily net assets on the next $500 million of average
daily net assets, .45% of average daily net assets on the next $500 million
of average daily net assets, .425% of average daily net assets on the next
$500 million of average daily net assets, and .40% of average daily net
assets over $2 billion.
Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee for each of the Funds equal
to .25% of the average daily net assets of the Fund. This .25% waiver
applies to the contractual rates of compensation in the previous paragraph
at each level of average daily net assets.
During the most recent fiscal year of each Fund, LB Research received
fees amounting to the following percentages of each Fund's average daily net
assets:
<TABLE>
<S> <C>
LB Opportunity Growth Fund 0.68%
LB Mid Cap Growth Fund* 0.46%
LB World Growth Fund 1.00%
LB Fund** 0.59%
LB High Yield Fund** 0.59%
LB Income Fund** 0.55%
LB Municipal Bond Fund** 0.53%
LB Money Market Fund*** 0.40%
</TABLE>
- - ------------
* After giving effect to a fee waiver of 0.24%.
** After giving effect to a fee waiver of 0.04%.
*** After giving effect to a fee waiver of 0.10%.
LB Research pays the Sub-advisor for the LB World Growth Fund an
annual sub-advisory fee for the performance of sub-advisory services. The
fee payable is equal to a percentage of that Fund's average daily net
assets. The percentage decreases as the Fund's assets increase. For purposes
of determining the percentage level of the sub-advisory fee for the Fund,
the assets of the Fund are combined with the assets of the LB Series Fund,
Inc. World Growth Portfolio, another fund with investment objectives and
policies that are similar to the LB World Growth Fund and for which the Sub-
advisor also provides sub-advisory services. The sub-advisory fee LB
Research pays the Sub-advisor is equal to the LB World Growth Fund's pro
rata share of the combined assets of the Fund and the LB Series Fund, Inc.
World Growth Portfolio and is equal to .75% of combined average daily net
assets up to $20 million, .60% of combined average daily net assets over $20
million but not over $50 million, and .50% of combined average daily net
assets over $50 million. When the combined assets of the LB World Growth
Fund and the LB Series Fund, Inc. World Growth Portfolio exceed $200
million, the sub-advisory fee for the LB World Growth Fund is equal to .50%
of all of the Fund's average daily net assets. At October 31, 1997 the
combined assets of LB World Growth Fund and World Growth Portfolio totaled
$351.0 million.
LB Research has further undertaken, until October 31, 1998 and
thereafter until further notice to LB Mid Cap Growth Fund to waive its
advisory fee and if necessary, to bear certain expenses associated with
operating the Fund in order to limit the Fund's total operating expenses for
the Class A shares and Class B shares to an annual rate of 1.95% and 2.70%,
respectively, of the average daily net assets of the Fund.
LB Research has further undertaken, until October 31, 1998 and thereafter
until further notice to LB Money Market Fund, to waive its advisory fees in
order to limit LB Money Market Fund's total operating expenses for the Class
A and Class B shares to 0.95% of the average net assets of each class.
Effective January 1, 1997, LB Research has also voluntarily agreed to
waive 5 basis points (0.05%) from the advisory fees payable by the LB Fund,
LB High Yield Fund, LB Income Fund, and LB Municipal Bond Fund. These
voluntary partial waivers of advisory fees may be discontinued at any time.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES
LB Securities, the Funds' distributor, provides administrative
personnel and services necessary to operate the Funds on a daily basis at
for a fee equal to 0.02% of each Fund's daily net assets.
During the fiscal year ended October 31, 1997, the Funds paid the
following amounts to LB Securities for administrative services:
<TABLE>
<S> <C>
LB Opportunity Growth Fund $55,875
LB Mid Cap Growth Fund $617
LB World Growth Fund $13,826
LB Fund $184,583
LB High Yield Fund $158,365
LB Income Fund $166,209
LB Municipal Bond Fund $122,078
LB Money Market Fund $90,172
</TABLE>
CUSTODIAN
State Street Bank ("State Street Bank") is custodian of the Funds'
cash and securities.
TRANSFER AGENT
LB Securities serves as transfer agent for the Funds, with the
assistance of Norwest Bank Minnesota, N.A., respecting cash transactions.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP is the independent accountants for the Funds.
DESCRIPTION OF DEBT RATINGS
Moody's Investors Service, Inc. describes grades of corporate debt
securities and "Prime-1" and "Prime-2" commercial paper as follows:
BONDS:
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds 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 which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which 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.
COMMERCIAL PAPER:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return of funds employed.
o Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
o Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of senior short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above
but to a lesser degree. Earning trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Standard & Poor's Corporation describes grades of corporate debt
securities and "A" commercial paper as follows:
BONDS:
AAA Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher rated categories. However, the obligor's capacity to meet
its financial commitments on the obligation is still strong.
BBB Debt rated BBB exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitments on the obligation in this category than in higher rated
categories.
BB Debt 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 inadequate capacity of the obligor to meet its
financial commitments on the obligation. The BB rating category is
also used for debt subordinated to senior debt that is assigned an
actual or implied BBB-rating.
B Debt rated B is more vulnerable to nonpayment but currently has the
capacity to meet its financial commitments on the obligation.
Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial
commitments on the obligation.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC Debt rated CCC is vulnerable to nonpayment, and is dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitments 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
commitments on the obligation.
The CCC rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied B or B- rating.
CC The rating CC typically is currently highly vulnerable to
nonpayment.
C The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken but payments on the
obligation are being continued.
D Debt rated D is in payment default. The D rating category is used
when payments are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking
of similar action if payments on the obligation are jeopardized.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on
the likelihood of, or the risk of default upon failure of, such completion.
The investor should exercise judgment with respect to such likelihood and
risk.
Commercial Paper: Commercial paper rated A by Standard & Poor's
Corporation has the following characteristics: liquidity ratios are better
than the industry average; long-term senior debt rating is "A" or better
(however, in some cases a "BBB" long-term rating may be acceptable); the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowances made for unusual
circumstances. Also, the issuer's industry typically is well established,
the issuer has a strong position within its industry and the reliability and
quality of management is unquestioned. Issuers rated A are further referred
to by use of numbers 1, 2 and3 to denote relative strength within this
classification.
HOW TO INVEST
o Complete and sign the General Application
o Enclose a check made payable to The Lutheran Brotherhood Family of
Funds
o Mail your application and check to:
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
ADDRESSES
Lutheran Brotherhood
Lutheran Brotherhood Research Corp.
Lutheran Brotherhood Securities Corp.
The Lutheran Brotherhood Family of Funds
625 Fourth Avenue South
Minneapolis, Minnesota 55415
State Street Bank
P.O. Box 1591
Boston, Massachusetts 02104
Norwest Bank Minnesota, N.A.
Sixth & Marquette Avenue
Minneapolis, Minnesota 55402
Price Waterhouse LLP
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
<PAGE>
YSHARES
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
LUTHERAN BROTHERHOOD FUND
LUTHERAN BROTHERHOOD HIGH YIELD FUND
LUTHERAN BROTHERHOOD INCOME FUND
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
LUTHERAN BROTHERHOOD MONEY MARKET FUND
NO LOAD
INSTITUTIONAL CLASS SHARES
PROSPECTUS December 30 1997
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND ("LB Opportunity Growth
Fund") seeks long term growth of capital by investing primarily in a
professionally managed diversified portfolio of smaller capitalization
common stocks. See page P-16
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND ("LB Mid Cap Growth Fund")
seeks to achieve long term growth of capital by investing primarily in a
professionally managed diversified portfolio of common stocks of companies
with medium market capitalizations. See page P-16.
LUTHERAN BROTHERHOOD WORLD GROWTH FUND ("LB World Growth Fund") seeks
high total return from long-term growth of capital by investing primarily in
a professionally managed diversified portfolio of common stocks of
established, non-U.S. companies. See page P-17.
LUTHERAN BROTHERHOOD FUND ("LB Fund") seeks growth of capital and
income by investing in a professionally managed diversified portfolio of
common stocks and other securities issued by leading companies. See page P-
19.
LUTHERAN BROTHERHOOD HIGH YIELD FUND ("LB High Yield Fund") seeks high
current income by investing primarily in a professionally managed
diversified portfolio of high yield, high risk securities. The Fund will
also consider growth of capital as a secondary investment objective. See
page P-19.
LUTHERAN BROTHERHOOD INCOME FUND ("LB Income Fund") seeks high current
income while preserving principal, with possible long term growth of
capital, by investing primarily in a professionally managed diversified
portfolio of debt securities and dividend paying common and preferred
stocks. See page P-20.
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND ("LB Municipal Bond Fund")
seeks to provide high current income exempt from federal income tax by
investing primarily in a professionally managed diversified portfolio of
municipal bonds. See page P-20.
LUTHERAN BROTHERHOOD MONEY MARKET FUND ("LB Money Market Fund") seeks
to provide current income consistent with stability of principal. See page
P-20.
Lutheran Brotherhood Research Corp. ("LB Research"), an indirect
wholly-owned subsidiary of Lutheran Brotherhood, serves as investment
adviser for the funds listed above (each, a "Fund"). Lutheran Brotherhood
and LB Research personnel have developed skills in the investment advisory
business over the past 27 years, and have extensive skill in managing over
$20.5 billion in assets as of September 30, 1997, including $9.4 billion in
mutual fund assets. Lutheran Brotherhood Securities Corp. ("LB Securities")
serves as distributor for The Lutheran Brotherhood Family of Funds. LB
Research currently engages Rowe Price-Fleming International, Inc. ("Price-
Fleming" or "Sub-advisor") as investment sub-advisor for LB World Growth
Fund.
Each Fund is a diversified series of The Lutheran Brotherhood Family
of Funds (the "Trust"), an open-end management investment company.
Each Fund offers three classes of shares: Class A shares, Class B
shares and Institutional Class shares. The shares offered by this Prospectus
are the Institutional Class shares which are offered only to Lutheran
institutions, Lutheran church organizations and to certain other
institutional investors as may be determined by the Trust from time to time,
subject in each case to a minimum investment of $100,000. As of October 31,
1997, all of the then outstanding shares of each Fund were redesignated as
Class A shares and, immediately thereafter, shares held by Lutheran
institutions and church organizations with accounts of at least $100,000
were automatically converted to Institutional Class shares. The Class A and
B shares of the Funds are offered through a separate prospectus. A copy of
the prospectus for the Class A and Class B shares may be obtained by writing
LB Securities or by calling toll free (800) 328-4552.
This Prospectus sets forth concisely the information a prospective
investor ought to know about the Funds before investing. It should be
retained for future reference. A Statement of Additional Information about
the Funds dated December 30, 1997 has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference in this
Prospectus. It is available, at no charge, upon request by writing LB
Securities or by calling toll free (800) 328-4552. The SEC maintains a web
site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference herein and other information
regarding the Funds.
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 ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN LB MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Fund Expenses..............................................P-4
Financial Highlights..................................................P-6
Investment Objectives and Policies...................................P-14
Investment Limitations...............................................P-25
Investment Risks.....................................................P-26
Buying Shares of The Lutheran Brotherhood Family of Fund.............P-29
Net Asset Value of Your Shares.......................................P-31
Multiple Class System................................................P-31
Receiving Your Order.................................................P-32
Certificates and Statements..........................................P-32
Redeeming Shares.....................................................P-32
Dividends and Capital Gains..........................................P-33
Taxes................................................................P-34
Fund Performance....................................... .............P-35
The Funds and Their Shares...........................................P-36
Fund Management................ .....................................P-37
Fund Administration................... ..............................P-39
Description of Debt Ratings........................ .................P-45
How to Invest........................... ............................P-42
Addresses............................................................P-42
</TABLE>
SUMMARY OF FUND EXPENSES
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
LB OPPORTUNITY GROWTH FUND
LB MID CAP GROWTH FUND
LB WORLD GROWTH FUND
LB FUND
LB HIGH YIELD FUND
LB INCOME FUND LB
LB MUNICIPAL BOND FUND MONEY MARKET FUND (3)
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
("as a percentage of offering price) None None
Maximum Sales Charge Imposed on Reinvested
Dividends ("as a percentage of offering price) None None
Maximum Deferred Sales Charge
("as a percentage of net asset value at time of
purchase or redemption, whichever is lower None None
Redemption Fees ("as a percentage
of amount redeemed, if applicable) None None
Exchange Fees None None
- - ---------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (1) 0.43%
12b-1 Fees -
Other Expenses 0.61%
-----
Total Fund Operating Expenses (after waiver) (1) 1.04%
====
- - ---------------------
</TABLE>
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (2) 0.21%
12b-1 Fees -
Other Expenses 1.49%
----
Total Fund Operating Expenses (after waiver) 1.70%
====
- ---------------------
</TABLE>
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (3) .75%
12b-1 Fees -
Other Expenses 0.82%
----
Total Fund Operating Expenses (after waiver) (3) 1.57%
====
- - ---------------------
</TABLE>
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (4) .34%
12b-1 Fees -
Other Expenses) .29%
----
Total Fund Operating Expenses (after waiver) (4) .63%
===
- ---------------------
</TABLE>
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (5) .34%
12b-1 Fees -
Other Expenses .25%
----
Total Fund Operating Expenses (after waiver) (5) .59%
===
- ---------------------
</TABLE>
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD INCOME FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (6) .30%
12b-1 Fees -
Other Expenses .25%
----
Total Fund Operating Expenses (after waiver) (6) .55%
===
- ---------------------
</TABLE>
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver) (7) .28%
12b-1 Fees
Other Expenses .17%
----
Total Fund Operating Expenses (after waiver) (7) .45%
===
- --------------------
</TABLE>
<TABLE>
<S> <C>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver)(8) .15%(8)
12b-1 Fees -
Other Expenses .55%
----
Total Fund Operating Expenses (after waiver)(8) .70%(8)
===
- ---------------------
</TABLE>
(1) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of LB Opportunity Growth Fund. Without the waiver,
Management Fees and Total Operating Expenses would be 0.68% and 1.29%
respectively.
(2) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of LB Mid Cap Growth Fund. LB Research has further
undertaken, until October 31, 1998, and thereafter until further notice to
the LB Mid Cap Growth Fund, to waive its advisory fee and, if necessary, to
bear certain expenses associated with operating LB Mid Cap Growth Fund in
order to limit the Fund's total operating expenses for the Institutional
Class shares to an annual rate of 1.70% of average net assets of the
Institutional Class. Without the waiver, Management Fees and Total Fund
Operating Expenses for LB Mid Cap Growth Fund would be 0.70% and 2.19%,
respectively, for the Institutional Class.
(3) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of LB World Growth Fund. Without the waiver,
Management Fees and Total Fund Operating Expenses for LB World Growth Fund
would be 1.00% and 1.82%, respectively, for the Institutional Class.
(4) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fees equal to 0.25% of the
average daily net assets of LB Fund. Effective January 1, 1997, LB Research
has also voluntarily agreed to temporarily waive a portion of its advisory
fees equal to 0.05% of the average daily net assets of the LB Fund. The
temporary waiver of advisory fees may be discontinued at any time. Without
the waivers, Management Fees and Total Operating Expenses would have been
0.63% and 0.92%, respectively. See "Fund Management."
(5) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of LB High Yield Fund. Effective January 1, 1997,
LB Research has also voluntarily agreed to temporarily waive a portion of
its advisory fees equal to 0.05% of the average daily net assets of the LB
High Yield Fund. The temporary waiver of advisory fees may be discontinued
at any time. Without the waivers, Management Fees and Total Operating
Expenses would have been 0.63% and 0.88%, respectively. See "Fund
Management."
(6) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of LB Income Fund. Effective January 1, 1997, LB
Research has also voluntarily agreed to temporarily waive a portion of its
advisory fees equal to 0.05% of the average daily net assets of the LB
Income Fund. The temporary waiver of advisory fees may be discontinued at
any time. Without the waivers, Management Fees and Total Operating Expenses
would have been 0.59% and 0.84%, respectively. See "Fund Management."
(7) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of LB Municipal Bond Fund. Effective January 1,
1997, LB Research has also voluntarily agreed to temporarily waive a portion
of its advisory fees equal to 0.05% of the average daily net assets of the
LB Municipal Bond Fund. The temporary waiver of advisory fees may be
discontinued at any time. Without the waivers, Management Fees and Total
Operating Expenses would have been 0.57% and 0.74%, respectively. See "Fund
Management."
(8) Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of LB Money Market Fund. LB Research has further
undertaken, until October 31, 1998 and thereafter until further notice to
the Fund, to limit the LB Money Market Fund's total operating expenses for
the Institutional Class shares to 0.70%, of the average net assets of the
class by means of a voluntary waiver of its advisory fee. Without the
waiver, Management Fees and Total Fund Operating Expenses would be 0.50% and
1.05%, respectively.
EXAMPLE:
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT AND ASSUMING (1)
5% ANNUAL RETURN AND (2) REDEMPTION AT THE END OF EACH TIME PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
LB Opportunity Growth Fund $11 $33 $57 $127
LB Mid Cap Growth Fund $17 $54 $92 $201
LB World Growth Fund $16 $50 $86 $187
LB Fund $6 $20 $35 $79
LB High Yield Fund $6 $19 $33 $74
LB Income Fund $6 $18 $31 $69
LB Municipal Bond Fund $5 $14 $25 $57
LB Money Market Fund $7 $22 $39 $87
</TABLE>
YOU WOULD PAY THE FOLLOWING EXPENSES ON THE SAME INVESTMENT, ASSUMING NO
REDEMPTION:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
LB Opportunity Growth Fund $11 $33 $57 $127
LB Mid Cap Growth Fund $17 $54 $92 $201
LB World Growth Fund $16 $50 $86 $187
LB Fund $6 $20 $35 $79
LB High Yield Fund $6 $19 $33 $74
LB Income Fund $6 $18 $31 $69
LB Municipal Bond Fund $5 $14 $25 $57
LB Money Market Fund $7 $22 $39 $87
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF PAST OR
FUTURE RETURN OR EXPENSES. ACTUAL RETURN OR EXPENSES MAY BE GREATER OR LESS
THAN SHOWN.
The purpose of the table above is to assist the investor in
understanding the various costs and expenses that an investor will bear
directly or indirectly. Actual expense levels for the current and future
years may vary from the amounts shown. The table does not reflect charges
for optional services elected by certain shareholders. For more complete
information and descriptions of various costs and expenses, see "Multiple
Class System" and "Fund Administration".
FINANCIAL HIGHLIGHTS
The tables below for each of the Funds to the extent and for the
periods indicated in its report, have been examined by Price Waterhouse LLP,
independent accountants, whose reports are included in the Annual Reports to
Shareholders for the fiscal year ended October 31, 1997. The tables should
be read in conjunction with the financial statements and notes thereto that
appear in such reports, which are incorporated by reference into the
Statement of Additional Information. Shares of the Fund had no class
designations until October 31, 1997, when designations were assigned based
on the sales charges, Rule 12b-1 fees and shareholder servicing fees
applicable to shares sold thereafter. The financial data below only covers
periods prior to the adoption of class designations.
LB OPPORTUNITY GROWTH FUND
CLASS A SHARES
<TABLE>
<CAPTION>
For the Period
January 8, 1993
Year Ended Year Ended Year Ended Year Ended (effective date) to
(For a share outstanding throughout 10/31/97 10/31/96 10/31/95 10/31/94 October 31, 1993
the period)(a) ------------ ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.62 $13.83 $10.76 $10.66 $ 8.43
------ ------ ------ ------ ------
Investment Operations:
Net Investment Loss ............. (0.07) (0.11) (0.09) (0.06) (0.07)
Net Realized and Unrealized Gain
(Loss) on Investment............ .91 2.63 3.16 0.16 2.30
------ ------ ------ ------ ------
Total from Investment Operations .84 2.52 3.07 0.10 2.23
------ ------ ------ ------ ------
Less Distributions:
Distributions from Net Realized
Gain on Investments............. (1.49) (2.73) -- -- --
------ ------ ------ ------ ------
Net Asset Value, End of Period...... $12.97 $13.62 $13.83 $10.76 $10.66
====== ====== ====== ====== ======
Total Investment Return at Net Asset
Value(%)(b) 7.52% 21.27% 28.53% 0.94% 26.45%
Net Assets, End of Period (in millions). $311.4 $265.8 $165.7 $99.6 $40.8
Ratio of Expenses to Average Net
Assets (%) 1.29% 1.28% 1.43% 1.66% 2.33%(c)
Ratio of Net Investment Loss to
Average Net Assets (%)................ -0.60% -0.92% -0.88% -0.83% -1.76%(c)
Portfolio Turnover (%).................. 136% 176% 213% 64% 97%
Average commission rate(d).............. $0.0524 $0.0488 N/A N/A N/A
- - ---------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Average commission rate is based on total broker commissions incurred in connection with execution of portfolio
transactions during the period, divided by the sum of all portfolio shares purchased and sold during the period that
were subject to a commission. Broker commissions are treated as capital items that increase the cost basis of
securities purchased, or reduce the proceeds of securities sold.
</TABLE>
LB Mid Cap Growth Fund
CLASS A SHARES
<TABLE>
<CAPTION>
For the Period From
May 30, 1997
(effective date) to
October 31, 1997
------------------
<S> <C>
(For a share outstanding throughout the period) (a)
Net Asset Value, Beginning of Period ...................... $ 9.25
--------
Investment Operations:
Net Investment Loss ....................................... (0.02)
Net Realized and Unrealized Gain
(Loss) on Investments ................................... 1.10
--------
Total from Investment Operations .......................... 1.08
--------
Net Asset Value, End of Period ............................ $ 10.33
========
Total Investment Return at
Net Asset Value (b) ...................................... 11.68%
Net Assets, End of Period ($ in millions) ................. $ 14.6
Ratio of Expenses to Average
Net Assets ............................................... 1.95%(c)
Ratio of Net Investment Loss to
Average Net Assets ....................................... 0.84%(c)
Portfolio Turnover Rate ................................... 94%
Average commission rate (d) ............................... $ 0.0588
- - ----------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(c) Computed on an annualized basis.
(d) Average commission rate is based on total broker commissions incurred in connection with execution of
portfolio transactions during the period, divided by the sum of all portfolio shares purchased and sold during the
period that were subject to a commission. Broker commissions are treated as capital items that increase the cost basis
of securities purchased, or reduce the proceeds of securities sold.
</TABLE>
LB WORLD GROWTH FUND
CLASS A SHARES
<TABLE>
<CAPTION>
For the Period From
September 5, 1995
Year Ended Year Ended (effective date) to
(For a share outstanding throughout the period)(a) October 31, 1997 October 31, 1996 October 31, 1995
---------------- ---------------- ------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............... $9.48 $8.44 $8.50
----- ----- -----
Income From Investment Operations:
Net Investment Income......................... .02 0.04 0.01
Net Realized and Unrealized Gain (Loss)
on Investments............................. 0.67 1.02 (0.07)
----- ----- -----
Total from Investment Operations................... 0.69 1.06 (0.06)
----- ----- -----
Less Distributions from:
Net Investment Income......................... (0.04) (0.02) --
Net Realized Gains on Investments............. (0.04) -- --
----- ----- -----
Total Distributions................................ (0.08) (0.02) --
----- ----- -----
Net Asset Value, End of Period..................... $10.09 $9.48 $8.44
===== ===== =====
Total Investment Return at Net Asset Value(b)...... 7.38% 12.53% -0.71%
Net Assets, End of Period (in millions)............ $75.1 $52.9 $14.0
Ratio of Expenses to Average Net Assets............ 1.82% 1.95%(d) 1.95%(c,d)
Ratio of Net Investment Income to Average Net Assets. 0.17% 0.67%(d) 1.60%(c,d)
Portfolio Turnover Rate.............................. 17% 11% 0%
Average commission rate(e)........................... $0.0226 $0.0216 N/A
- - ------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Effective September 5, 1995 through October 31, 1996, Lutheran Brotherhood Research Corp. (LBRC) had voluntarily
undertaken to limit the Fund's expense ratio at 1.95%. Had LBRC not undertaken such action, the ratio of expenses to
average net assets would have been 2.13% and 2.89%, and the ratio of net investment income to average net assets would
have been 0.49% and 0.66%, respectively, for the year ended October 31, 1996 and for the period from September 5, 1995
to October 31, 1995.
(e) Average commission rate is based on total broker commissions incurred in connection with execution of portfolio
transactions during the period, divided by the sum of all portfolio shares purchased and sold during the period that
were subject to a commission. Broker commissions are treated as capital items that increase the cost basis of
securities purchased, or reduce the proceeds of securities sold.
</TABLE>
LB FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended Years ended January 31,
throughout the period)(a) Ended Ended Ended Ended Oct. 31 ------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- ------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.. $ 23.07 $ 21.19 $17.67 $18.85 $18.53 $19.14 $17.10 $15.83 $15.97 $14.44
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Net Investment Income...... 0.19 0.20 0.22 0.19 0.29 0.27 0.32 0.37 0.36 0.47
Net Realized and Unrealized
Gain Loss on Investments. 5.68 3.33 3.52 (0.20) 1.04 1.42 3.90 1.34 1.32 1.54
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations 5.87 3.53 3.74 (0.01) 1.33 1.69 4.22 1.71 1.68 2.01
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income... (0.20) (0.20) (0.22) (0.20) (0.28) (0.27) (0.31) (0.38) (0.32) (0.48)
Net Realized Gain on
Investments............. (1.76) (1.45) -- (0.97) (0.73) (2.03) (1.87) (0.06) (1.50) --
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions....... (1.96) (1.65) (0.22) (1.17) (1.01) (2.30) (2.18) (0.44) (1.82) (0.48)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value End of
Period................. $26.98 $ 23.07 $21.19 $17.67 $18.85 $18.53 $19.14 $17.10 $15.83 $15.97
======= ======= ====== ====== ====== ====== ====== ====== ====== ======
Total Investment Return a
Net Asset Value(%)(b)... 26.99% 17.61% 21.34% -0.11% 7.41% 9.47% 24.67% 10.92% 9.77% 14.26%
Net Assets, End of Period
(in millions).......... $ 989.8 $ 768.8 $645.5 $548.6 $527.3 $460.9 $380.3 $303.4 $273.3 $275.9
Ratio of Expenses to
Average Net Assets (%). .88%(e) 0.97% 1.02% 1.04% 1.01%(c) 0.97% 1.00% 1.05% 1.04% 1.08%
Ratio of Net Investment
Income to Average Net
Assets (%)..............0.76%(e) 0.94% 1.15% 1.10% 2.15%(c) 1.44% 1.69% 2.21% 1.99% 3.24%
Portfolio Turnover (%).... 54% 91% 127% 234% 237% 249% 175% 148% 145% 89%
Average commission rate(d). $0.0599 $0.0664 N/A N/A N/A N/A N/A N/A N/A N/A
- - ----------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Average commission rate is based on total broker commissions incurred in connection with execution of portfolio
transactions during the period, divided by the sum of all portfolio shares purchased and sold during the period that
were subject to a commission. Broker commissions are treated as capital items that increase the cost basis of
securities purchased, or reduce the proceeds of securities sold.
(e) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB Fund. Had LB Research not undertaken such action, the ratio of expenses to average net assets
would have been 0.92% and the ratio of net investment income to average net assets would have been 0.72%.
</TABLE>
LB HIGH YIELD FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share Year Year Year Year ended Years ended January 31,
outstanding throughout Ended Ended Ended Ended Oct. 31 ----------------------------------------
the period)(a) 10/31/97 10/31/96 10/31/95 10/31/94 1993 1993 1992 1991 1990 1989
---------- -------- -------- -------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 9.21 $ 9.03 $ 8.86 $ 9.73 $ 9.12 $ 8.45 $ 6.72 $ 7.93 $ 9.72 $ 9.86
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Net Investment
Income................ 0.85 0.84 0.83 0.83 0.61 0.88 0.93 0.92 1.12 1.14
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.41 0.17 0.24 (0.86) 0.60 0.68 1.72 (1.21) (1.76) (0.17)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations............ 1.26 1.01 1.07 (0.03) 1.21 1.56 2.65 (0.29) (0.64) 0.97
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income. (0.89) (0.83) (0.85) (0.82) (0.60) (0.89) (0.92) (0.92) (1.15) (1.11)
Net Realized Gain
on Investments........ (0.03) -- (0.05) (0.02) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions.... (0.89) (0.83) (0.90) (0.84) (0.60) (0.89) (0.92) (0.92) (1.15) (1.11)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value End
of Period........... $ 9.58 $ 9.21 $ 9.03 $ 8.86 $ 9.73 $ 9.12 $ 8.45 $ 6.72 $ 7.93 $ 9.72
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Investment
Return at Net
Asset Value(%)(b)... 14.43% 11.64% 12.93% -0.47% 13.72% 19.51% 41.59% -3.98% -7.52% 10.52%
Net Assets, End of
Period (in millions). $862.9 $703.1 $594.3 $499.6 $440.3 $330.2 $217.0 $137.0 $149.6 $126.5
Ratio of Expenses to
Average Net Assets (%). 0.84%(d) 0.91% 0.93% 0.95% 0.94%(c) 0.99% 1.16% 1.23% 1.19% 1.21%
Ratio of Net Investment
Income to Average
Net Assets (%)........ 9.14%(d) 9.23% 9.53% 8.92% 8.72%(c) 10.04% 11.95% 12.51% 12.23% 11.72%
Portfolio Turnover..... 113% 104% 71% 50% 66% 86% 145% 120% 86% 73%
- - -------------------
* For the period April 3, 1987 (effective date) to January 31, 1988.
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB High Yield Fund. Had LB Research not undertaken such action, the ratio of expenses to average
net assets would have been 0.88% and the ratio of net investment income to average net assets would have been 9.10%.
</TABLE>
LB INCOME FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended
throughout the period)(a) Ended Ended Ended Ended Oct. 31
10/31/97 10/31/96 10/31/95 10/31/94 1993
-------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period............ $ 8.50 $ 8.72 $ 8.01 $ 9.43 $ 9.10
------ ------ ------ ------ --------
Investment Operations:
Net Investment Income........... 0.55 0.57 0.59 0.58 0.47
Net Realized and
Unrealized Gain (Loss)
on Investments................. 0.11 (0.19) 0.69 (1.19) 0.33
------ ------ ------ ------ --------
Total from Investment
Operations..................... 0.66 0.38 1.28 (0.61) 0.80
------ ------ ------ ------ --------
Less Distributions from:
Net Investment Income.......... (0.55) (0.60) (0.57) (0.56) (0.47)
Net Realized Gain on
Investments.................... -- -- -- (0.25) --
------ ------ ----- ------ --------
Total Distributions............. (0.55) (0.60) (0.57) (0.81) (0.47)
------ ------ ------ ------ --------
Net Asset Value End of
Period......................... $ 8.61 $ 8.50 $ 8.72 $ 8.01 $ 9.43
====== ====== ====== ====== ========
Total Investment Return
at Net Asset
Value(%)(b).................... 8.05% 4.56% 16.53% -6.81% 8.97%
Net Assets, End of
Period (in millions)........... $778.0 $871.0 $942.1 $907.2 $1,042.2
Ratio of Expenses to
Average Net Assets (%)......... 0.80%(e) 0.83% 0.83% 0.82% 0.80%(c,d)
Ratio of Net Investment
Income to Average
Net Assets (%)................. 6.44%(e) 6.61% 7.01% 6.77% 6.87%(c,d)
Portfolio Turnover (%).......... 97% 142% 131% 155% 84%
</TABLE>
<TABLE>
<CAPTION>
(For a share outstanding Years ended January 31,
throughout the period)(a) ----------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period............ $ 8.79 $ 8.35 $ 8.47 $ 8.52 $ 8.62
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income........... 0.66 0.72 0.78 0.82 0.80
Net Realized and
Unrealized Gain (Loss)
on Investments................. 0.31 0.44 (0.11) (0.06) (0.10)
------ ------ ------ ------ ------
Total from Investment
Operations..................... 0.97 1.16 0.67 0.76 0.70
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income.......... (0.66) (0.72) (0.79) (0.81) (0.80)
Net Realized Gain on
Investments.................... -- -- -- -- --
------ ------ ------ ----- ------
Total Distributions............. (0.66) (0.72) (0.79) (0.81) (0.80)
------ ------ ------ ------ ------
Net Asset Value End of
Period......................... $ 9.10 $ 8.79 $ 8.35 $ 8.47 $ 8.52
====== ====== ====== ====== ======
Total Investment Return
at Net Asset
Value(%)(b).................... 11.50% 14.48% 8.39% 9.18% 8.69%
Net Assets, End of
Period (in millions)........... $944.6 $819.5 $736.5 $719.8 $725.5
Ratio of Expenses to
Average Net Assets (%)......... 0.90% 0.97% 1.02% 1.02% 1.03%
Ratio of Net Investment
Income to Average
Net Assets (%)................. 7.40% 8.38% 9.35% 9.53% 9.52%
Portfolio Turnover (%).......... 104% 117% 118% 113% 68%
- - ------------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) During the nine month period ended October 31, 1993, Lutheran Brotherhood Research Corp. (LBRC) undertook a
voluntary reduction of the Fund's investment advisory fee equal to 0.10% of average daily net assets. Had LBRC not
undertaken such action, the ratio of expenses to average net assets would have been 0.90% and the ratio of net
investment income to average net assets would have been 6.77%.
(e) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB Income Fund. Had LB Research not undertaken such action, the ratio of expenses to average net
assets would have been 0.84% and the ratio of net investment income to average net assets would have been 6.40%.
</TABLE>
LB MUNICIPAL BOND FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended
throughout the period)(a) Ended Ended Ended Ended Oct. 31
10/31/97 10/31/96 10/31/95 10/31/94 1993
---------------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........... $ 8.60 $ 8.58 $ 7.88 $ 9.00 $ 8.52
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income............ 0.45 0.44 0.45 0.46 0.37
Net Realized and Unrealized Gain
(Loss) on Investments......... 0.24 0.01 0.70 (0.96) 0.51
------ ------ ------ ------ ------
Total from Investment Operations. 0.69 0.45 1.15 0.50 0.88
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income......... (0.44) (0.43) (0.45) (0.46) (0.37)
Net Realized Gain on
Investments................. -- -- -- (0.16) (0.03)
------ ------ ------ ------ ------
Total Distributions.............. (0.44) (0.43) (0.45) (0.62) (0.40)
------ ------ ------ ------ ------
Net Asset Value End of Period.... $ 8.85 $ 8.60 $ 8.58 $ 7.88 $ 9.00
====== ===== ====== ====== ======
Total Investment Return at
Net Asset Value(%)(b)......... 8.28% 5.33% 14.97% -5.93% 10.73%
Net Assets, End of
Period (in millions).......... $591.9 $609.5 $628.7 $595.2 $629.7
Ratio of Expenses to Average
Net Assets (%)................ 0.70%(e) 0.74% 0.74% 0.75% 0.74%(c,d)
Ratio of Net Investment Income
to Average Net Assets (%)..... 5.13%(e) 5.14% 5.43% 5.44% 5.69%(c,d)
Portfolio Turnover (%)........... 18% 33% 36% 38% 46%
</TABLE>
<TABLE>
<CAPTION>
(For a share outstanding
throughout the period)(a) YEARS ENDED JANUARY 31,
--------------------------------------------------
1993 1992 1991 1990 1989
------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........... $ 8.45 $ 8.32 $ 8.15 $ 8.18 $ 8.09
------ ----- ----- ----- -----
Investment Operations:
Net Investment Income............ 0.53 0.56 0.58 0.58 0.60
Net Realized and Unrealized Gain
(Loss) on Investments......... 0.28 0.29 0.16 (0.02) 0.07
------ ----- ----- ----- -----
Total from Investment Operations. 0.81 0.85 0.74 0.56 0.67
------ ----- ----- ----- -----
Less Distributions from:
Net Investment Income......... (0.52) (0.56) (0.57) (0.59) (0.58)
Net Realized Gain on
Investments................. (0.22) (0.16) -- -- --
------ ----- ----- ----- -----
Total Distributions.............. (0.74) (0.72) (0.57) (0.59) (0.58)
------ ----- ----- ----- -----
Net Asset Value End of Period.... $ 8.52 $ 8.45 $ 8.32 $ 8.15 $ 8.18
====== ===== ===== ===== =====
Total Investment Return at
Net Asset Value(%)(b)......... 9.96% 10.64% 9.54% 7.02% 8.70%
Net Assets, End of
Period (in millions).......... $532.6 $448.4 $382.5 $348.2 $306.5
Ratio of Expenses to Average
Net Assets (%)................ 0.80% 0.83% 0.86% 0.86% 0.92%
Ratio of Net Investment Income
to Average Net Assets (%)..... 6.22% 6.65% 7.06% 7.04% 7.37%
Portfolio Turnover (%)........... 77% 78% 68% 60% 70%
- - ------------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Computed on an annualized basis.
(d) During the nine month period ended October 31, 1993, Lutheran Brotherhood Research Corp. (LBRC) undertook a
voluntary reduction of the Fund's investment advisory fee equal to 0.05% of average daily net assets. Had LBRC not
undertaken such action, the ratio of expenses to average net assets would have been 0.79% and the ratio of net
investment income to average net assets would have been 5.64%.
(e) Effective January 1, 1997, LB Research voluntarily agreed to waive five basis points (0.05%) from the advisory
fees payable by the LB Municipal Bond Fund. Had LB Research not undertaken such action, the ratio of expenses to
average net assets would have been 0.74% and the ratio of net investment income to average net assets would have been
5.09%.
</TABLE>
LB MONEY MARKET FUND
CLASS A SHARES
<TABLE>
<CAPTION>
Nine
Months
(For a share outstanding Year Year Year Year ended
throughout the period)(a) Ended Ended Ended Ended Oct. 31
10/31/97 10/31/96 10/31/95 10/31/94 1993
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset Value,
Beginning of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income........... 0.05 0.05 0.05 0.03 0.02
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income.......... (0.05) (0.05) (0.05) (0.03) (0.02)
------ ------ ------ ------ ------
Net Asset Value, End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Investment Return at Net
Asset Value (%)(b)........... 4.74% 4.63% 4.95% 2.89% 1.63%
Net Assets, End of
Period (in millions).......... $469.2 $417.6 $341.1 $276.9 $275.1
Ratio of Expenses to Average
Net Assets (%)................ 0.95%(d) 1.01%(d) 1.10%(d) 1.10%(d) 1.10%(c,d)
Ratio of Net Investment Income
to Average Net Assets (%)..... 4.64%(d) 4.53%(d) 4.85%(d) 2.85%(d) 2.16%(c,d)
</TABLE>
<TABLE>
<CAPTION>
(For a share outstanding
throughout the period)(a) Years ended January 31,
--------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income............ 0.03 0.05 0.07 0.08 0.07
------ ------ ------ ------ ------
Less Distributions from:
Net Investment Income............ (0.03) (0.05) (0.07) (0.08) (0.07)
------ ------ ------ ------ ------
Net Asset Value, End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Investment Return at Net
Asset Value (%)(b)............ 2.77% 5.10% 7.40% 8.44% 7.01%
Net Assets, End of
Period (in millions).......... $317.0 $412.3 $473.4 $423.5 $309.3
Ratio of Expenses to Average
Net Assets (%)................ 1.10%(d) 1.08% 1.07% 1.09% 1.07%
Ratio of Net Investment Income
to Average Net Assets (%)..... 2.76%(d) 5.01% 7.16% 8.10% 6.83%
- - ----------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total return is based on the change in net asset value during the period and assumes reinvestment of all
distributions.
(c) Computed on an annualized basis.
(d) Effective February 1, 1992 through March 31, 1996, Lutheran Brotherhood Research Corp. (LBRC) had voluntarily
undertaken to limit the Fund's expense ratio to 1.10% of annual average daily net assets. Effective April 1, 1996,
LBRC voluntarily lowered the expense limit prospectively to 0.95% of average daily net assets. Had LBRC not undertaken
such action to limit expenses, the ratio of expenses to average net assets would have been 1.05%, 1.07%, 1.18%, 1.36%,
1.44% and 1.23% and the ratio of net investment income to average net assets would have been 4.54%, 4.47%, 4.77%,
2.59%, 1.82% and 2.63%, respectively, for the years ended October 31, 1997. 1996, 1995, and 1994, the nine month
period ended October 31, 1993 and the year ended January 31, 1993.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
Each of the Funds in The Lutheran Brotherhood Family of Funds has a
separate investment objective and investment policies for the pursuit of
that objective. The investment objective of each Fund is fundamental and may
not be changed without the approval of shareholders of that Fund. Except as
otherwise indicated in this Prospectus, the investment policies of each Fund
may be changed from time to time by the Board of Trustees of the Trust.
There is no assurance that any of the Funds will achieve its investment
objective, but it will strive to do so by following the policies set forth
below.
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
The investment objective of the LB Opportunity Growth Fund is to
achieve long term growth of capital.
The Fund will pursue its objective by seeking realized and unrealized
capital gains through the active management of a portfolio consisting
primarily of common stocks. Such active management may involve a high level
of portfolio turnover. The Fund will invest primarily in common stocks of
domestic and foreign companies that in the opinion of LB Research have a
potential for above average sales and earnings growth that is expected to
lead to capital appreciation. The Fund's investment adviser believes that
over a long period of time, smaller companies that have a competitive
advantage will be able to grow faster than larger companies, leading to a
higher rate of growth in capital. For a description of the risks associated
with investments in such companies, see "Investment Risks--LB Opportunity
Growth Fund Investment Risks".
The Fund may also invest in bonds and preferred stocks, convertible
bonds, convertible preferred stocks, warrants, American Depository Receipts
(ADR's) and other debt or equity securities. In addition, the Fund may
invest in U.S. Government securities or cash. The Fund will not use any
minimum level of credit quality. At no time will the Fund invest more than
5% of its net assets in debt obligations. Debt obligations may be rated less
than investment grade, which is defined as having a quality rating below
"Baa", as rated by Moody's Investors Service, Inc. ("Moody's"), or below
"BBB", as rated by Standard & Poor's Corporation ("S&P"). For a description
of Moody's and S&P's ratings, see "Description of Debt Ratings". Securities
rated below investment grade are considered to be speculative and involve
certain risks, including a higher risk of default and greater sensitivity to
interest rate and economic changes.
LB Research will use fundamental investment research techniques to
seek out those companies that have a competitively superior product or
service in an unsaturated market with large potential for growth. These will
often be companies with shorter histories and less seasoned operations. Many
of such companies will have market capitalizations that are less than $1
billion, with lower daily trading volume in their stocks and less overall
liquidity than larger, more well established companies. LB Research
anticipates that the common stocks of such companies may increase in market
value more rapidly than the stocks of other companies.
The Fund will focus primarily on companies that possess superior
earnings prospects over a three to five year time horizon. The stocks that
the Fund invests in may be traded on national exchanges or in the over-the-
counter market ("OTC"). There will be no limit on the proportion of the
Fund's investment portfolio that may consist of OTC stocks.
The Fund may dispose of securities held for a short period if the
Fund's investment adviser believes such disposition to be advisable. While
LB Research does not intend to select portfolio securities for the specific
purpose of trading them within a short period of time, LB Research does
intend to use an active method of management which will result in the sale
of some securities after a relatively brief holding period. This method of
management necessarily results in higher cost to the Fund due to the fees
associated with portfolio securities transactions. A higher portfolio
turnover rate may also result in taxes on realized capital gains to be borne
by shareholders. However, it is LB Research's belief that this method of
management can produce added value to the Fund and its shareholders that
exceeds the additional costs of such transactions. The annual portfolio
turnover rates of the Fund for the fiscal years ended October 31, 1997 and
October 31, 1996 were 136% and 176%, respectively.
For more information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
The investment objective of the LB Mid Cap Growth Fund is to achieve
long term growth of capital.
The Fund will pursue its objective by investing primarily in a
professionally managed diversified portfolio of common stocks of companies
with medium market capitalizations LB Research defines companies with
medium market capitalizations ("mid cap companies") as those with market
capitalizations that fall within the capitalization range of companies
included in the Standard & Poor's MidCap 400 Index at the time of the
Portfolio's investment. The Fund will seek to invest in companies that have
a track record of earnings growth or the potential for continued above
average growth. The Fund will normally invest at least 65% of its total
assets in common stocks of mid cap companies. LB Research will use both
fundamental and technical investment research techniques to seek out these
companies.
The stocks that the Fund invests in may be traded on national
exchanges or in the over-the-counter market ("OTC"). There will be no limit
on the proportion of the Fund's investment portfolio that may consist of OTC
stocks.
Many mid cap companies have lower daily trading volume in their stocks
and less overall liquidity than larger, more well established companies. The
common stocks of such companies may have greater price volatility than the
stocks of other larger companies. For a description of these and other risks
associated with investments in such companies, see "Investment Risks -- LB
Mid Cap Growth Fund Investment Risks".
The Fund may also invest in other types of securities, including
bonds, preferred stocks, convertible bonds, convertible preferred stocks,
warrants, American Depository Receipts (ADR's), common stocks of companies
falling outside the medium market capitalization range, and other debt or
equity securities. In addition, the Fund may invest in U.S. Government
securities or cash. The Fund will not use any minimum level of credit
quality. At no time will the Fund invest more than 5% of its net assets in
debt obligations. Debt obligations may be rated less than investment grade,
which is defined as having a quality rating below "Baa", as rated by Moody's
Investors Service, Inc. ("Moody's"), or below "BBB", as rated by Standard &
Poor's Corporation ("S&P"). For a description of Moody's and S&P's ratings,
see "Description of Debt Ratings". Securities rated below investment grade
(sometimes referred to as "high yield" or "junk bonds") are considered to be
speculative and involve certain risks, including a higher risk of default
and greater sensitivity to interest rate and economic changes.
The Fund may dispose of securities held for a short period if the
Fund's investment adviser believes such disposition to be advisable. While
LB Research does not intend to select portfolio securities for the specific
purpose of trading them within a short period of time, LB Research does
intend to use an active method of management which will result in the sale
of some securities after a relatively brief holding period. This method of
management necessarily results in higher cost to the Fund due to the fees
associated with portfolio securities transactions. A higher portfolio
turnover rate may also result in taxes on realized capital gains to be borne
by shareholders. However, it is LB Research's belief that this method of
management can produce added value to the Fund and its shareholders that
exceeds the additional costs of such transactions. The annual portfolio
turnover rate of the Fund for the period ended October 31, 1997 was 94%.
For more information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
The investment objective of the LB World Growth Fund is to seek total
return from long-term growth of capital. The Fund will pursue its objective
principally through investments in common stocks of established, non- U.S.
companies. Total return consists of capital appreciation or depreciation,
dividend income, and currency gains or losses.
The Fund intends to diversify investments broadly among countries and
to normally have at least three different countries represented in the Fund.
The Fund may invest in countries of the Far East and Western Europe as well
as South Africa, Australia, Canada and other areas (including developing
countries). As a temporary defensive measure, the Fund may invest
substantially all of its assets in one or two countries.
In seeking its objective, the Fund will invest primarily in common
stocks of established foreign companies which have the potential for growth
of capital. In order to increase total return, the Fund may also invest in
bonds and preferred stocks, convertible bonds, convertible preferred stocks,
warrants, American Depository Receipts (ADR's) and other debt or equity
securities. In addition, the Fund may invest in U.S. Government securities
or cash. The Fund will not use any minimum level of credit quality. At no
time will the Fund invest more than 5% of its net assets in debt obligations
or other securities that may be converted to debt obligations. Debt
obligations may be rated less than investment grade, which is defined as
having a quality rating below "Baa", as rated by Moody's Investors Service,
Inc. ("Moody's"), or below "BBB", as rated by Standard & Poor's Corporation
("S&P"). Debt obligations rated "Baa" or "BBB" are considered to have
speculative characteristics. For a description of Moody's and S&P's ratings,
see "Description of Debt Ratings". Securities rated below investment grade
are considered to be speculative and involve certain risks, including a
higher risk of default and greater sensitivity to interest rate and economic
changes.
In determining the appropriate distribution of investments among
various countries and geographic regions, the Sub-advisor considers the
following factors: prospects for relative economic growth between foreign
countries; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range
of individual investment opportunities available to international investors.
In analyzing companies for investment, the Sub-advisor looks for one
or more of the following characteristics: an above-average earnings growth
per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management;
and general operating characteristics which will enable the companies to
compete successfully in their market place. While current dividend income is
not a prerequisite in the selection of portfolio companies, the companies in
which the Fund invests normally will have a record of paying dividends, and
will generally be expected to increase the amounts of such dividends in
future years as earnings increase.
The Fund's investments also may include, but are not limited to,
European Depository Receipts ("EDRs"), other debt and equity securities of
foreign issuers, and the securities of foreign investment funds or trusts
(including passive foreign investment companies). For a discussion of the
risks involved in foreign investing see the section of this Prospectus
entitled "Foreign Issuers".
The Fund may engage in certain forms of options and futures
transactions that are commonly known as derivative securities transactions.
These derivative securities transactions are identified and described in the
sections of this Prospectus entitled "Put and Call Options" and "Financial
Futures and Options on Futures."
The Fund may use foreign currency exchange-related securities
including foreign currency warrants, principal exchange rate linked
securities, and performance indexed paper. The Fund does not expect to hold
more than 5% of its total assets in foreign currency exchange-related
securities.
The Fund will normally conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or through entering into forward
contracts to purchase or sell foreign currencies. The Fund will generally
not enter into a forward contract with a term of greater than one year.
The Fund will generally enter into forward foreign currency exchange
contracts only under two circumstances. First, when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
Second, when Sub-advisor believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency,
it may enter into a forward contract to sell or buy the former foreign
currency (or another currency which acts as a proxy for that currency)
approximating the value of some or all of the Fund's securities denominated
in such foreign currency. Under certain circumstances, the Fund may commit a
substantial portion of the entire value of its portfolio to the consummation
of these contracts. Sub-advisor will consider the effect such a commitment
of its portfolio to forward contracts would have on the investment program
of the Fund and the flexibility of the Fund to purchase additional
securities. Although forward contracts will be used primarily to protect the
Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted and the
Fund's total return could be adversely affected as a result.
For a discussion of foreign currency contracts and the risks involved
therein, see the section of this Prospectus entitled, "Investment Risks."
The Fund will not generally trade in securities for short-term
profits, but, when circumstances warrant, securities may be purchased and
sold without regard to the length of time held. The annual portfolio
turnover rate of the Fund for the fiscal year ended October 31, 1997 and
October 31, 1996 were 17% and 11%, respectively.
For more information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD FUND
The investment objective of the LB Fund is to seek growth of capital
and income.
The Fund seeks to achieve its objective by investing in securities
issued by leading companies. The Fund may invest in the common stocks and
other securities of leading companies, including corporate bonds, notes,
preferred stock, and warrants. The Fund may also invest in U.S. Government
securities and cash. For purposes of the Fund's investment objective,
companies are deemed "leading" in terms of market share, asset size, cash
flow and other fundamental factors.
LB Research will use fundamental investment research techniques to
seek out those companies that have a leading position within their industry
or within the capital markets generally. LB Research will focus upon market
shares, growth in sales and earnings, market capitalization and asset size
and competitive dominance. These will often be mature companies with a
lengthy history and seasoned operations. Many of them will have market
capitalizations in excess of $1 billion.
The Fund may dispose of securities held for a short period if the
Fund's investment adviser believes such disposition to be advisable. LB
Research intends to use an active method of management and may select
portfolio securities for the specific purpose of trading them within a short
period of time, which will result in the sale of some securities after a
relatively brief holding period. This method of management necessarily
results in higher cost to the Fund due to the fees associated with portfolio
securities transactions. However, it is LB Research's belief that this
method of management can produce added value to the Fund and its
shareholders that exceeds the additional costs of such transactions. The
annual portfolio turnover rates of the Fund for the fiscal years ended
October 31, 1997 and October 31, 1996 were 54% and 91%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD HIGH YIELD FUND
The investment objective of the LB High Yield Fund is to obtain high
current income and, secondarily, growth of capital.
The Fund seeks to achieve its investment objectives by investing
primarily in a diversified portfolio of professionally managed high yield,
high risk securities, many of which involve greater risks than higher
quality investments. The Fund may invest in high yield, high risk bonds,
notes, debentures and other income producing debt obligations and dividend
paying preferred stocks. These securities are commonly known as "junk
bonds". High yield, high risk securities will ordinarily carry a quality
rating "Ba" or lower by Moody's, "BB" or lower by S&P, or, if not rated,
such securities will be of comparable quality as determined by the Fund's
investment adviser. The Fund will use no minimum level of quality rating and
may purchase and hold securities in default. Securities having a quality
rating of Ba or BB and lower are considered to be speculative. See
"Investment Risks - LB High Yield Fund Investment Risks". For a description
of Moody's and S&P's ratings, see "Description of Debt Ratings".
The Fund may also invest in common stocks, warrants to purchase
stocks, bonds or preferred stock convertible into common stock, and other
equity securities. Investments in such securities will be made in pursuit of
the income and capital growth objectives of the Fund, but at no time will
the Fund invest more than 20% of its total assets in equity securities.
As a nonfundamental policy, during normal market conditions the Fund
will maintain at least 65% of its total assets, taken at market value, in
lower rated securities. The Fund may invest, without limit, in short-term
money market instruments when, in the opinion of LB Research, short-term
investments provide a better opportunity for achieving the Fund's objectives
than do longer term investments. When making short-term investments for such
purpose, the Fund will not be limited to a minimum quality level and may use
unrated instruments.
The Fund does not intend to engage in short-term trading but may
dispose of securities held for a short time if LB Research believes such
disposition to be advisable. The annual portfolio turnover rates of the Fund
for the fiscal years ended October 31, 1997 and October 31, 1996 were 113%
and 104%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD INCOME FUND
The investment objective of the LB Income Fund is to seek high current
income while preserving principal. The Fund's secondary investment objective
is to obtain long-term growth of capital in order to maintain investors'
purchasing power.
The Fund seeks to achieve its investment objectives by investing
primarily in debt securities such as bonds, notes, debentures, mortgage-
backed securities, other income producing debt obligations, and preferred
stocks rated "Baa" or higher by Moody's or "BBB" or higher by S&P. If not
rated, such securities will be of comparable quality in the opinion of LB
Research. Securities rated BBB or Baa, although considered to be investment
grade or higher, have speculative characteristics. If a portfolio security's
quality rating drops below investment grade after the Fund has acquired the
security, the Fund may continue to hold the security in its portfolio. A
description of the ratings that are given to debt securities by Moody's and
S&P and the standards applied by them in assigning these ratings may be
found at end of this Prospectus.
The Fund may from time to time invest in debt securities that are not
rated as investment grade. For a description of the risks of investing in
such securities, see the section of this Prospectus entitled "Investment
Risks of High Yield Securities". The Fund may also invest in common stock
and bonds and preferred stock that are convertible into common stock. No
more than 10% of the Fund's total assets will be invested in common stock
and no more than 25% of the value of the total assets will be invested in
all securities described in this paragraph.
Debt securities may bear fixed or variable rates of interest. They may
involve equity features such as conversion or exchange rights, warrants for
the acquisition of common stock of the same or a different issuer,
participation based on revenues, sales or profits, or the purchase of common
stock in a unit transaction (where corporate debt securities and common
stock are offered as a unit).
The Fund may engage in short-term trading and dispose of securities
held for a short time if LB Research believes such disposition to be
advisable. This method of management necessarily results in higher cost to
the Fund due to the fees associated with portfolio securities transactions.
However, it is LB Research's belief that this method of management can
produce added value to the Fund and its shareholders that exceeds the
additional costs of such transactions. The annual portfolio turnover rates
of the Fund for the fiscal years ended October 31, 1997 and October 31, 1996
were 97% and 142%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
The investment objective of the LB Municipal Bond Fund is to provide
its shareholders with a high level of current income which is exempt from
federal income tax.
The Fund seeks to achieve its investment objective by investing in a
diversified portfolio of municipal bonds. Municipal bonds are debt
obligations issued by or on behalf of states (including the District of
Columbia), territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities, the interest from
which is exempt from federal income tax. At least 80% of the Fund's total
assets will be invested in municipal bonds unless LB Research determines
that market conditions call for a temporary defensive posture.
The Fund does not generally intend to purchase securities if, as a
result of such purchase, more than 25% of the value of its total assets
would be invested in the securities of governmental subdivisions located in
any one state, territory or possession of the United States. The Fund may
invest more than 25% of the value of its total assets in industrial
development bonds. As to industrial development bonds, the Fund may invest
up to 25% of its total assets in securities issued in connection with the
financing of projects with similar characteristics, such as toll road
revenue bonds, housing revenue bonds or electric power project revenue
bonds, or in industrial development revenue bonds which are based, directly
or indirectly, on the credit of private entities in any one industry. This
may make the Fund more susceptible to economic, political or regulatory
occurrences affecting a particular industry or sector and increase the
potential for fluctuation of net asset value.
Municipal Bonds: Municipal bonds are generally issued to finance
public works, such as bridges and highways, housing, mass transportation
projects, schools and hospitals. Municipal bonds are also issued to repay
outstanding obligations, to raise funds for general operating expenses and
to make loans to other public institutions and facilities. The two principal
classifications of municipal bonds are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge and
ability to raise taxes to repay the principal and interest. Revenue bonds
are repayable only from the income earned from the facility financed by the
bond or other specific source of revenue. For example, income earned by a
housing development can be used to repay the bonds that raised the funds for
its construction.
Industrial Development Bonds: Industrial development bonds are
considered municipal bonds if the interest paid on them is exempt from
federal income tax. Industrial development bonds which qualify as municipal
bonds are almost always revenue bonds. They are issued by or on behalf of
public authorities to raise money for privately-operated housing facilities,
sports facilities, convention or trade show centers, airports, mass transit,
port facilities, parking areas, air or water pollution control facilities
and certain local facilities for water supply, gas, electricity or sewage
disposal.
Municipal Bonds Suitable for Investment: The Fund generally restricts
its investments to municipal bonds rated Aaa, Aa, A or Baa by Moody's, or
AAA, AA, A or BBB by S&P. Municipal bonds in the lowest rated category have
speculative characteristics. The Fund also may invest in municipal bonds
(but not industrial development bonds) that are not rated by Moody's or S&P
but, in the opinion of LB Research, would qualify for Standard & Poor's BBB
or Moody's Baa rating. Subsequent to its purchase by the Fund, an issue of
municipal bonds may cease to be rated or its rating may be reduced below the
minimums required for purchase by the Fund. Neither event requires the
elimination of such obligation from the Fund's portfolio, but LB Research
will consider such an event in its determination of whether the Fund should
continue to hold such obligation in its
portfolio.
The annual portfolio turnover rates of the Fund for the fiscal years
ended October 31, 1997 and October 31, 1996 were 18% and 33%, respectively.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
LUTHERAN BROTHERHOOD MONEY MARKET FUND
The LB Money Market Fund's investment objective is current income
consistent with stability of principal.
The Fund pursues this investment objective by investing in a portfolio
of money market instruments that mature in 397 days or less in order to
obtain current income and maintain a stable principal. The dollar-weighted
average maturity of money market instruments held by the LB Money Market
Fund will be 90 days or less. The policy of the Fund is generally to hold
instruments until maturity. However, the Fund may attempt to increase yield
by trading portfolio securities to take advantage of short-term market
variations.
Permissible LB Money Market Fund investments include, but are not
limited to: U.S. Treasury bills and all other marketable obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities;
instruments of domestic and foreign banks and savings and loans; prime
commercial paper; variable amount demand master notes; repurchase
agreements; instruments secured by the obligations described above and
asset-backed securities.
The Fund will not purchase a security (other than U.S. Government
obligations) unless the security (i) is rated by at least two nationally
recognized statistical rating organizations (NRSROs) with the highest rating
assigned to short-term debt securities (or, if rated by only one NRSRO by
that NRSRO, or if not rated, is determined to be of comparable quality), or
(ii) is rated by at least two such NRSROs within the two highest ratings
assigned to short-term debt securities (or, if rated by only one NRSRO by
that NRSRO, or if not rated, is determined to be of comparable quality) and
not more than 5% of the assets of the Fund would be invested in such
securities. In addition, the Fund may not invest more than 1% of its total
assets or $1 million (whichever is greater) in the securities of a single
issuer included in clause (ii) above. Determinations of comparable quality
are made by LB Research in accordance with procedures established by the
Board of Trustees.
U.S. Government Obligations: The types of U.S. Government obligations
in which the Fund may invest include, but are not limited to: direct
obligations of the U.S. Treasury, such as U.S. Treasury bills, bonds and
notes; and instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities which are backed by the full faith and credit
of the United States, the credit of the agency or instrumentality (a
governmental agency organized under federal charter with government
supervision) issuing the obligations, or the issuer's right to borrow from
the U.S. Treasury. These U.S. Government obligations may include notes,
bonds and discount notes issued by following agencies: Federal Land Banks;
Central Bank for Cooperatives; Federal Intermediate Credit Banks; Federal
Home Loan Banks; Farmers Home Administration; and Federal National Home
Mortgage Association.
Bank Instruments: The Fund invests only in instruments of domestic and
foreign banks and savings and loans if they have capital and surplus of over
$100,000,000 or the principal amount of the instrument in which the Fund is
investing is insured by the Federal Deposit Insurance Corporation (FDIC),
including domestic or Eurodollar certificates of deposit, demand and time
deposits, savings shares and bankers' acceptances.
Asset-Backed Securities: Asset-backed securities represent interests
in pools of consumer loans such as credit card receivables, leases on
equipment such as computers and other financial instruments. These
securities provide a flow-through of interest and principal payments as
payments are received on the loans or leases and may be supported by letters
of credit or similar guarantees of payment by a financial institution. These
securities are subject to the risks of non-payment of the underlying loans
as well as the risks of prepayment. An interest in a bank sponsored master
trust which holds the receivables for a major international credit card is
an example of an asset backed security; an interest in a trust which holds
the customer receivable for a large consumer products company is another
example.
For information on other investment policies of the Fund, see
"Additional Investment Practices" below.
ADDITIONAL INVESTMENT PRACTICES
Various of the Funds may purchase the following securities or may
engage in the following transactions.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreement transactions in
pursuit of its investment objective. A repurchase agreement consists of a
purchase and a simultaneous agreement to resell for later delivery at an
agreed upon price and rate of interest U.S. Government obligations. The Fund
or its custodian will take possession of the obligations subject to a
repurchase agreement. If the original seller of a security subject to a
repurchase agreement fails to repurchase the security at the agreed upon
time, the Fund could incur a loss due to a drop in the market value of the
security during the time it takes the Fund to either sell the security or
take action to enforce the original seller's agreement to repurchase the
security. Also, if a defaulting original seller filed for bankruptcy or
became insolvent, disposition of such security might be delayed by pending
court action. The Fund may only enter into repurchase agreements with banks
and other recognized financial institutions such as broker/dealers which are
found by LB Research (or the Sub-advisor) to be creditworthy.
RESTRICTED SECURITIES
Subject to the limitations on illiquid securities noted above, the
Funds may buy or sell securities that meet the requirements of Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). Securities may be
resold pursuant to Rule 144A under certain circumstances only to qualified
institutional buyers as defined in the rule, and the markets and trading
practices for such securities are relatively new and still developing;
depending on the development of such markets, such Rule 144A Securities may
be deemed to be liquid as determined by or in accordance with methods
adopted by the Trustees. Under such methods the following factors are
considered, among others: the frequency of trades and quotes for the
security, the number of dealers and potential purchasers in the market,
market making activity, and the nature of the security and marketplace
trades. Investments in Rule 144A Securities could have the effect of
increasing the level of a Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities. Also, a Fund may be adversely impacted by the subjective
valuation of such securities in the absence of an active market for them.
REVERSE REPURCHASE AGREEMENTS
Each of the Funds except the LB Money Market Fund also may enter into
reverse repurchase agreements, which are similar to borrowing cash. A
reverse repurchase agreement is a transaction in which the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker or dealer, in return for a percentage of the
instrument's market value in cash, with an agreement that at a stipulated
date in the future the Fund will repurchase the portfolio instrument by
remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not assure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time. The Fund will engage in reverse
repurchase agreements which are not in excess of 60 days to maturity and
will do so to avoid borrowing cash and not for the purpose of investment
leverage or to speculate on interest rate changes.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued and
delayed delivery basis. When-issued and delayed delivery transactions arise
when U.S. Government obligations and other types of securities are bought by
the Fund with payment and delivery taking place in the future. The
settlement dates of these transactions, which may be a month or more after
entering into the transaction, are determined by mutual agreement of the
parties. There are no fees or other expenses associated with these types of
transactions other than normal transaction costs. To the extent a Fund
engages in when-issued and delayed delivery transactions, it will do so for
the purpose of acquiring portfolio instruments consistent with its
investment objective and policies and not for the purpose of investment
leverage or to speculate on interest rate changes. On the settlement date,
the value of such instruments may be less than the cost thereof. When
effecting when-issued and delayed delivery transactions, cash, cash
equivalents or high grade debt obligations of a dollar amount sufficient to
make payment for the obligations to be purchased will be segregated at the
trade date and maintained until the transaction has been settled.
LENDING SECURITIES
Consistent with applicable regulatory requirements, each of the Funds
may from time to time lend the securities it holds to broker-dealers,
provided that such loans are made pursuant to written agreements and are
continuously secured by collateral in the form of cash, U.S. Government
securities, irrevocable standby letters of credit or other liquid securities
in an amount at all times equal to at least the market value of the loaned
securities plus the accrued interest and dividends. For the period during
which the securities are on loan, the lending Fund will be entitled to
receive the interest and dividends, or amounts equivalent thereto, on the
loaned securities and a fee from the borrower or interest on the investment
of the cash collateral. The right to terminate the loan will be given to
either party subject to appropriate notice. Upon termination of the loan,
the borrower will return to the Fund securities identical to the loaned
securities.
The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly increasing in
value. In such event, if the borrower fails to return the loaned security,
the existing collateral might be insufficient to purchase back the full
amount of the security loaned, and the borrower would be unable to furnish
additional collateral. The borrower would be liable for any shortage, but
the lending Fund would be an unsecured creditor with respect to such
shortage and might not be able to recover all or any thereof. However, this
risk may be minimized by a careful selection of borrowers and securities to
be lent and by monitoring collateral.
No Fund will lend securities to broker-dealers affiliated with LB
Research or the Sub-advisor. LB Research believes that this will not affect
the Fund's ability to maximize its securities lending opportunities. No Fund
may lend any security or make any other loan if, as a result, more than one-
third of its total assets would be lent to other parties.
PUT AND CALL OPTIONS (ALL FUNDS EXCEPT THE LB MONEY MARKET FUND)
Selling ("Writing" Covered Call Options: Certain of the Funds may from
time to time sell ("write") covered call options on any portion of its
portfolio as a hedge to provide partial protection against adverse movements
in prices of securities in those Funds and, subject to the limitations
described below, for the non- hedging purpose of attempting to create
additional income. A call option gives the buyer of the option, upon payment
of a premium, the right to call upon the writer to deliver a specified
amount of a security on or before a fixed date at a predetermined ("strike")
price. As the writer of a call option, a Fund assumes the obligation to
deliver the underlying security to the holder of the option on demand at the
strike price.
If the price of a security hedged by a call option falls below or
remains below the strike price of the option, a Fund will generally not be
called upon to deliver the security. A Fund will, however, retain the
premium received for the option as additional income, offsetting all or part
of any decline in the value of the security. If the price of a hedged
security rises above or remains above the strike price of the option, the
Fund will generally be called upon to deliver the security. In this event, a
Fund limits its potential gain by limiting the value it can receive from the
security to the strike price of the option plus the option premium.
Buying Call Options: Certain of the Funds may also from time to time
purchase call options on securities in which those Funds may invest. As the
holder of a call option, a Fund has the right to purchase the underlying
security or currency at the exercise price at any time during the option
period (American style) or at the expiration of the option (European style).
A Fund generally will purchase such options as a hedge to provide protection
against adverse movements in the prices of securities which the Fund intends
to purchase. In purchasing a call option, a Fund would realize a gain if,
during the option period, the price of the underlying security increased by
more than the amount of the premium paid. A Fund would realize a loss equal
to all or a portion of the premium paid if the price of the underlying
security decreased, remained the same, or did not increase by more than the
premium paid.
Buying Put Options: Certain of the Funds may from time to time
purchase put options on any portion of its portfolio. A put option gives the
buyer of the option, upon payment of a premium, the right to deliver a
specified amount of a security to the writer of the option on or before a
fixed date at a predetermined ("strike") price. A Fund generally will
purchase such options as a hedge to provide protection against adverse
movements in the prices of securities in the Fund. In purchasing a put
option, a Fund would realize a gain if, during the option period, the price
of the security declined by an amount in excess of the premium paid. A Fund
would realize a loss equal to all or a portion of the premium paid if the
price of the security increased, remained the same, or did not decrease by
more than the premium paid.
Options on Foreign Currencies: The LB World Growth Fund may also write
covered call options and purchase put and call options on foreign currencies
as a hedge against changes in prevailing levels of currency exchange rates.
Selling Put Options: The Funds may not sell put options, except in the
case of a closing purchase transaction (see Closing Transactions).
Index Options: As part of its options transactions, certain of the
Funds may also purchase and sell call options and purchase put options on
stock and bond indices. Options on securities indices are similar to options
on a security except that, upon the exercise of an option on a securities
index, settlement is made in cash rather than in specific securities.
Closing Transactions: Certain of the Funds may dispose of options
which they have written by entering into "closing purchase transactions".
Those Funds may dispose of options which they have purchased by entering
into "closing sale transactions". A closing transaction terminates the
rights of a holder, or the obligation of a writer, of an option and does not
result in the ownership of an option.
A Fund realizes a profit from a closing purchase transaction if the
premium paid to close the option is less than the premium received by the
Fund from writing the option. The Fund realizes a loss if the premium paid
is more than the premium received. The Fund may not enter into a closing
purchase transaction with respect to an option it has written after it has
been notified of the exercise of such option.
A Fund realizes a profit from a closing sale transaction if the
premium received to close out the option is more than the premium paid for
the option. A Fund realizes a loss if the premium received is less than the
premium paid.
Spreads and Straddles: Certain of the Funds may also engage in
"straddle" and "spread" transactions in order to enhance return, which is a
speculative, non-hedging purpose. A straddle is established by buying both a
call and a put option on the same underlying security, each with the same
exercise price and expiration date. A spread is a combination of two or more
call options or put options on the same security with differing exercise
prices or times to maturity. The particular strategies employed by a Fund
will depend on LB Research's or the Sub-advisor's perception of anticipated
market movements.
Negotiated Transactions: Certain of the Funds will generally purchase
and sell options traded on a national securities or options exchange. Where
options are not readily available on such exchanges, a Fund may purchase and
sell options in negotiated transactions. A Fund effects negotiated
transactions only with investment dealers and other financial institutions
deemed creditworthy by its investment adviser. Despite the investment
adviser's or sub-advisor's best efforts to enter into negotiated options
transactions with only creditworthy parties, there is always a risk that the
opposite party to the transaction may default in its obligation to either
purchase or sell the underlying security at the agreed upon time and price,
resulting in a possible loss by the Fund. This risk is described more
completely in the section of this Prospectus entitled, "Risks of
Transactions in Options and Futures". Options written or purchased by a Fund
in negotiated transactions are illiquid and there is no assurance that a
Fund will be able to effect a closing purchase or closing sale transaction
at a time when its Investment Adviser or Sub-advisor believes it would be
advantageous to do so. In the event the Fund is unable to effect a closing
transaction with the holder of a call option written by the Fund, the Fund
may not sell the security underlying the option until the call written by
the Fund expires or is exercised. The underlying securities on such
transactions will also be considered illiquid and are subject to the Fund's
15% illiquid securities limitations.
Limitations: A Fund will not purchase any option if, immediately
thereafter, the aggregate cost of all outstanding options purchased and held
by the Fund would exceed 5% of the market value of the Fund's total assets.
A Fund will not write any option if, immediately thereafter, the aggregate
value of the Fund's securities subject to outstanding options would exceed
30% of the market value of the Fund's total assets.
FINANCIAL FUTURES AND OPTIONS ON FUTURES (ALL FUNDS EXCEPT THE LB MONEY
MARKET FUND)
Selling Futures Contracts: Certain of the Funds may sell financial
futures contracts ("futures contracts") as a hedge against adverse movements
in the prices of securities in those Funds. Such contracts may involve
futures on items such as U.S. Government Treasury bonds, notes and bills,
government mortgage-backed securities; corporate and municipal bond indices;
and stock indices. A futures contract sale creates an obligation for the
Fund, as seller, to deliver the specific type of instrument called for in
the contract at a specified future time for a specified price. In selling a
futures contract, the Fund would realize a gain on the contract if, during
the contract period, the price of the securities underlying the futures
contract decreased. Such a gain would be expected to approximately offset
the decrease in value of the same or similar securities in the Fund. The
Fund would realize a loss if the price of the securities underlying the
contract increased. Such a loss would be expected to approximately offset
the increase in value of the same or similar securities in the Fund.
Futures contracts have been designed by and are traded on boards of
trade which have been designated "contract markets" by the Commodity Futures
Trading Commission ("CFTC"). These boards of trade, through their clearing
corporations, guarantee performance of the contracts. Although the terms of
some financial futures contracts specify actual delivery or receipt of
securities, in most instances these contracts are closed out before the
settlement due date without the making or taking of delivery of the
securities. Other financial futures contracts, such as futures contracts on
a securities index, by their terms call for cash settlements. The closing
out of a futures contract is effected by entering into an offsetting
purchase or sale transaction.
When a Fund sells a futures contract, or a call option on a futures
contract, it is required to make payments to the commodities broker which
are called "margin" by commodities exchanges and brokers.
The payment of "margin" in these transactions is different than
purchasing securities "on margin". In purchasing securities "on margin" an
investor pays part of the purchase price in cash and receives an extension
of credit from the broker, in the form of a loan secured by the securities,
for the unpaid balance. There are two categories of "margin" involved in
these transactions: initial margin and variation margin. Initial margin does
not represent a loan between a Fund and its broker, but rather is a "good
faith deposit" by a Fund to secure its obligations under a futures contract
or an option. Each day during the term of certain futures transactions, a
Fund will receive or pay "variation margin" equal to the daily change in the
value of the position held by the Fund.
Buying Futures Contracts: Certain of the Funds may also purchase
financial futures contracts as a hedge against adverse movements in the
prices of securities which they intend to purchase. A futures contract
purchase creates an obligation by a Fund, as buyer, to take delivery of the
specific type of instrument called for in the contract at a specified future
time for a specified price. In purchasing a futures contract, a Fund would
realize a gain if, during the contract period, the price of the securities
underlying the futures contract increased. Such a gain would approximately
offset the increase in cost of the same or similar securities which a Fund
intends to purchase. a Fund would realize a loss if the price of the
securities underlying the contract decreased. Such a loss would
approximately offset the decrease in cost of the same or similar securities
which a Fund intends to purchase.
Options on Futures Contracts: Certain of the Funds may also sell
("write") covered call options on futures contracts and purchase put and
call options on futures contracts in connection with hedging strategies. A
Fund may not sell put options on futures contracts. An option on a futures
contract gives the buyer of the option, in return for the premium paid for
the option, the right to assume a position in the underlying futures
contract (a long position if the option is a call and a short position if
the option is a put). The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of securities
underlying the futures contract to the extent of the premium received for
the option. The purchase of a put option on a futures contract constitutes a
hedge against price declines below the exercise price of the option and net
of the premium paid for the option. The purchase of a call option
constitutes a hedge, net of the premium, against an increase in cost of
securities which a Fund intends to purchase.
Currency Futures Contracts and Options: The LB World Growth Fund may
also sell and purchase currency futures contracts (or options thereon) as a
hedge against changes in prevailing levels of currency exchange rates. Such
contracts may be traded on U.S. or foreign exchanges. The Fund will not use
such contracts or options for leveraging purposes.
Limitations: Certain of the Funds may engage in futures transactions,
and transactions involving options on futures, only on regulated commodity
exchanges or boards of trade. A Fund will not enter into a futures contract
or purchase or sell related options if immediately thereafter (a) the sum of
the amount of initial margin deposits on the Fund's existing futures and
related options positions and premiums paid for options with respect to
futures and options used for non-hedging purposes would exceed 5% of the
market value of the Fund's total assets or (b) the sum of the then aggregate
value of open futures contracts sales, the aggregate purchase prices under
open futures contract purchases, and the aggregate value of futures
contracts subject to outstanding options would exceed 30% of the market
value of the Fund's total assets. In addition, in instances involving the
purchase of futures contracts or call options thereon, a Fund will maintain
cash or cash equivalents, less any related margin deposits, in an amount
equal to the market value of such contracts. "Cash and cash equivalents" may
include cash, government securities, or liquid high quality debt
obligations.
HYBRID INVESTMENTS (ALL FUNDS EXCEPT THE LB MONEY MARKET FUND)
As part of its investment program and to maintain greater flexibility,
the Fund may invest in hybrid instruments (a potentially high risk
derivative) which have the characteristics of futures, options and
securities. Such instruments may take a variety of forms, such as debt
instruments with interest or principal payments determined by reference to
the value of a currency, security index or commodity at a future point in
time. The risks of such investments would reflect both the risks of
investing in futures, options, currencies and securities, including
volatility and illiquidity. Under certain conditions, the redemption value
of a hybrid instrument could be zero. The Fund does not expect to hold more
than 5% of its total assets in hybrid instruments. For a discussion of
hybrid investments and the risks involved therein, see the Trust's Statement
of Additional Information under "Additional Information Concerning Certain
Investment Techniques".
RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES
There are certain risks involved in the use of futures contracts,
options on securities and securities index options, and options on futures
contracts, as hedging devices. There is a risk that the movement in the
prices of the index or instrument underlying an option or futures contract
may not correlate perfectly with the movement in the prices of the assets
being hedged. The lack of correlation could render a Fund's hedging strategy
unsuccessful and could result in losses. The loss from investing in futures
transactions is potentially unlimited.
There is a risk that LB Research or the Sub-advisor could be incorrect
in their expectations about the direction or extent of market factors such
as interest rate movements. In such a case a Fund would have been better off
without the hedge. In addition, while the principal purpose of hedging is to
limit the effects of adverse market movements, the attendant expense may
cause a Fund's return to be less than if hedging had not taken place. The
overall effectiveness of hedging therefore depends on the expense of hedging
and LB Research's or the Sub-advisor's accuracy in predicting the future
changes in interest rate levels and securities price movements.
A Fund will generally purchase and sell options traded on a national
securities or options exchange. Where options are not readily available on
such exchanges a Fund may purchase and sell options in negotiated
transactions. When a Fund uses negotiated options transactions it will seek
to enter into such transactions involving only those options and futures
contracts for which there appears to be an active secondary market. There is
nonetheless no assurance that a liquid secondary market such as an exchange
or board of trade will exist for any particular option or futures contract
at any particular time. If a futures market were to become unavailable, in
the event of an adverse movement, a Fund would be required to continue to
make daily cash payments of maintenance margin if it could not close a
futures position. If an options market were to become unavailable and a
closing transaction could not be entered into, an option holder would be
able to realize profits or limit losses only by exercising an option, and an
option writer would remain obligated until exercise or expiration. In
addition, exchanges may establish daily price fluctuation limits for options
and futures contracts, and may halt trading if a contract's price moves
upward or downward more than the limit in a given day. On volatile trading
days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for a Fund to enter into new positions or
close out existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could prevent
prompt liquidation of unfavorable positions, and potentially could require a
Fund to continue to hold a position until delivery or expiration regardless
of changes in its value. As a result, a Fund's access to other assets held
to cover its options or futures positions could also be impaired.
When conducting negotiated options transactions there is a risk that
the opposite party to the transaction may default in its obligation to
either purchase or sell the underlying security at the agreed upon time and
price. In the event of such a default, a Fund could lose all or part of
benefit it would otherwise have realized from the transaction, including the
ability to sell securities it holds at a price above the current market
price or to purchase a security from another party at a price below the
current market price.
The Funds intend to continue to meet the requirements of federal law
to be treated as a regulated investment company. For taxable years of a Fund
that began on or prior to August 5, 1997, one of these requirements is that
a Fund realize less than 30% of its annual gross income from the sale of
securities held for less than three months. Accordingly, the extent to which
a Fund may engage in futures contracts and related options may be materially
limited by this 30% test. Options activities of a Fund may increase the
amount of gains from the sale of securities held for less than three months,
because gains from the expiration of, or from closing transactions with
respect to, call options written by a Fund will be treated as short-term
gains and because the exercise of call options written by the Fund would
cause it to sell the underlying securities before it otherwise might. For
each taxable year of a Fund beginning after August 5, 1997, a Fund will no
longer be subject to the 30% test described above.
Finally, if a broker or clearing member of an options or futures
clearing corporation were to become insolvent, a Fund could experience
delays and might not be able to trade or exercise options or futures
purchased through that broker or clearing member. In addition, a Fund could
have some or all of its positions closed out without its consent. If
substantial and widespread, these insolvencies could ultimately impair the
ability of the clearing corporations themselves.
TEMPORARY DEFENSIVE INVESTMENTS
The LB Opportunity Growth Fund, LB World Growth Fund, LB Fund, LB Mid
Cap Growth Fund, LB High Yield Fund, LB Income Fund, and LB Municipal Bond
Fund, may hold up to 100% of their assets in cash or short-term debt
securities for temporary defensive position when, in the opinion of LB
Research or the Sub-advisor such a position is more likely to provide
protection against unfavorable market conditions than adherence to the
Funds' other investment policies. The types of short-term instruments in
which the Funds may invest for such purposes include short-term money market
securities such as repurchase agreements and securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, certificates of
deposit, Eurodollar certificates of deposit, commercial paper and banker's
acceptances issued by domestic and foreign corporations and banks. When
investing in short-term money market obligations for temporary defensive
purposes, a Fund will invest only in securities rated at the time of
purchase Prime-1 or Prime-2 by Moody's, A-1 or A-2 by S&P, F-1 or F-2 by
Fitch Investors Service, Inc., or unrated instruments that are determined by
LB Research or the Sub-advisor to be of a comparable level of quality. When
a Fund adopts a temporary defensive position its investment objective may
not be achieved.
INVESTMENT LIMITATIONS
In seeking to lessen investment risk, each Fund operates under certain
investment restrictions. The restrictions in the following paragraphs may
not be changed with respect to any Fund except by a vote of a majority of
the outstanding voting securities of that Fund.
No Fund may, with respect to 75% of its total assets, purchase the
securities of any issuer (except Government Securities, as such term is
defined in the Investment Company Act of 1940) if, as a result, the Fund
would own more than 10% of the outstanding voting securities of such issuer
or the Fund would have more than 5% of its total assets invested in the
securities of such issuer. The LB Opportunity Growth Fund, LB Mid Cap Growth
Fund, LB World Growth Fund, LB Fund, LB High Yield Fund, LB Income Fund, and
LB Money Market Fund may not invest in a security if the transaction would
result in 25% or more of the Fund's total assets being invested in any one
industry.
A Fund other than the LB Money Market Fund may borrow (through reverse
repurchase agreements or otherwise) up to one-third of its total assets. If
a Fund borrows money its share price will be subject to greater fluctuation
until the borrowing is paid off. If a Fund makes additional investments
while borrowings are outstanding, this may be considered a form of leverage.
If borrowings, including reverse repurchase agreements, exceed 5% of a
Fund's total assets, such Fund will not purchase portfolio securities.
For further information on these and other investment restrictions,
including nonfundamental investment restrictions which may be changed
without a shareholder vote, see the Statement of Additional Information.
INVESTMENT RISKS
Special risks are associated with investments in some of the Funds,
beyond the standard level of risks. These risks are described below. An
investor should take into account his or her investment objectives and
ability to absorb a loss or decline in his or her investment when
considering an investment in such Funds. Investors in certain of the Funds
assume an above average risk of loss, and should not consider an investment
those Funds to be a complete investment program.
LB OPPORTUNITY GROWTH FUND INVESTMENT RISKS
The LB Opportunity Growth Fund is aggressively managed and invests
primarily in the stocks of smaller, less seasoned companies many of which
are traded on an over-the-counter basis, rather than on a national exchange.
These companies represent a relatively higher degree of risk than do the
stocks of larger, more established companies. The companies the LB
Opportunity Growth Fund invests in also tend to be more dependent on the
success of a single product line and have less experienced management. They
tend to have smaller market shares, smaller capitalization, and less access
to sources of additional capital. As a result, these companies tend to have
less ability to cope with problems and market downturns and their shares of
stock tend to be less liquid and more volatile in price.
LB MID CAP GROWTH FUND INVESTMENT RISKS
Stocks in mid cap companies entail greater risk than the stocks of
larger, well-established companies. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial
resources, and less competitive strength than larger companies. Also, mid
cap companies usually reinvest a high portion of their earnings in their own
businesses and therefore lack a predictable dividend yield. Since investors
frequently buy these stocks because of their expected above average earnings
growth, earnings levels that fail to meet expectations often result in sharp
price declines of such stocks.
In addition, in many instances, the frequency and volume of trading of
mid cap companies is substantially less than is typical of larger companies.
Therefore, the securities of such companies may be subject to wider price
fluctuations. The spreads between the bid and asked prices of the securities
of these companies in the over-the-counter market typically are larger than
the spreads for more actively-traded companies. As a result, the Fund could
incur a loss if it determined to sell such a security shortly after its
acquisition. When making large sales, the Fund may have to sell portfolio
holdings at discounts from quoted prices or may have to make a series of
small sales over an extended period of time due to the trading volume of
such securities. Investors should be aware that, based on the foregoing
factors, an investment in the Fund may be subject to greater price
fluctuations than an investment in a fund that invests primarily in larger
more established companies.
LB WORLD GROWTH FUND INVESTMENT RISKS
The Fund, may invest in stocks of foreign issuers and in "ADRs" "EDRs"
of foreign stocks. When investing in foreign stocks, ADRs and EDRs, the Fund
assumes certain additional risks that are not present with investments in
stocks of domestic companies. These risks include political and economic
developments such as possible expropriation or confiscatory taxation that
might adversely affect the market value of such stocks, ADRs and EDRs. In
addition, there may be less publicly available information about such
foreign issuers than about domestic issuers, and such foreign issuers may
not be subject to the same accounting, auditing and financial standards and
requirements as domestic issuers.
OTHER RISKS OF FOREIGN INVESTING INCLUDE:
Foreign Securities: Investments in securities of foreign issuers may
involve risks that are not present with domestic investments. While
investments in foreign securities are intended to reduce risk by providing
further diversification, such investments involve sovereign risk in addition
to credit and market risks. Sovereign risk includes local political or
economic developments, potential nationalization, withholding taxes on
dividend or interest payments, and currency blockage (which would prevent
cash from being brought back to the United States). Compared to United
States issuers, there is generally less publicly available information about
foreign issuers and there may be less governmental regulation and
supervision of foreign stock exchanges, brokers and listed companies. Fixed
brokerage commissions on foreign securities exchanges are generally higher
than in the United States. Foreign issuers are not generally subject to
uniform accounting and auditing and financial reporting standards, practices
and requirements comparable to those applicable to domestic issuers.
Securities of some foreign issuers are less liquid and their prices are more
volatile than securities of comparable domestic issuers. In some countries,
there may also be the possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, difficulty in enforcing
contractual and other obligations, political or social instability or
revolution, or diplomatic developments which could affect investments in
those countries. Settlement of transactions in some foreign markets may be
delayed or less frequent than in the United States, which could affect the
liquidity of investments. For example, securities which are listed on
foreign exchanges or traded in foreign markets may trade on days (such as
Saturday) when the Fund does not compute its price or accept orders for the
purchase, redemption or exchange of its shares. As a result, the net asset
value of the Fund may be significantly affected by trading on days when
shareholders cannot make transactions. Further, it may be more difficult for
the Trust's agents to keep currently informed about corporate actions which
may affect the price of portfolio securities. Communications between the
U.S. and foreign countries may be less reliable than within the U.S.,
increasing the risk of delayed settlements or loss of certificates for
portfolio securities.
Investments by the Fund in foreign companies may require the Fund to
hold securities and funds denominated in a foreign currency. Foreign
investments may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. Thus, the Fund's net asset value per
share will be affected by changes in currency exchange rates. Changes in
foreign currency exchange rates may also affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to shareholders of
the Fund. They generally are determined by the forces of supply and demand
in foreign exchange markets and the relative merits of investment in
different countries, actual or perceived changes in interest rates or other
complex factors, as seen from an international perspective. Currency
exchange rates also can be affected unpredictably by intervention by U.S. or
foreign governments or central banks or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad. In
addition, the Fund may incur costs in connection with conversions between
various currencies. Investors should understand and consider carefully the
special risks involved in foreign investing. These risks are often
heightened for investments in emerging or developing countries.
Developing Countries: Investing in developing countries involves
certain risks not typically associated with investing in U.S. securities,
and imposes risks greater than, or in addition to, risks of investing in
foreign, developed countries. These risks include: the risk of
nationalization or expropriation of assets or confiscatory taxation;
currency devaluations and other currency exchange rate fluctuations; social,
economic and political uncertainty and instability (including the risk of
war); more substantial government involvement in the economy; higher rates
of inflation; less government supervision and regulation of the securities
markets and participants in those markets; controls on foreign investment
and limitations on repatriation of invested capital and on the Fund's
ability to exchange local currencies for U.S. dollars; unavailability of
currency hedging techniques in certain developing countries; the fact that
companies in developing countries may be smaller, less seasoned and newly
organized companies; the difference in, or lack of, auditing and financial
reporting standards, which may result in unavailability of material
information about issuers; the risk that it may be more difficult to obtain
and/or enforce a judgment in a court outside the United States; and greater
price volatility, substantially less liquidity and significantly smaller
market capitalization of securities markets.
American Depository Receipts (ADRs) and European Depository Receipts
(EDRs): ADRs are dollar-denominated receipts generally issued by a domestic
bank that represents the deposit of a security of a foreign issuer. ADRs may
be publicly traded on exchanges or over-the-counter in the United States.
EDRs are receipts similar to ADRs and are issued and traded in Europe. ADRs
and EDRs may be issued as sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its securities traded in the
form of ADRs or EDRs. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are
generally similar, the issuers of unsponsored ADRs or EDRs are not obligated
to disclose material information in the United States and, therefore, the
import of such information may not be reflected in the market value of such
securities.
Currency Fluctuations: Investment in securities denominated in foreign
currencies involves certain risks. A change in the value of any such
currency against the U.S. dollar will result in a corresponding change in
the U.S. dollar value of a Fund's assets denominated in that currency. Such
changes will also affect a Fund's income. Generally, when a given currency
appreciates against the dollar (the dollar weakens) the value of a Fund's
securities denominated in that currency will rise. When a given currency
depreciates against the dollar (the dollar strengthens) the value of a
Fund's securities denominated in that currency would be expected to decline.
INVESTMENT RISKS OF HIGH YIELD SECURITIES (LB HIGH YIELD FUND, LB INCOME
FUND, AND LB MID CAP GROWTH FUND)
Investment in high yield, high risk securities (sometimes referred to
as "junk bonds") involves a greater degree of risk than investment in higher
quality securities. Investment in high yield, high risk securities involves
increased financial risk due to the higher risk of default by the issuers of
bonds and other debt securities having quality rating of "Ba" or lower by
Moody's or "BB" or lower by Standard & Poor's. The higher risk of default
may be due to higher debt leverage ratios, a history of low profitability or
losses, or other fundamental factors that weaken the ability of the issuer
to service its debt obligations.
In addition to the factors of issuer creditworthiness described above,
high yield, high risk securities generally involve a number of additional
market risks. These risks include:
Youth and Growth of High Yield, High Risk Market: The high yield, high
risk bond market is relatively new. While many of the high yield issues
currently outstanding have endured an economic recession, there can be no
assurance that this will be true in the event of increased interest rates or
widespread defaults brought about by a more severe and sustained economic
downturn.
Sensitivity to Interest Rate and Economic Changes: The market value of
high yield, high risk securities have been found to be less sensitive to
interest rate changes on a short-term basis than higher-rated investments,
but more sensitive to adverse economic developments or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may be more likely to experience
financial stress which would impair their ability to service their principal
and interest payment obligations or obtain additional financing. In the
event the issuer of a bond defaults on payments, the LB High Yield Fund may
incur additional expenses in seeking recovery. In periods of economic change
and uncertainty, market values of high yield, high risk securities and the
LB High Yield Fund's assets value may become more volatile. Furthermore, in
the case of zero coupon or payment-in-kind high yield, high risk securities,
market values tend to be more greatly affected by interest rate changes than
securities which pay interest periodically and in cash. Changes in the
market value of securities owned by the LB High Yield Fund will not affect
cash income but will affect the net asset value of the Fund's shares.
Payment Expectations: High yield, high risk securities, like higher
quality securities, may contain redemption or call provisions, which allow
the issuer to redeem a security in the event interest rates drop. In this
event, the LB High Yield Fund would have to replace the issue with a lower
yielding security, resulting in a decreased yield for investors.
Liquidity and Valuation: High yield, high risk securities at times
tend to be more thinly traded and are less likely to have an estimated
retail secondary market than investment grade securities. This may adversely
impact the LB High Yield Fund's ability to dispose of particular issues and
to accurately value securities in the LB High Yield Fund's portfolios. Also,
adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease market values and liquidity, especially
on thinly traded issues.
Taxation: High yield, high risk securities structured as zero coupon
or payment-in-kind issues may require the LB High Yield Fund to report
interest on such securities as income even though the LB High Yield Fund
receives no cash interest on such securities until the maturity or payment
date. The LB High Yield Fund may be required to sell other securities to
generate cash to make any required dividend distribution.
LIMITING INVESTMENT RISK
LB Research believes that the risks of investing in high yield, high
risk securities can be reduced by the use of professional portfolio
management techniques including:
Credit Research: LB Research will perform it owns credit analysis in
addition to using recognized rating agencies and other sources, including
discussions with the issuer's management, the judgment of other investment
analysts and its own judgment. The adviser's credit analysis will consider
such factors as the issuer's financial soundness, its responsiveness to
changes in interest rates and business conditions, its anticipated cash
flow, asset values, interest or dividend coverage and earnings.
Diversification: The LB High Yield Fund invests in widely diversified
portfolio of securities to minimize the impact of a loss in any single
investment and to reduce portfolio risk. As of October 31, 1997, the LB High
Yield Fund held securities of 178 corporate issuers, and the LB High Yield
Fund's holdings had the following credit quality characteristics:
<TABLE>
<CAPTION>
Percentage of
Investment Net Assets
---------- -------------
<S> <C>
Short-term securities
AAA equivalent........................................ 2.6%
Government obligations..................................... --
Corporate obligations
AAA/Aaa............................................... --
AA/Aa................................................. --
A/A................................................... --
BBB/Baa............................................... 2.3%
BB/Ba................................................. 10.6%
B/B................................................... 50.6%
CCC/Caa............................................... 9.3%
CC/Ca................................................. --
D/D................................................... --
Not rated............................................. 7.7%
Other Net Assets...................................... 16.9%
-----
Total...................................................... 100.0%
=====
</TABLE>
Economic and Market Analysis: LB Research will analyze current
developments and trends in the economy and in the financial markets. The LB
High Yield Fund may invest in higher quality securities in the event that
investment in high yield, high risk securities is deemed to present
unacceptable market or financial risk.
BUYING SHARES OF THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
INITIAL PURCHASES
Institutional Class shares are offered to certain Lutheran
institutions, Lutheran church organizations and certain other institutional
investors as may be determined by the Trust from time to time, subject in
each case to a minimum investment in each Fund of $100,000. There is no
sales load imposed in connection with the purchase of Institutional Class
shares.
To make your first purchase of Institutional Class shares of the
Funds:
o complete and sign an Institutional Account application;
o enclose a check made payable to the "LB Family of Funds;" and
o mail your application and check to Lutheran Brotherhood
Securities Corp., 625 Fourth Avenue S., Minneapolis, MN 55415.
SUBSEQUENT PURCHASES
To purchase additional shares of any of The Lutheran Brotherhood
Family of Funds, send a check payable to the LB Family of Funds to LB
Securities together with a completed To Invest By Mail form. You may also
buy additional Fund shares through:
o your LB Securities representative;
o the Systematic Investment Plan (SIP), under which you authorize
automatic monthly payments to the Fund from your checking
account;
o the automatic Payroll Deduction Plan;
o Invest-by-Phone; or
o Federal Reserve or bank wire.
INVEST-BY-PHONE
The Fund's Invest-by-Phone service allows you to telephone LB
Securities to request the purchase of Fund shares. You may elect this
feature on your account application or you may complete an Account Features
Request permitting LB Securities to accept your telephoned requests. When LB
Securities receives your telephoned request, it will draw funds directly
from your preauthorized bank account at a commercial or savings bank or
credit union. The bank or credit union must be a member of the Automated
Clearing House system. To use this service, you may call 800-328-4552 before
4:00 p.m. (Eastern time). Funds will be withdrawn from your bank or credit
union account and shares will be purchased for you at the price next
calculated by the Fund after receipt of funds from your bank. This service
may also be used to redeem shares. See "Redeeming Shares."
FEDERAL RESERVE OR BANK WIRE
You may purchase shares by Federal Reserve or bank wire directly to
Norwest Bank Minnesota, N.A. This method will result in a more rapid
investment in Fund shares. To wire Funds:
Notify LB Securities of a pending wire, call: (800) 328-4552
Wire to: Norwest Bank of Minneapolis, NA
Norwest Bank
6th Street and Marquette Avenue
Minneapolis, MN 55479
ABA Routing #: 091000019
Account #: 00-003-156
Account Name: Lutheran Brotherhood Securities Corp.
Use text message to indicate:
Transfer for -shareholder name(s), fund number and account number, LB
Representative name and number.
Your LB Securities representative can explain any of these investment plans.
MINIMUM INVESTMENTS REQUIRED
The minimum investment required for Institutional Class Shares of a
Fund is $100,000 for an initial purchase and $1,000 for additional
purchases.
EXCHANGING SHARES BETWEEN FUNDS
Shareholders of any of the Funds of The Lutheran Brotherhood Family
of Funds may exchange their shares for available shares of the same class of
any of the other Funds at any time on the basis of the relative net asset
values of the respective shares to be exchanged, subject to minimum
investment requirements. Each such exchange constitutes a sale of shares
requiring the calculation of a capital gain or loss for tax reporting
purposes. To obtain an exchange form or to receive more information about
making exchanges between funds, contact your LB Securities representative.
This exchange offer may be modified or terminated in the future. If the
exchange offer is materially modified or terminated, you will receive at
least 60 days prior notice. Shares of one class may not be exchanged for
shares of another class.
TELEPHONE EXCHANGES
You may make the type of exchanges between Funds described above by
telephone unless otherwise indicated on the account application. You may
make an unlimited number of telephone exchanges. Telephone exchanges must be
for a minimum amount of $1,000. Telephone exchanges may be made into new or
existing Fund or LB Money Market Fund accounts, and all accounts involved in
telephone exchanges must have the same ownership registration. To request a
telephone exchange, call toll-free (800) 328-4552.
The Funds reserve the right to refuse a wire or telephone redemption
or exchange if it is reasonably believed to be unauthorized. Procedures for
redeeming or exchanging Fund shares by wire or telephone may be modified or
terminated at any time by the Funds. When requesting a redemption or
exchange by telephone, shareholders should have available the correct
account registration and account number or tax identification number. All
telephone redemptions and exchanges are recorded and written confirmations
are subsequently mailed to an address of record. Neither the Funds nor LB
Securities will be liable for following redemption or exchange instructions
received by telephone, which are reasonably believed to be genuine, and the
shareholder will bear the risk of loss in the event of unauthorized or
fraudulent telephone instructions. The Funds and LB Securities will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. The Funds and/or LB Securities may be liable for any losses due
to unauthorized or fraudulent instructions in the absence of following these
procedures.
WHAT YOUR SHARES WILL COST
The offering price of the Fund is the next determined net asset
value (which will fluctuate). Currently there is no sales load imposed in
connection with the purchase of Institutional Class shares.
NET ASSET VALUE OF YOUR SHARES
LB Money Market Fund seeks to maintain a stable $1.00 net asset
value pursuant to procedures established by the Board of Trustees in
connection with the amortized cost method of portfolio valuation. The net
asset value for the other seven Funds varies with the value of their
investments. Each Fund determines its net asset value for a particular class
by adding the value of Fund assets attributable to such class, subtracting
the Fund's liabilities attributable to such class, and dividing the result
by the number of shares of that class outstanding.
The Funds determine their net asset value on each day the New York
Stock Exchange is open for business, or any other day as required under the
rules of the Securities and Exchange Commission. The calculation is made as
of the close of regular trading of the New York Stock Exchange (currently
4:00 p.m. Eastern time) after the Fund has declared any applicable
dividends.
MULTIPLE CLASS SYSTEM
SUMMARY
The Trust has adopted a system of multiple classes of shares for
each of the Funds (the "Multiple Class System") consisting of Class A
shares, Class B shares and Institutional Class shares.
Institutional Class shares are offered to Lutheran institutions,
Lutheran church organizations and certain other institutional investors as
may be determined by the Trust from time to time, subject in each case to a
minimum investment in each Fund of $100,000. There is no sales load imposed
in connection with the purchase of Institutional Class shares and such
shares are not subject to any Rule 12b-1 fee or shareholder servicing fee.
Because the sales charges and expenses vary between the Class A and B shares
and Institutional Class shares, performance will vary will respect to each
class. A copy of the Class A and Class B prospectus may be obtained by
writing LB Securities or by calling toll free (800) 328-4552.
Automatic Conversion of Class A Shares to Institutional Class
Shares.
Class A shares, including any shares received as dividends or
distributions with respect to such shares, will automatically convert to
Institutional Class shares if the shareholder becomes ineligible to hold
Class A shares. Lutheran institutions and Lutheran church organizations with
accounts of at least $100,000 are not eligible to hold Class A shares.
Consequently, any such account in Class A shares would be subject to
automatic conversion to Institutional Class shares. The Fund will provide
such Class A shareholders with prior notice of any such automatic
conversion. Any automatic conversion will take place on the basis of
relative net asset values of the two classes.
RECEIVING YOUR ORDER
Shares of the Funds are issued on days on which the New York Stock
Exchange is open. The net asset value of the shares you are buying will be
determined at the close of the regular trading session of the New York Stock
Exchange after your order is received.
Your order will be considered received when your check or other
payment is received in good order by the home office of LB Securities. The
Funds reserve the right to reject any purchase request.
CERTIFICATES AND STATEMENTS
As transfer agent for the Funds, LB Securities will maintain a share
account for you. Share certificates will not be issued. Systematic
Investment Plan, Systematic Withdrawal Plan and Systematic Exchange Plan
transactions, as well as dividend transactions (including dividends
reinvested to other funds) will be confirmed on the quarterly consolidated
statement. All other transactions will be reported as they occur.
REDEEMING SHARES
One of the advantages of owning shares in The Lutheran Brotherhood
Family of Funds is the rapid access you have to your investment. Once your
request for redemption has been received at the home office of LB
Securities, your shares will be redeemed at the next computed net asset
value on any day on which the New York Stock Exchange is open for business,
or any other day as required under the rules of the Securities and Exchange
Commission. That net asset value may be more or less than the net asset
value at the time you bought the shares.
You may redeem your shares at any time you choose. The redemption
method you choose will determine exactly when you will receive your funds.
All eight Lutheran Brotherhood funds allow you to redeem your
shares:
o in writing;
o through Redeem-by-Phone; or
o through the Fund's systematic withdrawal plan.
WRITTEN REQUESTS
To redeem all or some of your shares, send a written request to:
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Authorized Signature: The signature of an authorized representative
of your institution on the redemption request must be guaranteed by:
o a trust company or commercial bank;
o a savings association;
o a credit union; or
o a securities broker, dealer, exchange, association, or clearing
agency.
The Fund will not accept signatures that are notarized by a notary
public.
Receiving Your Check: Normally, each Fund will mail you a check
within one business day after it receives a proper redemption request, but
in no event more than three days, unless the Fund has not received payment
for the shares to be redeemed. (See "Redemption before Purchase Instruments
Clear.")
REDEEM BY PHONE
If you have completed an Account Features Request, you may redeem
shares with a net asset value of at least $1,000 and have them transmitted
electronically to your commercial bank by the third business day after your
redemption request.
SYSTEMATIC WITHDRAWAL
Shareholders owning or buying shares with a net asset value of at
least $150,000 may order automatic monthly, quarterly, semiannual or annual
redemptions in any amount. The proceeds will be sent to the shareholder or
other designated payee, or may be deposited in the shareholder's commercial
bank, savings bank or credit union.
Income dividends and capital gains distributions will continue to be
reinvested in additional Fund shares. Shares will be redeemed as necessary
to make automatic payments to the shareholder.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the
Funds may redeem shares in any account if the net asset value of
Institutional Class shares in the account falls below $100,000 for all
Funds.
Before shares are redeemed to close an account, the shareholder is
notified in writing and allowed 60 days to purchase additional shares.
Shares will not be redeemed if the account's value drops below the minimum
only because of market fluctuations.
BACKUP WITHHOLDING
When you sign your account application you will be asked to certify
that your social security or taxpayer identification number is correct and
that you are not subject to 31% backup withholding for failure to report
income to the IRS. If you violate IRS regulations, the IRS can generally
require the Funds to withhold 31% of your taxable distributions and
redemptions.
FOR MORE INFORMATION
For more information about the Fund or your shares, see your LB
Securities representative or call toll-free (800) 328-4552.
DIVIDENDS AND CAPITAL GAINS
DIVIDENDS
Each Fund declares and pays dividends from net income at regular
intervals. LB High Yield Fund, LB Income Fund, and LB Municipal Bond Fund
declare and pay dividends monthly. LB Fund declares and pays dividends
quarterly. LB Opportunity Growth Fund, LB Mid Cap Growth Fund and LB World
Growth Fund each declare and pay dividends annually in years that the
relevant Fund has accumulated enough net income to require the payment of a
dividend. LB Money Market Fund declares dividends daily and pays accumulated
dividends monthly.
Unless you ask to receive all or a portion of your dividends in
cash, they will automatically be reinvested in shares of the Fund. You may
also choose to have your dividends reinvested into an existing account in
another Fund within The Lutheran Brotherhood Family of Funds. On the
dividend payable date, your dividend will be invested in the designated Fund
account at net asset value. In order to receive your dividends in cash, you
must notify LB Securities in writing or indicate this choice in the
appropriate place on your account application. Your request to receive all
or a portion of your dividends and other distributions in cash must be
received by LB Securities at least ten days before the record date of the
dividend or other distribution.
STATEMENTS
You will receive quarterly statements of dividends and capital gains
paid the previous quarter.
CAPITAL GAINS
The Funds distribute their realized gains in accordance with federal
tax regulations. Distributions from any net realized capital gains will
usually be declared in December.
TAXES
As with any investment, you should consider the tax implications of
an investment in the Funds. The following discussion is only a short summary
of the important tax considerations generally affecting the Funds and their
shareholders. In particular, the following discussion does not address the
taxation of foreign shareholders in the Funds. You should consult with your
tax advisor with specific reference to your own tax situation.
FUNDS' TAX STATUS
The Funds expect to pay no federal income tax because they intend to
meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to
such companies.
SHAREHOLDERS' TAX POSITION
Except for dividends you receive from LB Municipal Bond Fund, unless
you are otherwise exempt, you will be required to pay federal income tax on
any dividends and other distribution that you receive. This applies whether
you receive dividends or distributions in cash or as additional shares. To
the extent any of the Funds earn interest from U.S. Government obligations,
a number of states may allow pass-through treatment and permit shareholders
to exclude a portion of their dividends from state income tax. For corporate
shareholders, dividends paid to shareholders may qualify for the 70%
dividends received deduction to the extent the Fund earns dividend income
from domestic corporations. The Funds will mail annually to each shareholder
advice as to the tax status of each year's dividends and distributions.
You will not be required to pay federal income tax on the automatic
conversion of Class A shares to Institutional Class shares that occurs when
the shareholder is no longer eligible to hold Class A shares.
You will not be required to pay federal income tax on any LB
Municipal Bond Fund dividends you receive which represent net interest
received on tax-exempt municipal bonds. The portion of that Fund's
distributions representing net interest income from taxable temporary
investments, market discount on tax-exempt municipal bonds, and net short-
term capital gains realized by the Fund, if any, will be taxable to
shareholders as ordinary income. Most of that Fund's income is expected to
be free of federal income tax. This applies whether you receive dividends in
cash or as additional shares. The Fund's income, however, is not necessarily
free from state income taxes. State laws differ on this issue and
shareholders are advised to consult their own tax advisers. The Fund will
provide to shareholders an annual breakdown of the percentage of its income
from each state. Information on the tax status of dividends will be provided
annually. You should also note that income that is not subject to federal
income tax may nonetheless have to be considered along with other adjusted
gross income in determining whether any Social Security payments received by
you are subject to federal income tax. If the LB Municipal Bond Fund holds
certain "private activity bonds" issued after August 7, 1986, shareholders
will need to include as an item of tax preference for purposes of the
federal alternative minimum tax that portion of the dividends paid by that
Fund derived from interest received on such bonds. The maximum federal
alternative minimum tax rate is 28% for individuals. In addition,
corporations will need to take into account all exempt-interest dividends
paid by that Fund in determining certain adjustments for the federal
alternative minimum tax and the environmental tax.
Dividends and certain interest income earned by a Fund from foreign
securities may be subject to foreign withholding taxes or other income
taxes. In the event that more than 50% of the value of a Fund's total assets
at the close of its taxable year consists of stock or securities in foreign
corporations, a Fund may elect, for U.S. income tax purposes, to treat
certain foreign taxes paid by it as paid by its shareholders. Should a Fund
make that election, a pro rata portion of such foreign taxes paid by the
Fund will constitute income to you (in addition to taxable dividends
actually received by you), and you may be entitled to claim an offsetting
tax credit or itemized deduction for that amount of foreign taxes.
For federal income tax purposes, all dividends paid by the Fund that
are derived from taxable net investment income and net short-term capital
gains are taxable as ordinary income whether reinvested or received in cash
unless you are exempt from taxation or entitled to tax deferral.
Distributions paid by the Fund from net long-term capital gains (including
such distributions paid by the LB Municipal Bond Fund), whether received in
cash or reinvested in additional shares, are taxable as long-term capital
gain. The capital gain holding period for this purpose is determined by the
length of time the Fund has held the security and not the length of time you
have held shares in the Fund. For non-corporate taxpayers, however, net
capital gains (i.e., the excess of net long-term capital gain over net
short-term capital loss) will be taxed at a maximum marginal rate of 28%.
The Taxpayer Relief Act of 1997 (the "Act") alters the taxation of
net capital gain income. Under the Act, individuals, trusts and estates that
hold capital investments for more than 18 months may be taxed at a maximum
long-term capital gain rate of 20% on the sale or exchange of those
investments. Individuals, trusts and estates that hold certain assets for
more than 12 months but not more than 18 months may be taxed at a maximum
mid-term capital gain rate of 28% on the sale or exchange of those
investments. Net short-term capital gains remain taxable as ordinary income.
The Act allows the Internal Revenue Service to prescribe regulations on how
the Act's new capital gain rates will apply to sales of capital assets by
"pass-thru entities," which include regulated investment companies such as
the Funds. To date regulations have not yet been prescribed, and it remains
unclear how the Act's new rates will apply to capital gain dividends or
undistributed capital gains, including for example the extent, if any, to
which capital gain dividends or undistributed capital gains from the Funds
will be taxed to individuals at the new rates for mid-term capital gains
rather than the long-term capital gain rates. Investors are urged to consult
their own tax advisors with respect to the new rules contained in the Act.
FUND PERFORMANCE
From time to time, quotations of the Funds' performance in terms of
yield or total return may be included in advertisements, sales literature,
or shareholder reports. Total return and yield information for the Funds are
computed separately for each class of shares of the Funds. Any variations in
shareholder servicing fees, Rule 12b-1 fees or sales charges among the
classes offered now or in the future by the Funds will have an impact on
such performance data. Shares of the Funds had no class designations until
October 31, 1997 when designations were assigned based upon the sales
charges, Rule 12b-1 fees and shareholder servicing fees. Institutional Class
shares are not currently subject to such sales charges, Rule 12b-1 fees or
shareholder servicing fees. All performance figures are based on historical
results and are not intended to indicate future performance. Performance
data or rankings for a given class of shares should be interpreted carefully
by investors who hold or may invest in a different class of shares.
"Total returns" are based on the change in value of an investment in
a Fund for a specified period. "Average annual total return" is the average
annual compounded rate of return of an investment in a Fund at the maximum
public offering price, if applicable, assuming the investment has been held
for one year, five years and ten years as of a stated ending date. (If the
Fund has not been in operation for at least ten years, the life of the Fund
will be used where applicable.) Average annual return quotations assume a
constant rate of growth. Actual performance fluctuates and will vary from
the quoted results for periods of time within the quoted periods.
"Cumulative total return" represents the cumulative change in value of an
investment in a Fund over a stated period. Average annual total return may
be accompanied with nonstandard total return information computed in the
same manner, but for differing periods and with or without annualizing the
total return or taking sales charges into account. These calculations assume
that all dividends and capital gains distributions during the period were
reinvested in shares of a Fund.
The yield of the LB High Yield Fund, LB Income Fund, LB Municipal
Bond Fund and LB Money Market Fund refers to the income generated by an
investment in the Fund. A Fund's yield is computed by dividing the net
investment income, after recognition of all recurring charges, per share
earned during the most recent month or other specified 30-day period by the
applicable maximum offering price per share on the last day of such period
and annualizing the result. The yield of the LB Money Market Fund refers to
the income generated by an investment in that Fund over a specified seven-
day period. The LB Municipal Bond Fund's tax-equivalent yield is a
hypothetical current yield that the Fund's actual current yield is
comparable to when the shareholder is assumed to pay federal income tax on
the entire hypothetical yield at a specific tax rate. Yields for a Fund are
expressed as annualized percentages. The "effective yield" of the LB Money
Market Fund is expressed similarly but, when annualized, the income earned
by an investment in that Fund is assumed to be reinvested and will reflect
the effects of compounding.
The average annual total return and yield results take sales charges
into account, if applicable, but do not take into account recurring and
nonrecurring charges for optional services which only certain shareholders
elect and which involve nominal fees. Where sale charges are not applicable
and therefore not taken into account in the calculation of average annual
total return and yield, the results will be increased. Any voluntary waiver
of fees or assumption of expenses will also increase performance results.
The Funds' performance reported from time to time in advertisements
and sales literature may be compared to generally accepted indices or
analyses such as those provided by Lipper Analytical Service, Inc., Standard
& Poor's and Dow Jones. Performance ratings reported periodically in
financial publications such as "Money Magazine", "Forbes", "Business Week",
"Fortune", "Financial Planning" and the "Wall Street" Journal will be used.
In addition, subject to applicable law and regulations, the Funds may refer
to performance ratings reported by Lipper Analytical Services, and other
organizations, that reflects performance data for periods prior to the
introduction of the current class designations and periods after such
designations went into effect.
THE FUNDS AND THEIR SHARES
All the Funds in The Lutheran Brotherhood Family of Funds, except
the LB World Growth Fund and LB Mid Cap Growth Fund, were organized in 1993
as series of The Lutheran Brotherhood Family of Funds, a Delaware business
trust. Each of those Funds is the successor to a fund of the same name that
previously operated as a separate corporation or trust pursuant to a
reorganization that was effective as of November 1, 1993. The LB World
Growth Fund and LB Mid Cap Growth Fund began operating as a series of the LB
Family of Funds on September 5, 1995 and May 30, 1997, respectively. The
fiscal year end of the Trust and each Fund is October 31. Prior to October
31, 1997, the shares of the Funds had no specific class designations. As of
that date, Class A, Class B and Institutional Class shares were authorized
by the Board of Trustees of the Trust. The Trust has reserved the right to
create other classes of shares in the future.
The rights of holders of shares may be modified by the Trustees at
any time, so long as such modifications do not have a material, adverse
effect on the rights of any shareholder. On any matter submitted to the
shareholders, the holder of each Fund share is entitled to one vote per
share (with proportionate voting for fractional shares) regardless of the
relative net asset value thereof.
Shares of a Fund when issued are fully and nonassessable by the
Trust. Shares of Fund represent an identical interest in the same portfolio
of investments of the Fund and have the same rights, privileges and
preferences, except with respect to: (a) the designation of each class; (b)
the sales charge applicable to each class; (c) the Rule 12b-1 distribution
fees and shareholder servicing fees borne by each class; (d) the expenses
allocable exclusively to each class, if any; and (e) voting rights on
matters exclusively affecting a single class. The differences in fees and
expenses borne by each class will result in different net asset values
(except for LB Money Market Fund) and dividends for the classes. Each share
has one vote (with proportionate voting for fractional shares) irrespective
of net asset value. The Board of Trustees authorized the creation of such
shares by adopting a Multiple Class Plan pursuant to Rule 18f-3 of the 1940
Act. Rule 18f-3 and the Trust's Master Trust Agreement require shareholders
of specific classes of shares to vote on certain matters on a class-by-class
basis. The Trust has reserved the right to create other classes of shares in
the future.
Under the Trust's Master Trust Agreement, no annual or regular
meeting of shareholders is required. Thus, there will ordinarily be no
shareholder meetings unless required by the Investment Company Act of 1940.
The Trustees may fill vacancies on the Board or appoint new Trustees
provided that immediately after such action at least two-thirds of the
Trustees have been elected by shareholders. Under the Master Trust
Agreement, any Trustee may be removed by vote of two-thirds of the
outstanding Trust shares or by three-fourths of the Trustees; holders of 10%
or more of the outstanding shares of the Trust can require that the Trustees
call a meeting of shareholders for purposes of voting on the removal of one
or more Trustees. In connection with such meetings called by shareholders,
the relevant Fund or Funds will assist shareholders in shareholder
communications.
FUND MANAGEMENT
BOARD OF TRUSTEES
The Board of Trustees of the Trust is responsible for the management
and supervision of the Funds' business affairs and for exercising all powers
except those reserved to the shareholders.
INVESTMENT ADVISER
Investment decisions for each of the Funds, except the LB World
Growth Fund, are made by LB Research, subject to the overall direction of
the Board of Trustees. LB Research provides investment research and
supervision of the Funds'investments and conducts a continuous program of
investment evaluation and appropriate disposition and reinvestment of the
Funds' assets. LB Research assumes the expense of providing the personnel to
perform its advisory functions. Lutheran Brotherhood, the indirect parent
company of LB Research, also serves as the investment adviser for LB Series
Fund, Inc.
Michael A. Binger, Assistant Vice President of LB Research, has been
the portfolio manager of LB Opportunity Growth Fund since October 31, 1994.
Mr. Binger has been with LB Research since 1987.
James M. Walline, Vice President of LB Research and Vice President
of the Funds has been the portfolio manager of LB Fund since October 31,
1994. Mr. Walline has been with LB Research since 1969.
Brian Thorkelson, Assistant Vice President of LB Research, serves as
the portfolio manager of LB Mid Cap Growth Fund. Mr. Thorkelson has been
with LB Research since 1989, previously serving as a securities analyst for
LB Research and Lutheran Brotherhood.
Paul Ocenasek, Assistant Vice President of LB Research, serves as the
portfolio manager of LB High Yield Fund. Mr. Ocenasek joined LB Research in
1987, previously serving as a fixed-income analyst and bond portfolio
manager
Charles E. Heeren, Vice President of LB Research has been the
portfolio manager of LB Income Fund since 1987. Mr. Heeren has been with LB
Research since 1976.
Janet I. Grangaard, Assistant Vice President of LB Research, has
been portfolio manager of LB Municipal Bond Fund since January 1, 1994.
Prior to that time she served as associate portfolio manager of that Fund.
Ms. Grangaard has been with LB Research since 1988.
Gail R. Onan, Assistant Vice President of LB Research, has been the
portfolio manager of LB Money Market Fund since January 1, 1994. Prior to
that time she served as associate portfolio manager of that Fund. Ms. Onan
has been with LB Research since 1986.
LB Research has engaged Rowe Price-Fleming International, Inc.
("Price-Fleming") as investment sub-advisor for Lutheran Brotherhood World
Growth Fund. Price-Fleming was founded in 1979 as a joint venture between T.
Rowe Price Associates, Inc. and Robert Fleming Holdings Limited. Price-
Fleming is one of the world's largest international mutual fund asset
managers with approximately $31 billion under management as of October 31,
1997 in its offices in Baltimore, London, Tokyo and Hong Kong. Price-Fleming
has an investment advisory group that has day-to-day responsibility for
managing the Fund and developing and executing the Fund's investment
program. The members of the advisory group are listed below.
Martin G. Wade, Christopher Alderson, Peter Askew, David Boardman,
Richard J. Bruce, Mark T.J. Edwards, John R. Forde, Robert C. Howe, James
B.M. Seddon, Benedict R.F. Thomas, and David J.L. Warren.
Martin Wade joined Price-Fleming in 1979 and has 27 years of
experience with Fleming Group (Fleming Group includes Robert Fleming
Holdings Ltd. and/or Jardine Fleming International Holdings Ltd.) in
research, client service and investment management, including assignments in
the Far East and the United States.
Peter Askew joined Price-Fleming in 1988 and has 20 years of
experience managing multicurrency fixed income portfolios. Christopher
Alderson joined Price-Fleming in 1988, and has nine years of experience with
the Fleming Group in research and portfolio management, including an
assignment in Hong Kong. David Boardman joined Price-Fleming in 1988 and has
21 years experience in managing multicurrency fixed income portfolios.
Richard J. Bruce joined Price-Fleming in 1991 and has seven years of
experience in investment management with the Fleming Group in Tokyo. Mark
J.T. Edwards joined Price-Fleming in 1986 and has 15 years of experience in
financial analysis, including three years in Fleming European research. John
R. Ford joined Price-Fleming in 1982 and has 16 years of experience with
Fleming Group in research and portfolio management, including assignments in
the Far East and the United States. Robert C. Howe joined Price-Fleming in
1986 and has 16 years of experience in economic research in Japan. James
B.M. Seddon joined Price-Fleming in 1987 and has nine years of experience in
investment management. Benedict R.F. Thomas joined Price-Fleming in 1988 and
has seven years of portfolio management experience, including assignments in
London and Baltimore. David J.L. Warren joined Price-Fleming in 1984 and has
16 years experience in equity research, fixed income research and portfolio
management, including an assignment in Japan.
LB Research and Price-Fleming personnel may invest in securities for
their own account pursuant to a code of ethics that establishes procedures
for personal investing and restricts certain transactions.
LB Research receives an annual investment advisory fee from each
Fund. The advisory contract between LB Research and the Trust provides for
the following advisory fees: LB Opportunity Growth Fund pays an advisory fee
equal to .75% of average daily net assets up to $100 million, .65% of
average daily net assets over $100 million but not over $250 million, .60%
of average daily net assets over $250 million but not over $500 million,
.55% of average daily net assets over $500 million but not over $1 billion,
and .50% of average daily net assets over $1 billion. LB Mid Cap Growth Fund
pays an advisory fee equal to .70% of average daily net assets up to $100
million, .65% of average daily net assets over $100 million but not over
$250 million, .60 % of average daily net assets over $250 million but not
over $500 million, .55% of average daily net assets over $500 million but
not over $1 billion and .50% of average daily net assets over $1 billion. LB
World Growth Fund pays and advisory fee equal to 1.25% of average daily net
assets up to $20 million, 1.10% of average daily net assets over $20 million
but not over $50 million, and 1.00% of average daily net assets over $50
million. LB Fund pays an advisory fee equal to .65% of average daily net
assets of $500 million or less, .60% of average daily net assets over $500
million but not over $1 billion, and .55% of average daily net assets over
$1 billion. LB High Yield Fund pays an advisory fee equal to .65% of average
daily net assets of $500 million or less, .60% of average daily net assets
over $500 million but not over $1 billion, and .55% of average daily assets
over $1 billion. LB Income Fund pays an advisory fee equal to .60% of
average daily net assets of $500 million or less, .575% of average daily net
assets over $500 million but not over $1 billion, and .55% of average daily
net assets over $1 billion. LB Municipal Bond Fund pays an advisory fee
equal to .575% of average daily net assets of $500 million or less, .5625%
of average daily net assets over $500 million but not over $1 billion, and
.55% of average daily net assets over $1 billion. LB Money Market Fund pays
an advisory fee equal to .50% of average daily net assets of $500 million or
less, .475% of average daily net assets on the next $500 million of average
daily net assets, .45% of average daily net assets on the next $500 million
of average daily net assets, .425% of average daily net assets on the next
$500 million of average daily net assets, and .40% of average daily net
assets over $2 billion.
Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee for each of the Funds equal
to .25% of the average daily net assets of the Fund. This .25% waiver
applies to the contractual rates of compensation in the previous paragraph
at each level of average daily net assets.
During the most recent fiscal year of each Fund, LB Research
received fees amounting to the following percentages of each Fund's average
daily net
assets:
<TABLE>
<S> <C>
LB Opportunity Growth Fund 0.68%
LB Mid Cap Growth Fund* 0.46%
LB World Growth Fund 1.00%
LB Fund** 0.59%
LB High Yield Fund** 0.59%
LB Income Fund** 0.55%
LB Municipal Bond Fund** 0.53%
LB Money Market Fund*** 0.40%
</TABLE>
- - ------------
* After giving effect to a fee waiver of 0.24%.
** After giving effect to a fee waiver of 0.04%.
*** After giving effect to a fee waiver of 0.10%.
LB Research pays the Sub-advisor for the LB World Growth Fund an
annual sub-advisory fee for the performance of sub-advisory services. The
fee payable is equal to a percentage of that Fund's average daily net
assets. The percentage decreases as the Fund's assets increase. For purposes
of determining the percentage level of the sub-advisory fee for the Fund,
the assets of the Fund are combined with the assets of the LB Series Fund,
Inc. World Growth Portfolio, another fund with investment objectives and
policies that are similar to the LB World Growth Fund and for which the Sub-
advisor also provides sub-advisory services. The sub-advisory fee LB
Research pays the Sub-advisor is equal to the LB World Growth Fund's pro
rata share of the combined assets of the Fund and the LB Series Fund, Inc.
World Growth Portfolio and is equal to .75% of combined average daily net
assets up to $20 million, .60% of combined average daily net assets over $20
million but not over $50 million, and .50% of combined average daily net
assets over $50 million. When the combined assets of the LB World Growth
Fund and the LB Series Fund, Inc. World Growth Portfolio exceed $200
million, the sub-advisory fee for the LB World Growth Fund is equal to .50%
of all of the Fund's average daily net assets. At October 31, 1997 the
combined assets of LB World Growth Fund and World Growth Portfolio totaled
$351.0 million.
LB Research has further undertaken, until October 31, 1998 and
thereafter until further notice to LB Mid Cap Growth Fund to waive its
advisory fee and if necessary, to bear certain expenses associated with
operating the Fund in order to limit the Fund's total operating expenses for
the Class A shares and Class B shares to an annual rate of 1.95% and 2.70%,
respectively, of the average daily net assets of the Fund.
LB Research has further undertaken, until October 31, 1998 and thereafter
until further notice to LB Money Market Fund, to waive its advisory fees in
order to limit LB Money Market Fund's total operating expenses for the Class
A and Class B shares to 0.95% of the average net assets of each class.
Effective January 1, 1997, LB Research has also voluntarily agreed to
waive 5 basis points (0.05%) from the advisory fees payable by the LB Fund,
LB High Yield Fund, LB Income Fund, and LB Municipal Bond Fund. These
voluntary partial waivers of advisory fees may be discontinued at any time.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES
LB Securities, the Funds' distributor, provides administrative
personnel and services necessary to operate the Funds on a daily basis at
for a fee equal to 0.02 percent of each Fund's daily net assets.
During the fiscal year ended October 31, 1997, the Funds paid the
following amounts to LB Securities for administrative services:
<TABLE>
<S> <C>
LB Opportunity Growth Fund $55,875
LB Mid Cap Growth Fund $617
LB World Growth Fund $13,826
LB Fund $184,583
LB High Yield Fund $158,365
LB Income Fund $166,209
LB Municipal Bond Fund $122,078
LB Money Market Fund $90,172
</TABLE>
CUSTODIAN
State Street Bank ("State Street Bank") is custodian of the Funds'
cash and securities.
TRANSFER AGENT
LB Securities serves as transfer agent for the Funds, with the
assistance of Norwest Bank Minnesota, N.A., respecting cash transactions.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP is the independent accountants for the Funds.
DESCRIPTION OF DEBT RATINGS
Moody's Investors Service, Inc. describes grades of corporate debt
securities and "Prime-1" and "Prime-2" commercial paper as follows:
BONDS:
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds 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 which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which 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.
COMMERCIAL PAPER:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return of funds employed.
o Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of senior short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above
but to a lesser degree. Earning trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Standard & Poor's Corporation describes grades of corporate debt
securities and "A" commercial paper as follows:
BONDS:
AAA Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher rated categories. However, the obligor's capacity to meet
its financial commitments on the obligation is still strong.
BBB Debt rated BBB exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitments on the obligation in this category than in higher rated
categories.
BB Debt 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 inadequate capacity of the obligor to meet its
financial commitments on the obligation. The BB rating category is
also used for debt subordinated to senior debt that is assigned an
actual or implied BBB-rating.
B Debt rated B is more vulnerable to nonpayment but currently has the
capacity to meet its financial commitments on the obligation.
Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial
commitments on the obligation.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC Debt rated CCC is vulnerable to nonpayment, and is dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitments 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
commitments on the obligation.
The CCC rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied B or B- rating.
CC The rating CC typically is currently highly vulnerable to
nonpayment.
C The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken but payments on the
obligation are being continued.
D Debt rated D is in payment default. The D rating category is used
when payments are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking
of similar action if payments on the obligation are jeopardized.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on
the likelihood of, or the risk of default upon failure of, such completion.
The investor should exercise judgment with respect to such likelihood and
risk.
Commercial Paper: Commercial paper rated A by Standard & Poor's
Corporation has the following characteristics: liquidity ratios are better
than the industry average; long-term senior debt rating is "A" or better
(however, in some cases a "BBB" long-term rating may be acceptable); the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowances made for unusual
circumstances. Also, the issuer's industry typically is well established,
the issuer has a strong position within its industry and the reliability and
quality of management is unquestioned. Issuers rated A are further referred
to by use of numbers 1, 2 and 3 to denote relative strength within this
classification.
HOW TO INVEST
o Complete and sign the General Application
o Enclose a check made payable to The Lutheran Brotherhood
Family of Funds:
o Mail your application and check to:
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
ADDRESSES
Lutheran Brotherhood
Lutheran Brotherhood Research Corp.
Lutheran Brotherhood Securities Corp.
The Lutheran Brotherhood Family of Funds
625 Fourth Avenue South
Minneapolis, Minnesota 55415
State Street Bank
P.O. Box 1591
Boston, Massachusetts 02104
Norwest Bank Minnesota, N.A.
Sixth & Marquette Avenue
Minneapolis, Minnesota 55402
Price Waterhouse LLP
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
<PAGE>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
LUTHERAN BROTHERHOOD FUND
LUTHERAN BROTHERHOOD HIGH YIELD FUND
LUTHERAN BROTHERHOOD INCOME FUND
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
LUTHERAN BROTHERHOOD MONEY MARKET FUND
SERIES OF
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Investment Policies and Restrictions..................................... 2
Additional Information Concerning Certain Investment Techniques.......... 4
Fund Management..........................................................10
Investment Advisory Services.............................................13
Administrative Services..................................................16
Distribution and Shareholder Services....................................17
Brokerage Transactions...................................................19
Code of Ethics...........................................................21
Purchasing Shares........................................................21
Sales Charges............................................................21
Net Asset Value..........................................................22
Redeeming Shares.........................................................24
Tax Status...............................................................24
General Information......................................................25
Calculation of Performance Data..........................................26
Report of Independent Public Accountants and Financial Statements........30
</TABLE>
The Lutheran Brotherhood Family of Funds (the "Trust") offers eight
Funds, each of which offer three classes of shares: Class A, Class B and
Institutional Class shares. Class A and B shares are offered through a
combined prospectus and Institutional Class shares are offered through a
separate prospectus. Each such prospectus is referred to hereinafter as a
"prospectus". This Statement of Additional Information should be read in
conjunction with the prospectus dated December 30, 1997 for the applicable
class of the Lutheran Brotherhood Opportunity Growth Fund ("LB Opportunity
Growth Fund"), Lutheran Brotherhood Mid Cap Growth Fund ("LB Mid Cap Growth
Fund"), Lutheran Brotherhood World Growth Fund ("LB World Growth Fund"),
Lutheran Brotherhood Fund ("LB Fund"), Lutheran Brotherhood High Yield Fund
("LB High Yield Fund"), Lutheran Brotherhood Income Fund ("LB Income Fund"),
Lutheran Brotherhood Municipal Bond Fund ("LB Municipal Bond Fund") and
Lutheran Brotherhood Money Market Fund ("LB Money Market Fund") series of
The Lutheran Brotherhood Family of Funds (the "Trust"). This Statement is
not a prospectus itself. To receive a copy of either prospectus, write to
Lutheran Brotherhood Securities Corp., 625 Fourth Avenue South, Minneapolis,
Minnesota 55415 or call toll-free (800) 328-4552.
FOR MORE INFORMATION, CALL TOLL-FREE
(800) 328-4552
INVESTMENT POLICIES AND RESTRICTIONS
As set forth in part under "Investment Limitations" in the Fund's
Prospectus, the Fund has adopted certain fundamental and nonfundamental
investment policies.
The fundamental investment restrictions for the Fund are set forth
below. These fundamental investment restrictions may not be changed by a
Fund except by the affirmative vote of a majority of the outstanding voting
securities of that Fund as defined in the Investment Company Act of 1940.
(Under the Investment Company Act of 1940, a "vote of the majority of the
outstanding voting securities" means the vote, at a meeting of security
holders duly called, (i) of 67% or more of the voting securities present at
a meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (ii) of more than 50% of
the outstanding voting securities, whichever is less (a "1940 Act Majority
Vote").) Under these restrictions, with respect to each Fund:
(1) The Fund may not borrow money, except that the Fund may
borrow money (through the issuance of debt securities or
otherwise) in an amount not exceeding one-third of the Fund's
total assets immediately after the time of such borrowing.
(2) The Fund may not purchase or sell commodities or commodity
contracts, except that the Fund may invest in financial
futures contracts, options thereon and similar instruments.
(3) The Fund may not purchase or sell real estate unless acquired
as a result of ownership of securities or other instruments,
except that the Fund may invest in securities or other
instruments backed by real estate or securities of companies
engaged in the real estate business or that invest or deal in
real estate.
(4) The Fund may not engage in underwriting or agency
distribution of securities issued by others; provided,
however, that this restriction shall not be construed to
prevent or limit in any manner the power of the Fund to
purchase and resell restricted securities or securities for
investment.
(5) The Fund may not lend any of its assets except portfolio
securities. The purchase of corporate or U.S. or foreign
governmental bonds, debentures, notes, certificates of
indebtedness, repurchase agreements or other debt securities
of an issuer permitted by the Fund's investment objective and
policies will not be considered a loan for purposes of this
limitation.
(6) The Fund may not with respect to 75% of its total assets,
purchase the securities of any issuer (except Government
Securities, as such term is defined in the Investment Company
Act of 1940) if, as a result, the Fund would own more than
10% of the outstanding voting securities of such issuer or
the Fund would have more than 5% of its total assets invested
in the securities of such issuer.
(7) The Fund may not issue senior securities, except as permitted
under the Investment Company Act of 1940 or any exemptive
order or rule issued by the Securities and Exchange
Commission.
(8) The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in
the securities of a single open-end management investment
company with substantially the same fundamental investment
objectives, policies, and limitations as the Fund.
(9) The Fund may not invest in a security if the transaction
would result in 25% or more of the Fund's total assets being
invested in any one industry. This restriction does not apply
to the LB Municipal Bond Fund.
The following nonfundamental investment restrictions may be changed
without shareholder approval. Under these restrictions, with respect to the
Fund:
(1) The Fund may not purchase securities on margin or sell
securities short, except that the Fund may obtain short-term
credits necessary for the clearance of securities
transactions and make short sales against the box. The
deposit or repayment of initial or variation margin in
connection with financial futures contracts or related
options will not be deemed to be a purchase of securities on
margin.
(2) The Fund may not purchase or sell interests in oil, gas and
other mineral exploration or development programs or leases,
although it may invest in securities of companies that do.
(3) The Fund may not purchase the securities of any issuer (other
than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a
result, more than 5% of the value of its total assets would
be invested in the securities of business enterprises (which
does not include issuers of asset-backed securities) that,
including predecessors, have a record of less than three
years of continuous operations. This restriction does not
apply to the LB Opportunity Growth Fund.
(4) The Fund may not purchase or retain the securities of any
issuer if the officers and Trustees of the Fund or its
investment adviser owning individually more than 1/2 of 1% of
the issuer's securities together own more than 5% of the
issuer's securities.
(5) The Fund may not invest in securities of other investment
companies, except to the extent permitted under the
Investment Company Act of 1940 or except by purchases in the
open market involving only customary brokers' commissions, or
securities acquired as dividends or distributions or in
connection with a merger, consolidation or similar
transaction or other exchange.
(6) The Fund may not invest in warrants, if at the time of such
investment (a) more than 5% of the value of the Fund's total
assets would be invested in warrants or (b) more than 2% of
the value of the Fund's total assets would be invested in
warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange, or in the case of the LB
World Growth Fund, warrants not listed on major foreign
exchanges, (and for this purpose, warrants attached to
securities will be deemed to have no value).
(7) The LB Money Market Fund may not write, purchase, or sell
puts, calls, or any combination of puts and calls.
(8) The LB Opportunity Growth Fund, LB Mid Cap Growth Fund, LB
World Growth Fund, LB Fund, LB High Yield Fund, LB Income
Fund, and LB Municipal Bond Fund may not invest more than 15%
of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days. The
LB Money Market Fund may not invest more than 10% of its net
assets in illiquid securities, including repurchase
agreements maturing in more than seven days.
(9) The Fund will not purchase any security while borrowings,
including reverse repurchase agreements, representing more
than 5% of the Fund's total assets are outstanding.
(10) The LB Mid Cap Growth Fund may not write put options but may
write covered call options and purchase put and call options.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Some of the investment instruments, techniques and methods which may
be used by each Fund to aid in achieving its investment objective, and the
risks attendant thereto, are described below. Other risk factors and
investment methods may be described in the "Investment Objectives and
Policies" and "Investment Risks" sections of the Funds' Prospectus.
SHORT SALES AGAINST THE BOX
The Funds may effect short sales, but only if such transactions are
short sale transactions known as short sales "against the box". A short sale
is a transaction in which a Fund sells a security it does not own by
borrowing it from a broker, and consequently becomes obligated to replace
that security. A short sale against the box is a short sale where a Fund
owns the security sold short or has an immediate and unconditional right to
acquire that security without additional cash consideration upon conversion,
exercise or exchange of options with respect to securities held in its
portfolio. The effect of selling a security short against the box is to
insulate that security against any future gain or loss.
FOREIGN FUTURES AND OPTIONS
Participation in foreign futures and foreign options transactions
involves the execution and clearing of trades on or subject to the rules of
a foreign board of trade. Neither the National Futures Association nor any
domestic exchange regulates activities of any foreign boards of trade,
including the execution, delivery and clearing of transactions, or has the
power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked
to a domestic market so that a position taken on the market may be
liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, customers
who trade foreign futures or foreign options contracts may not be afforded
certain of the protective measures provided by the Commodity Exchange Act,
the CFTC's regulations and the rules of the National Futures Association and
any domestic exchange, including the right to use reparations proceedings
before the Commission and arbitration proceedings provided by the National
Futures Association or any domestic futures exchange. In particular, funds
received from customers for foreign futures or foreign options transactions
may not be provided the same protections as funds received in respect of
transactions on United States futures exchanges. In addition, the price of
any foreign futures or foreign options contract and, therefore, the
potential profit and loss thereon may be affected by any variance in the
foreign exchange rate between the time your order is placed and the time it
is liquidated, offset or exercised.
FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES
Foreign Currency Warrants. Foreign currency warrants are warrants
which entitle the holder to receive from their issuer an amount of cash
(generally, for warrants issued in the United States, in U.S. dollars) which
is calculated pursuant to a predetermined formula and based on the exchange
rate between a specified foreign currency and the U.S. dollar as of the
exercise date of the warrant. Foreign currency warrants generally are
exercisable upon their issuance and expire as of a specified date and time.
Foreign currency warrants have been issued in connection with U.S. dollar-
denominated debt offerings by major corporate issuers in an attempt to
reduce the foreign currency exchange risk which, from the point of view of
prospective purchasers of the securities, is inherent in the international
fixed-income marketplace. Foreign currency warrants may attempt to reduce
the foreign exchange risk assumed by purchasers of a security by, for
example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese Yen or German Deutschmark. The formula used to determine the amount
payable upon exercise of a foreign currency warrant may make the warrant
worthless unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or
depreciates against the particular foreign currency to which the warrant is
linked or indexed). Foreign currency warrants are severable from the debt
obligations with which they may be offered, and may be listed on exchanges.
Foreign currency warrants may be exercisable only in certain minimum
amounts, and an investor wishing to exercise warrants who possesses less
than the minimum number required for exercise may be required either to sell
the warrants or to purchase additional warrants, thereby incurring
additional transaction costs. In the case of any exercise of warrants, there
may be a time delay between the time a holder of warrants gives instructions
to exercise and the time the exchange rate relating to exercise is
determined, during which time the exchange rate could change significantly,
thereby affecting both the market and cash settlement values of the warrants
being exercised. The expiration date of the warrants may be accelerated if
the warrants should be delisted from an exchange or if their trading should
be suspended permanently, which would result in the loss of any remaining
"time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case the
warrants were "out-of-the-money," in a total loss of the purchase price of
the warrants. Warrants are generally unsecured obligations of their issuers
and are not standardized foreign currency options issued by the Options
Clearing Corporation ("OCC"). Unlike foreign currency options issued by OCC,
the terms of foreign exchange warrants generally will not be amended in the
event of governmental or regulatory actions affecting exchange rates or in
the event of the imposition of other regulatory controls affecting the
international currency markets. The initial public offering price of foreign
currency warrants is generally considerably in excess of the price that a
commercial user of foreign currencies might pay in the interbank market for
a comparable option involving significantly larger amounts of foreign
currencies. Foreign currency warrants are subject to significant foreign
exchange risk, including risks arising from complex political or economic
factors.
Principal Exchange Rate Linked Securities. Principal exchange rate
linked securities are debt obligations the principal on which is payable at
maturity in an amount that may vary based on the exchange rate between the
U.S. dollar and a particular foreign currency at or about that time. The
return on "standard" principal exchange rate linked securities is enhanced
if the foreign currency to which the security is linked appreciates against
the U.S. dollar, and is adversely affected by increases in the foreign
exchange value of the U.S. dollar; "reverse" principal exchange rate linked
securities are like the "standard" securities, except that their return is
enhanced by increases in the value of the U.S. dollar and adversely impacted
by increases in the value of foreign currency. Interest payments on the
securities are generally made in U.S. dollars at rates that reflect the
degree of foreign currency risk assumed or given up by the purchaser of the
notes (i.e., at relatively higher interest rates if the purchaser has
assumed some of the foreign exchange risk, or relatively lower interest
rates if the issuer has assumed some of the foreign exchange risk, based on
the expectations of the current market). Principal exchange rate linked
securities may in limited cases be subject to acceleration of maturity
(generally, not without the consent of the holders of the securities), which
may have an adverse impact on the value of the principal payment to be made
at maturity.
Performance Indexed Paper. Performance indexed paper is U.S. dollar-
denominated commercial paper the yield of which is linked to certain foreign
exchange rate movements. The yield to the investor on performance indexed
paper is established at maturity as a function of spot exchange rates
between the U.S. dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is
below, and a potential maximum rate of return that is above, market yields
on U.S. dollar-denominated commercial paper, with both the minimum and
maximum rates of return on the investment corresponding to the minimum and
maximum values of the spot exchange rate two business days prior to
maturity.
Hybrid Instruments. Hybrid Instruments (a type of potentially high
risk derivative) have recently been developed and combine the elements of
futures contracts or options with those of debt, preferred equity or a
depository instrument (hereinafter "Hybrid Instruments"). Often these Hybrid
Instruments are indexed to the price of a commodity, particular currency, or
a domestic foreign debt or equity securities index. Hybrid Instruments may
take a variety of forms, including, but not limited to, debt instruments
with interest or principal payments or redemption terms determined by
reference to the value of a currency or commodity or securities index at a
future point in time, preferred stock with dividend rates determined by
reference to the value of a currency, or convertible securities with the
conversion terms related to a particular
commodity.
The risks of investing in Hybrid Instruments reflect a combination
of the risks from investing in securities, options, futures and currencies,
including volatility and lack of liquidity. Reference is made to the
discussion of futures, options, and forward contracts herein for a
discussion of these risks. Further, the prices of the Hybrid Instrument and
the related commodity or currency may not move in the same direction or at
the same time. Hybrid Instruments may bear interest or pay preferred
dividends at below market (or even relatively nominal) rates. Alternatively,
Hybrid Instruments may bear interest at above market rates but bear an
increased risk of principal loss (or gain). In addition, because the
purchase and sale of Hybrid Instruments could take place in an over-the-
counter market or in a private transaction between the Fund and the seller
of the Hybrid Instrument, the creditworthiness of the contra party to the
transaction would be a risk factor which the Fund would have to consider.
Hybrid Instruments also may not be subject to regulation of the Commodities
Futures Trading Commission ("CFTC"), which generally regulates the trading
of commodity futures by U.S. persons, the SEC, which regulates the offer and
sale of securities by and to U.S. persons, or any other governmental
regulatory authority.
INVESTMENT RISKS OF FOREIGN INVESTING
There are special risks in investing in the LB World Growth Fund, as
discussed in the Prospectus. Certain of these risks are inherent in any
international mutual fund while others relate more to the countries in which
the Fund will invest ("Portfolio Companies"). Many of the risks are more
pronounced for investments in developing or emerging countries. Although
there is no universally accepted definition, a developing country is
generally considered to be a country which is in the initial stages of its
industrialization cycle with a per capita gross national product of less
than $5,000.
Investors should understand that all investments have a risk factor.
There can be no guarantee against loss resulting from an investment in the
Fund, and there can be no assurance that the Fund's investment policies will
be successful, or that its investment objective will be attained. The Fund
is designed for individual and institutional investors seeking to diversify
beyond the United States in an actively researched and managed portfolio,
and is intended for long-term investors who can accept the risks entailed in
investment in foreign securities. In addition to the general risks of
foreign investing described in the Trust's Prospectus, other risks include:
Investment and Repatriation Restrictions. Foreign investment in the
securities markets of certain foreign countries is restricted or controlled
in varying degrees. These restrictions may at times limit or preclude
investment in certain of such countries and may increase the cost and
expenses of a Fund. Investments by foreign investors are subject to a
variety of restrictions in many developing countries. These restrictions may
take the form of prior governmental approval, limits on the amount or type
of securities held by foreigners, and limits on the types of companies in
which foreigners may invest. Additional or different restrictions may be
imposed at any time by these or other countries in which a Fund invests. In
addition, the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under certain
regulations, including in some cases the need for certain government
consents. Although these restrictions may in the future make it undesirable
to invest in these countries, the Advisor and Sub-advisor do not believe
that any current repatriation restrictions would affect its decision to
invest in these countries.
Market Characteristics. Foreign securities may be purchased in over-
the-counter markets or on stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities
are located, if that is the best available market. Foreign stock markets are
generally not as developed or efficient as, and may be more volatile than,
those in the United States. While growing in volume, they usually have
substantially less volume than U.S. markets and a Fund's portfolio
securities may be less liquid and more volatile than securities of
comparable U.S. companies. Equity securities may trade at price/earnings
multiples higher than comparable United States securities and such levels
may not be sustainable. Fixed commissions on foreign stock exchanges are
generally higher than negotiated commissions on United States exchanges,
although a Fund will endeavor to achieve the most favorable net results on
its portfolio transactions. There is generally less government supervision
and regulation of foreign stock exchanges, brokers and listed companies than
in the United States. Moreover, settlement practices for transactions in
foreign markets may differ from those in United States markets, and may
include delays beyond periods customary in the United States.
Political and Economic Factors. Individual foreign economies of
certain countries may differ favorably or unfavorably from the United
States' economy in such respects as growth of gross national product, rate
of inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. The internal politics of certain foreign countries are
not as stable as in the United States. For example, the Philippines'
National Assembly was dissolved in 1986 following a period of intense
political unrest and the removal of President Marcos. During the 1960's, the
high level of communist insurgency in Malaysia paralyzed economic activity,
but by the 1970's these communist forces were suppressed and normal economic
activity resumed. In 1991, the existing government in Thailand was
overthrown in a military coup. In addition, significant external political
risks currently affect some foreign countries. Both Taiwan and China still
claim sovereignty of one another and there is a demilitarized border between
North and South Korea.
Governments in certain foreign countries continue to participate to
a significant degree, through ownership interest or regulation, in their
respective economics. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The
economies of many foreign countries are heavily dependent upon international
trade and are accordingly affected by protective trade barriers and economic
conditions of their trading partners. The enactment by these trading
partners of protectionist trade legislation could have a significant adverse
effect upon the securities markets of such countries.
Information and Supervision. There is generally less publicly
available information about foreign companies comparable to reports and
ratings that are published about companies in the United States. Foreign
companies are also generally not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to
those applicable to United States companies.
Taxes. The dividends and interest payable on certain of a Fund's
foreign portfolio securities may be subject to foreign withholding taxes,
thus reducing the net amount of income available for distribution to the
Fund's shareholders. A shareholder otherwise subject to United States
federal income taxes may, subject to certain limitations, be entitled to
claim a credit or deduction for U.S. federal income tax purposes for his or
her proportionate share of such foreign taxes paid by the Fund.
Costs. Investors should understand that the expense ratio of the
Fund can be expected to be higher than investment companies investing in
domestic securities since the cost of maintaining the custody of foreign
securities and the rate of advisory fees paid by the Fund are higher.
Other. With respect to certain foreign countries, especially
developing and emerging ones, there is the possibility of adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitations on the removal of funds or other assets of the Fund,
political or social instability, or diplomatic developments which could
affect investments by U.S. persons in those countries.
Eastern Europe. Changes occurring in Eastern Europe and Russia today
could have long-term potential consequences. As restrictions fall, this
could result in rising standards of living, lower manufacturing costs,
growing consumer spending, and substantial economic growth. However,
investment in the countries of Eastern Europe and Russia is highly
speculative at this time. Political and economic reforms are too recent to
establish a definite trend away from centrally-planned economies and state
owned industries. In many of the countries of Eastern Europe and Russia,
there is no stock exchange or formal market for securities. Such countries
may also have government exchange controls, currencies with no recognizable
market value relative to the established currencies of western market
economies, little or no experience in trading in securities, no financial
reporting standards, a lack of a banking and securities infrastructure to
handle such trading, and a legal tradition which does not recognize rights
in private property. In addition, these countries may have national policies
which restrict investments in companies deemed sensitive to the country's
national interest. Further, the governments in such countries may require
governmental or quasi-governmental authorities to act as custodian of the
Fund's assets invested in such countries and these authorities may not
qualify as a foreign custodian under the Investment Company Act of 1940 and
exemptive relief from such Act may be required. All of these considerations
are among the factors which could cause significant risks and uncertainties
to investment in Eastern Europe and Russia. The Fund will only invest in a
company located in, or a government of, Eastern Europe or Russia, if the
Sub-advisor believes the potential return justifies the risk. To the extent
any securities issued by companies in Eastern Europe and Russia are
considered illiquid, the Fund will be required to include such securities
within its 15% restriction on investing in illiquid securities.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on stock exchanges located in the countries in
which the respective principal offices of the issuers of the various
securities are located, if that is the best available market.
The Fund may invest in investment portfolios which have been
authorized by the governments of certain countries specifically to permit
foreign investment in securities of companies listed and traded on the stock
exchanges in these respective countries. The Fund's investment in these
portfolios is subject to the provisions of the 1940 Act discussed below. If
the Fund invests in such investment portfolios, the Fund's shareholders will
bear not only their proportionate share of the expenses of the Fund
(including operating expenses and the fees of the Investment Manager), but
also will bear indirectly similar expenses of the underlying investment
portfolios. In addition, the securities of these investment portfolios may
trade at a premium over their net asset value.
Apart from the matters described herein, the Fund is not aware at
this time of the existence of any investment or exchange control regulations
which might substantially impair the operations of the Fund as described in
the Trust's Prospectus and this Statement. It should be noted, however, that
this situation could change at any time.
Foreign Currency Transactions. The Fund will generally enter into
forward foreign currency exchange contracts under two circumstances. First,
when the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock in" the U.S.
dollar price of the security.
Second, when the Sub-advisor believes that the currency of a
particular foreign country may suffer or enjoy a substantial movement
against another currency, including the U.S. dollar, it may enter into a
forward contract to sell or buy the amount of the former foreign currency,
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. Alternatively, where appropriate, the
Fund may hedge all or part of its foreign currency exposure through the use
of a basket of currencies or a proxy currency where such currency or
currencies act as an effective proxy for other currencies. In such a case,
the Fund may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities denominated in such
currency. The use of this basket hedging technique may be more efficient and
economical than entering into separate forward contracts for each currency
held in the Fund. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible since
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency market movement is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Other than as set forth above, and immediately below, the Fund
will also not enter into such forward contracts or maintain a net exposure
to such contracts where the consummation of the contracts would obligate the
Fund to deliver an amount of foreign currency in excess of the value of the
Fund's portfolio securities or other assets denominated in that currency.
The Fund, however, in order to avoid excess transactions and transaction
costs, may maintain a net exposure to forward contracts in excess of the
value of the Fund's portfolio securities or other assets to which the
forward contracts relate (including accrued interest to the maturity of the
forward on such securities) provided the excess amount is "covered" by
liquid, high-grade debt securities, denominated in any currency, at least
equal at all times to the amount of such excess. For these purposes "the
securities or other assets to which the forward contracts relate may be
securities or assets denominated in a single currency, or where proxy
forwards are used, securities denominated in more than one currency. Under
normal circumstances, consideration of the prospect for currency parities
will be incorporated into the longer term investment decisions made with
regard to overall diversification strategies. However, the Sub-advisor
believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the Fund
will be served.
At the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract obligating it to
purchase, on the same maturity date, the same amount of the foreign
currency.
As indicated above, it is impossible to forecast with absolute
precision the market value of portfolio securities at the expiration of the
forward contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made
to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security if its market value exceeds
the amount of foreign currency the Fund is obligated to deliver. However, as
noted, in order to avoid excessive transactions and transaction costs, the
Fund may use liquid, high-grade debt securities denominated in any currency,
to cover the amount by which the value of a forward contract exceeds the
value of the securities to which it relates.
If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract
prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering
into a forward contract for the sale of a foreign currency and the date it
enters into an offsetting contract for the purchase of the foreign currency,
the Fund will realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Fund will suffer a loss to the extent of
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts
will generally be limited to the transactions described above. However, the
Fund reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is
not required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate
by the Sub-advisor. It also should be realized that this method of hedging
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which
might result from an increase in the value of that currency.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to the Fund at one rate, while offering a lesser
rate of exchange should the Fund desire to resell that currency to the
dealer.
In addition to the restrictions described above, some foreign
countries limit, or prohibit, all direct foreign investment in the
securities of their companies. However, the governments of some countries
have authorized the organization of investment portfolios to permit indirect
foreign investment in such securities. For tax purposes these portfolios may
be known as Passive Foreign Investment Companies. The Fund is subject to
certain percentage limitations under the 1940 Act and certain states
relating to the purchase of securities of investment companies, and may be
subject to the limitation that no more than 10% of the value of the Fund's
total assets may be invested in such securities.
For an additional discussion of certain risks involved in foreign
investing, see this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
FUND MANAGEMENT
The officers and Trustees of the Trust and their addresses,
positions with the Trust, and principal occupations are set forth below. As
of September 30, 1997 the officers and Trustees own less than 1% of any
Fund's outstanding shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE TRUST PRINCIPAL OCCUPATION DURING THE
PAST 5 YEARS
<S> <C> <C>
Rolf F. Bjelland* Chairman, Trustee and Executive Vice President and Chief
625 Fourth Avenue South President Investment Officer, Lutheran
Minneapolis, MN Brotherhood; President and Director,
Age 59 Lutheran Brotherhood Research Corp;
Director and Vice President-Investments,
Lutheran Brotherhood Variable Insurance
Products Company; Director and Executive
Vice President, Lutheran Brotherhood
Financial Corporation; Director, Lutheran
Brotherhood Securities Corp.; Director,
Lutheran Brotherhood Real Estate Products
Company; Director, Chairman and President
of LB Series Fund, Inc.
Charles W. Arnason Trustee Lawyer in private practice; formerly
101 Judd Street, Suite 1 member of Head, Hempel. Seifert &
P.O. Box 150 Vander Weide; formerly Executive
Marine-On St. Croix, MN Director of Minnesota Technology
Age 69 Corridor; formerly Senior Vice
President, Secretary and General Counsel
of Cowles Media Company; Officer,
Director or Trustee of various community
non-profit boards and organizations;
Director of LB Series Fund, Inc.
Herbert F. Eggerding, Jr. Trustee Retired Executive Vice President and
12587 Glencroft Dr. Chief Financial Officer, Petrolite
St. Louis, MO Corporation; Director, Wheat Ridge
Age 60 Foundation; Director, Lutheran
Charities Association of St. Louis,
MO; Director of LB Series Fund, Inc.
Connie M. Levi Trustee Retired President of the Greater
P.O. Box 675325 Minneapolis Chamber of Commerce;
Rancho Santa Fe, CA Director or member of numerous
Age 58 governmental, public service and
non-profit boards and organizations;
Director of LB Series Fund, Inc.
Noel K. Estenson Trustee Chairman, CENEX, Inc.; Director of
CENEX, Inc. LB Series Fund, Inc.
P.O. Box 64089
St. Paul, MN
Age 58
Bruce J. Nicholson* Trustee Executive Vice President and Chief
625 Fourth Avenue South Operating Officer, Lutheran
Minneapolis, MN Brotherhood; Director, Executive Vice
Age 50 President and Chief Financial Officer,
Lutheran Brotherhood Financial
Corporation; Director, Lutheran
Brotherhood Research Corp; Director,
Lutheran Brotherhood Securities Corp.;
Director and Chief Financial Officer,
Lutheran Brotherhood Variable
Insurance Products Company; Director,
Lutheran Brotherhood Real Estate
Products Company; Director, LB Series
Fund, Inc.
Ruth E. Randall Trustee Retired Interim Dean, Division of
25 Stanley, #A2 Continuing Studies, University of
West Hartford, CT Nebraska-Lincoln; formerly Associate
Age 68 Dean, Teachers College and Professor,
Department of Educational
Administration, Teachers College,
University of Nebraska-Lincoln;
Commissioner of Education for the
State of Minnesota; Director or member
of numerous governmental, public
service and non-profit boards and
organizations; Director of LB Series
Fund, Inc.
James R. Olson Vice President Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Vice President, Lutheran Brotherhood
Minneapolis, MN Variable Insurance Products Company;
Age 55 Vice President, Lutheran Brotherhood
Research Corp.; Vice President,
Lutheran Brotherhood Research Corp.;
Vice President, Lutheran Brotherhood
Securities Corp.; Vice President,
Lutheran Brotherhood Real Estate
Products Company; Vice President of
LB Series Fund, Inc.
Richard B. Ruckdashel Vice President Assistant Vice President, Lutheran
625 Fourth Avenue South Brotherhood; Vice President of LB
Minneapolis, MN Series Fund, Inc.
Age 42
James M. Walline Vice President Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Vice President, Lutheran Brotherhood
Minneapolis, MN Research Corp.; Vice President,
Age 52 Lutheran Brotherhood Variable
Insurance Products Company; Vice
President of LB Series Fund, Inc.
Wade M. Voigt Treasurer Assistant Vice President, Mutual Fund
625 Fourth Avenue South Accounting, Lutheran Brotherhood;
Minneapolis, MN Treasurer of LB Series Fund, Inc.
Age 41
Otis F. Hilbert Secretary and Vice President Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Counsel, Vice President and Secretary,
Minneapolis, MN Lutheran Brotherhood Securities Corp.;
Age 60 Counsel and Secretary of Lutheran
Brotherhood Research Corp.; Vice
President and Secretary, Lutheran
Brotherhood Real Estate Products
Company; Vice President and Assistant
Secretary, Lutheran Brotherhood
Variable Insurance Products Company;
Secretary and Vice President of LB
Series Fund, Inc.
</TABLE>
- - ---------------------
(*) "Interested person" of the Fund as defined in the Investment Company Act
of 1940 by virtue of his positions with affiliated entities referred to
elsewhere herein.
Lutheran Brotherhood, directly and through its wholly-owned subsidiary
companies, owned 9.39% of the outstanding Institutional Class shares of LB
World Growth Fund and 8.33% of the outstanding Institutional Class shares
of LB Money Market Fund as of November 30, 1997.
COMPENSATION OF TRUSTEES AND OFFICERS
The Funds make no payments to any of its officers for services performed
for the Fund. Trustees of the Trust who are not interested persons of the Trust
are paid an annual retainer fee by the Trust of $23,500 and an annual fee of
$9,000 per year to attend meetings of Board of Trustees.
Trustees who are not interested persons of the Trust are reimbursed by
the Trust for any expenses they may incur by reason of attending Board meetings
or in connection with other services they may perform in connection with their
duties as Trustees of the Trust. The Trustees receive no pension or retirement
benefits in connection with their service to the Fund.
For the fiscal year ended October 31, 1997, the Trustees of the Trust
received the following amounts of compensation either directly or in the form of
payments made into a deferred compensation plan:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL TOTAL COMPENSATION
NAME AND POSITION COMPENSATION AS PART OF FUND BENEFITS UPON PAID BY FUND
OF PERSON FROM TRUST EXPENSES RETIREMENT AND FUND COMPLEX (1)
<S> <C> <C> <C> <C>
Rolf F. Bjelland(2) $0 $0 $0 $0
Chairman and Trustee
Charles W. Arnason $17,170 $0 $0 $31,000
Trustee
Herbert F. Eggerding, Jr. $17,170 $0 $0 $31,000
Trustee
Connie M. Levi $17,170 $0 $0 $31,000
Trustee
Bruce J. Nicholson(2) $0 $0 $0 $0
Trustee
Ruth E. Randall $17,170 $0 $0 $31,000
Trustee
Noel K. Estenson $8,125 $0 $0 $4,536
Trustee
</TABLE>
- - -------------------------
(1) The "Fund Complex" includes The Lutheran Brotherhood Family of Funds
and LB Series Fund, Inc.
(2) "Interested person" of the Fund as defined in the Investment Company
Act of 1940.
INVESTMENT ADVISORY SERVICES
The Funds' investment adviser, LB Research, was organized as a
Pennsylvania corporation in 1969 and was reincorporated as a Minnesota
corporation in 1987. It has been in the investment advisory business since
1970. LB Research is a wholly-owned subsidiary of Lutheran Brotherhood
Financial Corporation which, in turn, is a wholly-owned subsidiary of
Lutheran Brotherhood, a fraternal benefit society. The officers and
directors of LB Research who are affiliated with the Trust are set forth
under "Fund Management".
Investment decisions for each of the Funds, except the LB World
Growth Fund, are made by LB Research, subject to the overall direction of
the Board of Trustees. LB Research provides overall investment supervision
of the LB World Growth Fund's investments, with investment decisions for
that Fund being made by an investment sub-advisor. Except for the LB World
Growth Fund, LB Research provides investment research and supervision of
each Fund's investments and conducts a continuous program of investment
evaluation and appropriate disposition and reinvestment of each Fund's
assets. LB Research assumes the expense of providing the personnel to
perform its advisory functions. Lutheran Brotherhood, the indirect parent
company of LB Research, also serves as the investment adviser for LB Series
Fund, Inc. The Master Advisory Contract (the "Advisory Contract") for the
Funds provides that Lutheran Brotherhood has reserved the right to grant the
non-exclusive use of the name "Lutheran Brotherhood" or any derivative
thereof to any other investment company, investment adviser, distributor or
other business enterprise, and to withdraw from each Fund the use of the
name "Lutheran Brotherhood". The name "Lutheran Brotherhood" will continue
to be used by each Fund as long as such use is mutually agreeable to
Lutheran Brotherhood and the Funds.
Investment decisions for the LB World Growth Fund are made by Rowe
Price-Fleming International, Inc. (the "Sub-advisor"), which LB Research has
engaged the sub-advisor for that Fund. The Sub-advisor manages that Fund on
a daily basis, subject to the overall direction of LB Research and the
Funds' Board of Trustees.
The Sub-advisor was founded in 1979 as a joint venture between T.
Rowe Price Associates, Inc. and Robert Fleming Holdings Limited. The Sub-
advisor is one of the world's largest international mutual fund asset
managers with approximately $17 billion under management as of December 31,
1994 in its offices in Baltimore, London, Tokyo and Hong Kong.
To the extent required under applicable state regulatory
requirements, the Investment Manager will reduce its management fee up to
the amount of any expenses (exclusive of interest, taxes, brokerage
expenses, distribution expenses, extra-ordinary items and any other items
allowed to be excluded by applicable state law) paid or incurred by any of
the Funds in any fiscal year which exceed specified percentages of the
average daily net assets of such Fund for such fiscal year. The most
restrictive of such percentage limitations is (which does not presently
apply to any of the Funds) currently 2.5% of the first $30 million of
average net assets, 2.0% of the next $70 million of average net assets and
1.5% of the remaining average net assets. These commitments may be amended
or rescinded in response to changes in the requirements of the various
states by the Trustees without shareholder approval.
The Advisory Contract provides that it shall continue in effect with
respect to each Fund from year to year as long as it is approved at least
annually both (i) by a vote of a majority of the outstanding voting
securities of such Fund (as defined in the 1940 Act) or by the Trustees of
the Trust, and (ii) in either event by a vote of a majority of the Trustees
who are not parties to the Advisory Contract or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Advisory Contract may be terminated on 60 days'
written notice by either party and will terminate automatically in the event
of its assignment, as defined under the 1940 Act and regulations thereunder.
Such regulations provide that a transaction which does not result in a
change of actual control or management of an adviser is not deemed an
assignment.
The Sub-advisory Contract provides that it shall continue in effect
with respect to the LB World Growth Fund from year to year as long as it is
approved at least annually both (i) by a vote of a majority of the
outstanding voting securities of such Fund (as defined in the 1940 Act) or
by the Trustees of the Trust, and (ii) in either event by a vote of a
majority of the Trustees who are not parties to the Sub-advisory Contract or
"interested persons" of any party thereto, cast in person at a meeting
called for the purpose of voting on such approval. The Sub-advisory Contract
may be terminated on 60 days' written notice by either party and will
terminate automatically in the event of its assignment, as defined under the
1940 Act and regulations thereunder. Such regulations provide that a
transaction which does not result in a change of actual control or
management of an adviser is not deemed an assignment.
LB Research receives an annual investment advisory fee from each
Fund. The Advisory Contract provides for the following advisory fees: The
advisory contract between LB Research and the Trust provides for the
following advisory fees: LB Opportunity Growth Fund pays an advisory fee
equal to .75% of average daily net assets up to $100 million, .65% of
average daily net assets over $100 million but not over $250 million, .60%
of average daily net assets over $250 million but not over $500 million,
.55% of average daily net assets over $500 million but not over $1 billion,
and .50% of average daily net assets over $1 billion. LB Mid Cap Growth Fund
pays an advisory fee equal to .70% of average daily net assets up to $100
million, .65% of average daily net assets over $100 million but not over
$250 million, .60 % of average daily net assets over $250 million but not
over $500 million, .55% of average daily net assets over $500 million but
not over $1 billion and .50% of average daily net assets over $1 billion. LB
World Growth Fund pays and advisory fee equal to 1.25% of average daily net
assets up to $20 million, 1.10% of average daily net assets over $20 million
but not over $50 million, and 1.00% of average daily net assets over $50
million. LB Fund pays an advisory fee equal to .65% of average daily net
assets of $500 million or less, .60% of average daily net assets over $500
million but not over $1 billion, and .55% of average daily net assets over
$1 billion. LB High Yield Fund pays an advisory fee equal to .65% of average
daily net assets of $500 million or less, .60% of average daily net assets
over $500 million but not over $1 billion, and .55% of average daily assets
over $1 billion. LB Income Fund pays an advisory fee equal to .60% of
average daily net assets of $500 million or less, .575% of average daily net
assets over $500 million but not over $1 billion, and .55% of average daily
net assets over $1 billion. LB Municipal Bond Fund pays an advisory fee
equal to .575% of average daily net assets of $500 million or less, .5625%
of average daily net assets over $500 million but not over $1 billion, and
.55% of average daily net assets over $1 billion. LB Money Market Fund pays
an advisory fee equal to .50% of average daily net assets of $500 million or
less, .475% of average daily net assets on the next $500 million of average
daily net assets, .45% of average daily net assets on the next $500 million
of average daily net assets, .425% of average daily net assets on the next
$500 million of average daily net assets, and .40% of average daily net
assets over $2 billion.
Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee for each of the Funds equal
to .25% of the average daily net assets of the Fund. This .25% waiver
applies to the contractual rates of compensation in the previous paragraph
at each level of average daily net assets.
Effective January 1, 1997, LB Research has also voluntarily agreed
to waive 5 basis points (0.05%) from the advisory fees payable by the LB
Fund, LB High Yield Fund, LB Income Fund, and LB Municipal Bond Fund. These
voluntary partial waivers of advisory fees may be discontinued at any time.
LB Research has further undertaken, until October 31, 1998 and
thereafter until further notice to LB Mid Cap Growth Fund to waive its
advisory fee and if necessary, to bear certain expenses associated with
operating the Fund in order to limit the Fund's total operating expenses for
the Class A shares, Class B shares and Institutional Class shares to an
annual rate of 1.95%, 2.70%, and 1.70%, respectively, of the average daily
net assets of the relevant class. LB Research has further undertaken, until
October 31, 1998 and thereafter until further notice to LB Money Market
Fund, to waive its advisory fees in order to limit LB Money Market Fund's
total operating expenses for the Class A, Class B shares and Institutional
Class shares to 0.95%, 0.95%, and 0.70%, respectively of the average net
assets of the relevant class.
The total dollar amounts paid to LB Research under the investment
advisory contract then in effect for the last three fiscal years (other than
LB Mid Cap Growth Fund, which is in its first year of operations) are as
follows:
[CAPTION]
10/31/97 10/31/96 10/31/95
[S] [C] [C] [C]
LB Opportunity Growth Fund $1,868,475 $ 1,563,341 $ 938,166
LB Mid Cap Growth Fund 21,586 -- --
LB World Growth Fund 682,203 392,419 17,787
LB Fund 5,686,741 4,529,474 3,726,938
LB High Yield Fund 4,911,490 4,150,072 3,509,710
LB Income Fund 4,799,245 5,330,930 5,431,506
LB Municipal Bond Fund 3,424,258 3,551,045 3,504,880
LB Money Market Fund 2,210,254 1,922,505 1,538,307
LB Research waived fees with respect to LB World Growth Fund
totaling $66,807 for the fiscal year ended October 31, 1996, and $13,415 for
the period from September 5, 1995 to October 31, 1995. LB Research waived
fees with respect to the LB Fund totaling $385,904 for the fiscal year ended
October 31, 1997. LB Research waived fees with respect to LB High Yield Fund
totaling $328,810. LB Research waived fees with respect to LB Income Fund
totaling $333,931. LB Research waived fees with respect to LB Municipal Bond
Fund totaling $247,844. LB Research waived fees with respect to the Mid Cap
Growth Fund totaling $7,357. LB Research waived fees with respect to the
Money Market Fund totaling $435,799 for the fiscal year ended October 31,
1997, $246,901 for the fiscal year ended October 31, 1996 and $253,844 for
the fiscal year ended October 31, 1995.
LB Research pays the Sub-advisor for the LB World Growth Fund an
annual sub-advisory fee for the performance of sub-advisory services. The
fee payable is equal to a percentage of the that Fund's average daily net
assets. The percentage decreases as the Fund's assets increase. For purposes
of determining the percentage level of the sub-advisory fee for the Fund,
the assets of the Fund are combined with the assets of the World Growth
Portfolio of LB Series Fund, Inc., another fund with investment objectives
and policies that are similar to the LB World Growth Fund and for which the
Sub-advisor also provides sub-advisory services. The sub-advisory fee LB
Research pays the Sub-advisor is equal to the World Growth Fund's pro rata
share of the combined assets of the Fund and the World Growth Portfolio of
LB Series Fund, Inc. and is equal to .75% of combined average daily net
assets up to $20 million, .60% of combined average daily net assets over $20
million but not over $50 million, and .50% of combined average daily net
assets over $50 million. When the combined assets of the LB World Growth
Fund and the World Growth Portfolio of LB Series Fund, Inc. exceed $200
million, the sub-advisory fee for the LB World Growth Fund is equal to .50%
of all of the Fund's average daily net assets. At October 31, 1997, the
combined assets of LB World Growth Fund and World Growth Portfolio totaled
$351.0 million.
The total dollar amount paid by LB Research to the Sub-advisor of
the LB World Growth Fund under the investment sub-advisory contract for the
fiscal period ended October 31, 1997 is $342,403.
ADMINISTRATIVE SERVICES
Lutheran Brotherhood Securities Corp. ("LB Securities") provides
administrative personnel and services necessary to operate the Funds on a
daily basis for a fee equal to 0.02 percent of the Funds' average daily net
assets. Prior to January 1, 1997, the fee equaled 0.0225 percent of the
Fund's average daily net assets. The total dollar amounts paid to LB
Securities for administrative services for the last three fiscal years are
as follows:
[CAPTION]
10/31/97 10/31/96 10/31/95
[S] [C] [C] [C]
LB Opportunity Growth Fund $ 55,875 $ 51,379 $ 33,788
LB Mid Cap Growth Fund 617 -- --
LB World Growth Fund 13,826 8,217 56
LB Fund 184,583 163,270 144,572
LB High Yield Fund 158,365 148,767 136,969
LB Income Fund 166,209 207,659 215,922
LB Municipal Bond Fund 122,078 142,190 151,391
LB Money Market Fund 90,172 87,973 85,688
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian, State Street
Bank and Trust Company is responsible for, among other things, safeguarding
and controlling the Funds' cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Funds'
investments.
TRANSFER AGENT
LB Securities provides transfer agency services necessary to the
Funds on a daily basis for a fee that is based on the number of shareholder
accounts. The total dollar amounts paid to LB Securities for transfer agency
services for the last three fiscal years are as follows:
[CAPTION]
10/31/97 10/31/96 10/31/95
[S] [C] [C] [C]
LB Opportunity Growth Fund $ 1,147,649 $ 865,339 $ 582,903
LB Mid Cap Growth Fund 21,145 -- --
LB World Growth Fund 311,027 169,451 4,983
LB Fund 1,791,020 1,610,381 1,478,056
LB High Yield Fund 1,205,817 1,061,296 944,128
LB Income Fund 1,275,325 1,382,275 1,398,946
LB Municipal Bond Fund 492,743 516,423 517,010
LB Money Market Fund 1,383,639 1,239,592 1,211,889
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 3100 Multifoods Tower, 33 South Sixth Street,
Minneapolis, Minnesota 55402, serves as the Trust's independent accountants,
providing professional services including audits of the Funds' annual
financial statements, assistance and consultation in connection with
Securities and Exchange Commission filings, and review of the annual income
tax returns filed on behalf of the Funds.
DISTRIBUTION AND SHAREHOLDER SERVICES
PLAN OF DISTRIBUTION AND DISTRIBUTION CONTRACT
The Trust has adopted a Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "12b-1 Plan") with respect to the Class B shares of
each Fund except for the LB Money Market Fund. General information about the
12b-1 Plan is set forth under "Distribution and Shareholder Servicing Plans"
in the prospectus regarding the Class A and B shares. The 12b-1 Plan
permits, among other things, payment by each such Fund for the purpose of
(1) making payments to underwriters, securities dealers and others engaged
in the sale of Class B shares, including payments to LB Securities to be
used to compensate or reimburse the LB Securities and others (including
affiliates of LB Securities) engaged in the distribution and marketing of
Class B shares or furnishing assistance to investors on an ongoing basis,
and (2) providing reimbursement of direct out-of-pocket expenditures
incurred by LB Securities in connection with the distribution and marketing
of Class B shares, (3) providing reimbursements of payments of commissions
to LB Securities's field force and others involved in the distribution of
the Class B shares at the time of purchase, plus interest at a rate not to
exceed prime plus 1% on the amount of unreimbursed commissions and (4)
providing payment of expenses relating to the formulation and implementation
of marketing strategies and promotional activities such as direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising, the preparation, printing and distribution of sales literature,
the preparation, printing and distribution of prospectuses of the Trust and
reports for recipients other than existing shareholders of the Trust, and
obtaining such information, analyses and reports with respect to marketing
and promotional activities and investor accounts as the Trust may, from time
to time, deem advisable. The Trust and the Funds are authorized to engage in
the activities listed above, and in other activities primarily intended to
result in the sale of Class B shares, either directly or through other
persons with which the Trust has entered into agreements pursuant to the
12b-1 Plan.
The 12b-1 Plan provides that it may not be amended to increase
materially the costs which a Fund may bear pursuant to the 12b-1 Plan
without approval by a 1940 Act Majority Vote of the Class B shareholders and
that other material amendments of the 12b-1 Plan must be approved by the
Trustees, and by the Trustees who are neither "interested persons" (as
defined in the 1940 Act) of the Trust nor have any direct or indirect
financial interest in the operation of the 12b-1 Plan or in any related
agreement (the "Qualified Trustees"), by vote cast in person at a meeting
called for the purpose of considering such amendments. While the 12b-1 Plan
is in effect, the selection and nomination of the Trustees of the Trust who
are not "interested persons" of the Trust has been committed to the
discretion of the Trustees who are not "interested persons" of the Trust.
The 12b-1 Plan was initially approved by the Board of Trustees, including a
majority of the Qualified Trustees, on September 9, 1997, and is subject to
annual approval, by the Board of Trustees and by the Qualified Trustees by
vote cast in person at a meeting called for the purpose of voting on the
12b-1 Plan. The 12b-1 Plan is terminable with respect to the Class B shares
of any Fund at any time by a vote of a majority of the Qualified Trustees or
by 1940 Act Majority Vote of the Class B shareholders of such Fund. A
quarterly report of the amounts expended under the 12b-1 Plan and the
purposes for which such expenditures were incurred must be made to the
Trustees for their review.
The Funds' distributor, LB Securities, is a Pennsylvania corporation
organized in 1969. LB Securities is a wholly-owned subsidiary of LB Research
and is located in Minneapolis, Minnesota. The officers and directors of LB
Securities who are affiliated with the Trust are set forth under "Fund
Management". Under a First Amended and Restated Distribution Contract dated
October 31, 1997 (the "Distribution Contract"), LB Securities is granted the
right to sell Class A, B and Institutional Class shares of the Funds as
agent for the Trust. LB Securities agrees to use its best efforts to secure
purchasers for the shares of the Funds. In connection with the services to
be provided by LB Securities under the Distribution Contract, LB Securities
receives from each Fund other than LB Money Market Fund an amount with
respect to Class B shares determined at an annual rate of .75% of the
average daily net asset value represented by such shares, such amount to be
paid in arrears at the end of each calendar month. The Distribution Contract
was initially approved by the Board of Trustees including a majority of the
Qualified Trustees, on September 9, 1997, and will continue in effect from
year to year so long as its continuance is approved at least annually by the
Board of Trustees and the Qualified Trustees.
SHAREHOLDER SERVICING PLANS
The Trust has adopted shareholder servicing plans (each a
"Shareholder Servicing Plan") for the Class A and Class B shares of each
Fund (including LB Money Market Fund). Such plans are more fully described
in the prospectus for the Class A and Class B shares under the caption
"Distribution and Shareholder Servicing Plans". Each Shareholder Servicing
Plan provides that the relevant class may spend annually, directly or
indirectly, up to .25% of the average daily value of the net assets
attributable to the relevant class for shareholder servicing activities.
Under the Distribution Contract, LB Securities has agreed to undertake
certain shareholder servicing activities on behalf of the Funds in exchange
for a fee of .25% of the average daily value of the net assets represented
by Class A and Class B shares. A quarterly report of the amounts expended
under the Shareholder Servicing Plans, and the purposes for which such
expenditures were incurred, must be made to the Trustees for their review.
Each Shareholder Servicing Plans may be amended by a majority of the
Qualified Trustees or by a 1940 Act Majority Vote by shareholders of the
respective class. The Shareholder Servicing Plans have been approved, and
are subject to annual approval, by the Board of Trustees and the Qualified
Trustees.
UNDERWRITING COMMISSIONS
The total dollar amounts of gross underwriting commissions on sales
of shares of the LB Opportunity Growth Fund, LB Fund, LB High Yield Fund, LB
Income Fund, and LB Municipal Bond paid to LB Securities for the last three
fiscal years, and the amounts retained by LB Securities for such years, are
as follows:
[CAPTION]
10/31/97 10/31/96
---------------------- -----------------------
Gross Amount Gross Amount
Commissions Retained Commissions Retained
[S] [C] [C] [C] [C]
LB Opportunity Growth Fund $1,724,236 $375,950 $2,272,864 $499,118
LB Mid Cap Growth Fund 278,924 59,480 -- --
LB World Growth Fund 637,128 138,984 857,697 187,621
LB Fund 2,613,029 566,543 2,306,035 504,687
LB High Yield Fund 3,716,291 812,906 3,372,402 742,668
LB Income Fund 905,599 194,851 1,486,518 324,229
LB Municipal Bond Fund 689,914 152,127 988,150 215,239
[CAPTION]
10/31/95
------------------------
Gross Amount
Commissions Retained
[S] [C] [C]
LB Opportunity Growth Fund $1,423,809 $315,636
LB Mid Cap Growth Fund -- --
LB World Growth Fund 153,713 33,490
LB Fund 1,609,270 352,617
LB High Yield Fund 2,422,070 530,028
LB Income Fund 1,325,519 288,981
LB Municipal Bond Fund 989,735 212,445
BROKERAGE TRANSACTIONS
PORTFOLIO TRANSACTIONS
In connection with the management of the investment and reinvestment
of the assets of the Funds, the Advisory Contract authorizes LB Research,
acting by its own officers, directors or employees or by a duly authorized
subcontractor, including the Sub-advisor, to select the brokers or dealers
that will execute purchase and sale transactions for the Funds. In executing
portfolio transactions and selecting brokers or dealers, if any, LB Research
and the Sub-advisor will use reasonable efforts to seek on behalf of the
Funds the best overall terms available. In assessing the best overall terms
available for any transaction, LB Research and the Sub-advisor will consider
all factors it deems relevant, including the breadth of the market in and
the price of the security, the financial condition and execution capability
of the broker or dealer, and the reasonableness of the commission, if any
(for the specific transaction and on a continuing basis). In evaluating the
best overall terms available, and in selecting the broker or dealer, if any,
to execute a particular transaction, LB Research and the Sub-advisor may
also consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to
any other accounts over which LB Research or the Sub-advisor or an affiliate
of LB Research or the Sub-advisor exercises investment discretion. LB
Research and the Sub-advisor may pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if, but only if, LB
Research or the Sub-advisor determines in good faith that such commission
was reasonable in relation to the value of the brokerage and research
services provided.
To the extent that the receipt of the above-described services may
supplant services for which LB Research or the Sub-advisor might otherwise
have paid, it would, of course, tend to reduce the expenses of LB Research
or the Sub-advisor.
The investment decisions for a Fund are and will continue to be made
independently from those of other investment companies and accounts managed
by LB Research, the Sub-advisor, or their affiliates. Such other investment
companies and accounts may also invest in the same securities as a Fund.
When purchases and sales of the same security are made at substantially the
same time on behalf of such other investment companies and accounts,
transactions may be averaged as to the price and available investments
allocated as to the amount in a manner which LB Research and its affiliates
believe to be equitable to each investment company or account, including the
Fund. In some instances, this investment procedure may affect the price paid
or received by a Fund or the size of the position obtainable or sold by a
Fund.
ROWE PRICE-FLEMING AFFILIATED TRANSACTIONS
Subject to applicable SEC rules, as well as other regulatory
requirements, the Sub-advisor of the LB World Growth Fund may allocate
orders to brokers or dealers affiliated with the Sub-advisor. Such
allocation shall be in such amounts and proportions as the Sub-advisor shall
determine and the Fund's Sub-advisor will report such allocations either to
LB Research, which will report such allocations to the Board of Trustees,
or, if requested, directly to the Board of Trustees.
BROKERAGE COMMISSIONS
During the last three fiscal years, the Funds paid the following
brokerage fees:
[CAPTION]
10/31/97 10/31/96 10/31/95
[S] [C] [C] [C]
LB Opportunity Growth Fund $ 520,660 $ 472,846 $ 197,461
LB Mid Cap Growth Fund 29,180 -- --
LB World Growth Fund* 102,408 108,394 24,302
LB Fund 941,481 1,349,473 1,787,109
LB High Yield Fund 15,071 36,567 47,583
LB Income 162,275 92,838 61,164
LB Municipal Bond Fund 7,399 7,399 9,518
LB Money Market Fund -- -- --
- - --------------------
* Amount paid to affiliated broker-dealer is $2,608 for the fiscal
year ended October 31, 1997, $4,028 for the fiscal year ended October 31,
1996 and $250 for the period ended October 31, 1995.
Of the brokerage fee amounts stated above and underwriting
concessions of dealers from whom the Funds purchased newly issued debt
securities, the following percentages were paid to firms which provided
research, statistical, or other services to LB Research or the Sub-advisor
in connection with the management of the Funds:
[CAPTION]
10/31/97 10/31/96 10/31/95
[S] [C] [C] [C]
LB Opportunity Growth Fund 6.68% 0.60% 0.22%
LB Mid Cap Growth Fund 68.99 -- --
LB World Growth Fund 0.48 0.08
LB Fund 1.30 7.17 8.10
LB High Yield Fund 0.00 0.24 0.70
LB Income Fund 5.12 6.41 0.62
LB Municipal Bond Fund 0.00 0.00 0.00
LB Money Market Fund 0.00 0.00 0.00
PORTFOLIO TURNOVER RATE
The rate of portfolio turnover in the Funds will not be a limiting
factor when LB Research or the Sub-advisor deems changes in a Fund's
portfolio appropriate in view of its investment objectives. As a result,
while a Fund will not purchase or sell securities solely to achieve short
term trading profits, a Fund may sell portfolio securities without regard to
the length of time held if consistent with the Fund's investment objective.
A higher degree of equity portfolio activity will increase brokerage costs
to a Fund. The portfolio turnover rate is computed by dividing the dollar
amount of securities purchased or sold (whichever is smaller) by the average
value of securities owned during the year. Short-term investments such as
commercial paper and short-term U.S. Government securities are not
considered when computing the turnover rate.
For the last three fiscal years, the portfolio turnover rates of the
LB Opportunity Growth Fund, LB Mid Cap Growth Fund, LB World Growth Fund, LB
Fund, LB High Yield Fund, LB Income Fund, and LB Municipal Bond Fund were as
follows:
[CAPTION]
10/31/97 10/31/96 10/31/95
[S] [C] [C] [C]
LB Opportunity Growth Fund 136% 176% 213%
LB Mid Cap Growth Fund 94% -- --
LB World Growth Fund 17% 11% 0%
LB Fund 54% 91% 127%
LB High Yield Fund 113% 104% 71%
LB Income Fund 97% 142% 131%
LB Municipal Bond Fund 18% 33% 36%
CODE OF ETHICS
The Trust has adopted a code of ethics that imposes certain
limitations and restrictions on personal securities transactions by persons
having access to Fund investment information, including portfolio managers.
Such access persons may not purchase any security being offered under an
initial public offering, any security for which one of the Funds has a
purchase or sale order pending, or any security currently under active
consideration for purchase or sale by a Fund. Additionally, portfolio
managers of the Funds may not purchase or sell any security within seven
days before or after any transaction in such security by the Fund that he or
she manages. In order for the Trust to monitor the personal investment
transactions, all access persons must obtain the approval of an officer of
the Trust designated by the Trustees before they may purchase or sell any
security and they must have all such transactions reported to such officer
by the broker-dealer through which the transaction was accomplished.
PURCHASING SHARES
Initial purchases of Fund shares must be made by check and
accompanied by an application. Subsequent purchases may be made by:
- check;
- Federal Reserve or bank wire;
- Invest-by-Phone;
- Systematic Investment Plan (SIP); and
- automatic payroll deduction.
Use of checks, Federal Reserve or bank wire and Invest-by-Phone is
explained in the General Information section of the Fund's prospectus under
"Buying Shares of The Lutheran Brotherhood Family of Funds".
SYSTEMATIC INVESTMENT PLAN
Under the Systematic Investment Plan program, funds may be withdrawn
monthly from the shareholder's checking account and invested in the Funds.
LB Securities representatives will provide shareholders with the necessary
authorization forms.
AUTOMATIC PAYROLL DEDUCTION
Under the Automatic Payroll Deduction program, funds may be
withdrawn monthly from the payroll account of any eligible shareholder of a
Fund and invested in a Fund. To be eligible for this program, the
shareholder's employer must permit and be qualified to conduct automatic
payroll deductions. LB Securities representatives will provide shareholders
with the necessary authorization forms.
SALES CHARGES
Purchases of Fund shares other than the Institutional Class shares
carry either an initial sales charges (Class A) or contingent deferred sales
charge (Class B) as explained in the section of the Funds' prospectus
relating to such shares entitled, "Sales Charges", which also lists ways to
reduce or avoid sales charges on subsequent purchases.
In addition to the situations described in the prospectus, sales
charges are waived when shares are purchased by:
- directors and regular full-time and regular part-time
employees of Lutheran Brotherhood and its subsidiaries;
- registered representatives of LB Securities; and
- any trust, pension, profit-sharing or other benefit plan
for such persons.
FULL-TIME EMPLOYEES
Regular full-time and regular part-time employees of Lutheran
Brotherhood are persons who are defined as such by the Lutheran Brotherhood
Human Resources Policy Manual.
RESTRICTION ON SALE OF SHARES PURCHASED
Sales to any of the persons or groups mentioned in this section are
made only with the purchaser's written promise that the shares will not be
resold, except through redemption or repurchase by or on behalf of a Fund.
NET ASSET VALUE
LB OPPORTUNITY GROWTH FUND, LB MID CAP GROWTH FUND, LB WORLD GROWTH FUND,
LB FUND, LB HIGH YIELD FUND, LB INCOME FUND, AND LB MUNICIPAL BOND FUND
The net asset value per share is determined at the close of each
day the New York Stock Exchange is open, or any other day as provided by
Rule 22c-1 under the Investment Company Act of 1940. Determination of net
asset value may be suspended when the Exchange is closed or if certain
emergencies have been determined to exist by the Securities and Exchange
Commission, as allowed by the Investment Company Act of 1940.
Net asset value is determined by adding the market or appraised
value of all securities and other assets attributable to each class of
shares; subtracting liabilities attributable to such class; and dividing the
result by the number of shares of such class outstanding.
The market value of each Fund's portfolio securities is determined
at the close of regular trading of the New York Stock Exchange (the
"Exchange") on each day the Exchange is open, except the day after
Thanksgiving. The value of portfolio securities is determined in the
following manner:
- - Equity securities traded on the Exchange or any other national
securities exchange are valued at the last sale price. If there has
been no sale on that day or if the security is unlisted, it is
valued at prices within the range of the current bid and asked
prices considered best to represent value in the circumstances.
- - Equity securities not traded on a national securities exchange are
valued at prices within the range of the current bid and asked
prices considered best to represent the value in the circumstances,
except that securities for which quotations are furnished through
the nationwide automated quotation system approved by the NASDAQ
will be valued at their last sales prices so furnished on the date
of valuation, if such quotations are available for sales occurring
on that day.
- - Bonds and other income securities traded on a national securities
exchange will be valued at the last sale price on such national
securities exchange that day. LB Research may value such securities
on the basis of prices provided by an independent pricing service
or within the range of the current bid and asked prices considered
best to represent the value in the circumstances, if those prices
are believed to better reflect the fair market value of such
exchange listed securities.
- - Bonds and other income securities not traded on a national
securities exchange will be valued within the range of the current
bid and asked prices considered best to represent the value in the
circumstances. Such securities may also be valued on the basis of
prices provided by an independent pricing service if those prices
are believed to reflect the fair market value of such securities.
For all Funds other than the Money Market Fund, short-term
securities with maturities of 60 days or less are valued at amortized cost;
those with maturities greater than 60 days are valued at the mean between
bid and asked price.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data
employed in determining valuation for such securities.
All other securities and assets will be appraised at fair value as
determined by the Board of Trustees.
Generally, trading in foreign securities, as well as U.S.
Government securities, money market instruments and repurchase agreements,
is substantially completed each day at various times prior to the close of
the Exchange. The values of such securities used in computing the net asset
value of shares of a Fund are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of such securities and
exchange rates may occur between the times at which they are determined and
the close of the Exchange, which will not be reflected in the computation of
net asset values. If during such periods events occur which materially
affect the value of such securities, the securities will be valued at their
fair market value as determined in good faith by the Trustees of the Fund.
For purposes of determining the net asset value of shares of a Fund
all assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such
major banks.
LB MONEY MARKET FUND
The net asset value for each share of the LB Money Market Fund
remains at $1.00.
USE OF AMORTIZED COST METHOD
The Trustees have determined that the best method for determining
the value of portfolio securities of the LB Money Market Fund is the
amortized cost method. The Executive Committee will continue to assess this
method of valuation and recommend changes to assure that the Fund's
portfolio instruments are properly valued.
The LB Money Market Fund's use of the amortized cost method of
valuing portfolio securities depends on its compliance with an order (the
"Order") of permanent exemption from certain provisions of the Investment
Company Act of 1940 granted by the Securities and Exchange Commission. Under
the Order, the Fund's Trustees must establish procedures reasonably designed
to stabilize the net asset value per share as computed for purposes of
distribution and redemption at $1.00 per share, taking into account current
market conditions and the Fund's investment objective.
The Trustee's procedures include monitoring the relationship
between the amortized cost value per share and a net asset value per share
based upon available indications of market value. The Trustees will decide
if any steps should be taken if there is a difference of more than .5%
between the two. The Trustees will take any steps they consider appropriate
(such as redemption in kind or shortening the average portfolio maturity) to
minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
INVESTMENT RESTRICTIONS
The Order requires that the LB Money Market Fund limit its
investments to instruments that, in the opinion of the Trustees, present
minimal credit risks and that are of high quality as determined by any major
rating agency. If they are not rated, the Trustees must determine that the
instrument is of comparable quality. It also calls for the Fund to maintain
a dollar weighted average portfolio maturity (not more than 90 days)
appropriate to its objective of maintaining a stable net asset value of
$1.00 per share.
The Order also allows the purchase of any instrument with a
remaining maturity of more than one year. Should the disposition of a
portfolio security result in a dollar weighted average portfolio maturity of
more than 90 days, the Fund will invest its available cash to reduce the
maturity to 90 days or less as soon as practicable. The 90-day maximum
dollar-weighted average maturity notwithstanding, it is the Fund's intention
to not exceed a dollar-weighted average maturity of 90 days.
It is the Fund's usual practice to hold portfolio securities to
maturity and realize par, unless sale or other disposition is mandated by
redemption requirements or other extraordinary circumstances. Under the
amortized cost method of valuation traditionally employed by institutions
for valuation of money market instruments, neither the amount of daily
income nor the net asset value is affected by any unrealized appreciation or
depreciation of the portfolio.
In periods of DECLINING interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on the
Fund's portfolio by the net asset value computed as above may tend to be
higher than a similar computation made by using a method of valuation based
upon market prices and estimates.
In periods of RISING interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on the
Fund's portfolio by the net asset value as computed above may tend to be
lower than a similar computation made by using a method of calculation based
upon market prices and estimates.
CONVERSION TO FEDERAL FUNDS
It is the LB Money Market Fund's policy to be as fully invested as
possible so that maximum interest may be earned on money market instruments
in the Fund's portfolio. To the end, all payments from investors must be in
federal funds or be converted into federal funds when deposited to State
Street Bank' account at the Boston Federal Reserve Bank. This conversion
must be made before shares are purchased. State Street Bank will act as the
investor's agent in depositing checks and converting them to federal funds.
State Street will convert the funds and enter the investor's order for
shares within two days of receipt of the check.
REDEEMING SHARES
Shares may be redeemed with requests made:
- in writing;
- through Redeem-by-Phone; or
- through the Lutheran Brotherhood systematic withdrawal plan.
All methods of redemption are described in the Funds' prospectus
under "Redeeming Shares".
TAX STATUS
THE FUNDS' TAX STATUS
The Funds expect to pay no federal income tax because they intend to
meet requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
for each of its tax years that has begun on or prior to August 5, 1997,
among other requirements:
- derive at least 90% of its gross income from dividends,
interest, gains from the sale of securities, and certain
other investments;
- derive less than 30% of its gross income from the sale of
securities held less than three months (the "30% test");
- invest in securities within certain statutory limits; and
- distribute at least 90% of its ordinary income to
shareholders.
For any Fund tax year beginning after August 5, 1997, the Fund will have to
comply with each of the requirements listed above except the 30% test in
order to qualify for such treatment.
It is each Fund's policy to distribute substantially all of its
income on a timely basis, including any net realized gains on investments
each year.
To avoid payment of a 4% excise tax, each Fund is also generally
required to distribute to shareholders at least 98% of its ordinary income
earned during the calendar year and 98% of its net capital gains realized
during the 12-month period ending October 31.
SHAREHOLDERS' TAX STATUS
Information on a shareholder's tax status is described in the Fund's
prospectus under "Taxes."
CAPITAL GAINS
While the Funds do not intend to engage in short-term trading, they
may dispose of securities held for only a short time if LB Research believes
it to be advisable. Such changes may result in the realization of capital
gains. Each Fund distributes its realized gains in accordance with federal
tax regulations. Distributions from any net realized capital gains will
usually be declared in December.
GENERAL INFORMATION
The Lutheran Brotherhood Family of Funds, a business trust organized
under the laws of the State of Delaware, was established pursuant to a
Master Trust Agreement dated July 15, 1993. The Trust is authorized to issue
shares of beneficial interest, par value $.001 per share, divisible into an
indefinite number of different series and classes and operates as a "series
company" as provided by Rule 18f-2 under the 1940 Act. Currently, eight
series of the Trust exist and each series is authorized to issue three
classes of shares: Class A, Class B and Institutional Class shares.
Effective October 31, 1997, all of the outstanding shares of the Funds were
redesignated as Class A shares and, immediately thereafter, shares held by
Lutheran institutions and church organizations with accounts of at least
$100,000 were automatically converted to Institutional Class shares. The
attributes of the various classes of shares are more fully described in
their respective prospectus. The interests of investors in the various
series of the Trust will be separate and distinct.
The assets received by the Trust from the issue and sale of shares
of a Fund and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specially allocated to each class of
such Fund and constitute the underlying assets of such Fund. The underlying
assets of such Fund are required to be segregated on the books of account,
and are charged with the expenses in respect of each class of the Fund and
with a share of the general expenses of the Trust. Under the Trust's
Multiple Class Expense Allocation Plan adopted under Rule 18f-3 of the 1940
Act, all expenses other than Rule 12b-1 and shareholder servicing fees are
allocated pro rata based on the relative net assets of each class. Upon any
liquidation of a Fund, shareholders thereof are entitled to share pro rata
in the net assets of each class available for distribution.
Except for the LB World Growth Fund and the LB Mid Cap Growth Fund,
each Fund is the successor to a fund of the same name that previously
operated as a separate corporation or trust. At a Special Meeting of
Shareholders of each such fund held on October 28, 1993, the shareholders of
each fund approved a reorganization of the respective funds as separate
series of the Trust, which reorganization became effective on November 1,
1993. The LB World Growth Fund and the LB Mid Cap Growth Fund commenced
operations as a series of The Lutheran Brotherhood Family of Funds on
September 5, 1995 and May 30, 1997, respectively.
CALCULATION OF PERFORMANCE DATA
The total return and yield of the Class A, Class B and Institutional
Class shares will be calculated as set forth below. Total return and yield
are computed separately for each class of shares of the Funds. The
performance data listed below covers periods prior to the adoption of the
current class designations. Shares of the Funds had no class designations
until October 31, 1997, when designations were assigned based upon the sales
charges, Rule 12b-1 fees and shareholder servicing fees applicable to shares
sold thereafter. Total return and yield performance data for periods prior
to October 31, 1997 have been restated to reflect the revised initial sales
charge schedule for the Class A shares and the CDSC for the Class B shares
that became effective on that date. However, the total return and yield
performance data have not been restated to reflect Rule 12b-1 fees for the
Class B shares and shareholder servicing fees for the Class A and B shares,
which will adversely affect performance after October 31, 1997.
Future performance data will reflect Rule 12b-1 fees, shareholder
servicing fees and sales charges, where applicable, as follows:
[CAPTION]
[S] [C] [C] [C]
Class Rule 12b-1 Shareholder Sales Charge
Servicing Fee
---------- ------------- -------------
A None .25% of average Maximum 4.0% initial
daily net assets sales charge
reflected(1)
B .75% of .25% of average 1- and 5- year
periods
average daily daily net assets reflect a 5% and 1%
net assets(1) CDSC, respectively(1)
Institutional None None None
- - -----------------
(1) Except for LB Money Market Fund, which is not subject to initial
sales charges, CDSC or Rule 12b-1 fees.
Calculations of performance data for all Funds except LB Opportunity
Growth Fund in this section reflect the subsidization by Fund affiliates of
fees and expenses relating to the Fund during the subject period. In the
absence of such subsidization actual performance would be lower.
TOTAL RETURN
Average annual total return is computed by determining the average
annual compounded rates of return over the designated periods that, if
applied to the initial amount invested would produce the ending redeemable
value, according to the following formula:
P(1+T)(n) = ERV
[In the above formula "n" is an exponent.]
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
designated period assuming a hypothetical
$1,000 payment made at the beginning of the
designated period
The calculation is based on the further assumptions that the maximum
initial sales charge applicable to the investment is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on
the reinvestment dates during the periods. All accrued expenses are also
taken into account as described later herein.
The following table presents the average annual returns of the Class
A shares for the indicated periods ended October 31, 1997:
AVERAGE ANNUAL TOTAL RETURNS FOR CLASS A SHARES FOR THE INDICATED PERIODS
ENDED
OCTOBER 31, 1997*
[CAPTION]
LB OPPORTUNITY
GROWTH FUND LB FUND LB HIGH YIELD FUND
- - -------------------- ----------------- ------------------
[S] [C] [C] [C] [C] [C]
1 year 3.20% 1 year 21.92% 1 year 9.90%
Since Fund 16.13% 5 years 14.87% 5 years 11.18%
Inception
1/8/93
10 years 13.80% 10 Years 10.98%
<TABLE>
<CAPTION>
LB INCOME FUND LB MUNICIPAL BOND FUND LB MONEY MARKET FUND
- - --------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C>
1 year 3.77% 1 year 3.93% 1 year 4.74%
5 years 5.90% 5 years 6.57% 5 years 3.88%
10 years 8.52% 10 years 8.22% 10 years 5.11%
</TABLE>
[CAPTION]
LB WORLD GROWTH FUND LB MID CAP GROWTH FUND
- - ------------------ ----------------------
[S] [C] [C] [C]
1 Year 3.04% Since Fund 7.16%
Inception
Since Fund 6.80% (5/30/97)
Inception
(9/5/95)
* Reflects the revised initial sales charge schedule for the Class A
shares effective October 31, 1997. Does not reflect the shareholder
servicing fee applicable to the Class A shares after October 31, 1997.
YIELD
Yield is computed by dividing the net investment income per share
earned during a recent month or other specified 30-day period by the
applicable maximum offering price per share on the last day of the period
and annualizing the result, according to the following formula:
[A formula is expressed here that is as follows:
Yield is equal to 2 times the difference between the sixth power of
a number and 1, where that number is equal to the sum of the quotient of a
divided by b and 1.]
Where:
a = dividends and interest earned during the period
minus expenses accrued for the period (net of
voluntary expense reductions by the Investment
Manager)
b = the average daily number of shares outstanding
during the period that were entitled to receive
dividends multiplied by the maximum offering
price per share on the last day of the period
To calculate interest earned (for the purpose of "a" above) on debt
obligations, a Fund computes the yield to maturity of each obligation held
by a Fund based on the market value of the obligation (including actual
accrued interest) at the close of the last business day of the preceding
period, or, with respect to obligations purchased during the period, the
purchase price (plus actual accrued interest). The yield to maturity is then
divided by 360 and the quotient is multiplied by the market value of the
obligation (including actual accrued interest) to determine the interest
income on the obligation for each day of the period that the obligation is
in the portfolio. Dividend income is recognized daily based on published
rates.
In the case of a tax-exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of interest
is used in lieu of the yield to maturity. Where, in the case of a tax-exempt
obligation with original issue discount, the discount based on the current
market value exceeds the then-remaining portion of original issue discount
(market discount), the yield to maturity is the imputed rate based on the
original issue discount calculation. Where, in the case of a tax-exempt
obligation with original issue discount, the discount based on the current
market value is less than the then-remaining portion of original issue
discount (market premium), the yield to maturity is based on the market
value. Dividend income is recognized daily based on published rates.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to
monthly payments of principal and interest ("paydowns"), a Fund accounts for
gain or loss attributable to actual monthly paydowns as a realized capital
gain or loss during the period. Each Fund has elected not to amortize
discount or premium on such securities.
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the
end of the base period, has not been declared as a dividend, but is
reasonably expected to be declared as a dividend shortly thereafter. The
maximum offering price includes, as applicable, a maximum sales charge of
4.0%.
All accrued expenses are taken into account as described later
herein.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to
compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which are insured and/or often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that yield is a function of the kind and
quality of the instruments in the Fund's portfolio, portfolio maturity and
operating expenses and market conditions.
The 30-day yield for the base period ended October 31, 1997,
including the maximum sales charge of 4% for the LB High Yield Fund, LB
Income Fund and LB Municipal Bond Fund were 8.90%, 5.65%, and 4.16%,
respectively.
<R/>
TAX EQUIVALENT YIELD
The LB Municipal Bond Fund may quote its tax equivalent yield. The
LB Municipal Bond Fund's tax equivalent yield is computed by dividing that
portion of such Fund's yield (computed as described under "Yield" above)
which is tax-exempt, by the complement of the combined federal and state
maximum effective marginal rate and adding the result to that portion, if
any, of the yield of such Fund that is not tax-exempt. The complement, for
example, of a tax rate of 31% is 69%, that is 1.00 - 0.31 = 0.69.
The LB Municipal Bond Fund's tax equivalent yields for the 30-day
base period ended October 31, 1997, including the maximum sales charge of 4%
assuming a tax rate of 15%, 28%, 31% and 39.6%, were 4.89%, 5.78%, 6.03% and
6.89%, respectively.
YIELD - MONEY MARKET FUND
When the LB Money Market Fund quotes a "current annualized" yield,
it is based on a specified recent seven calendar-day period. It is computed
by (1) determining the net change, exclusive of capital changes, in the
value of a hypothetical preexisting account having a balance of one share at
the beginning of the period, (2) dividing the net change in account value by
the value of the account at the beginning of the base period to obtain the
base return, then (3) multiplying the base period by 52.14 (365 divided by
7). The resulting yield figure is carried to the nearest hundredth of one
percent.
The calculation includes (1) the value of additional shares
purchased with dividends on the original share, and dividends declared on
both the original share and any such additional shares, and (2) all fees
charge to all shareholder accounts, in proportion to the length of the base
period and the Trust's average account size.
The capital changes excluded from the calculation are realized
capital gains and losses from the sale of securities and unrealized
appreciation and depreciation. The Fund's effective (compounded) yield will
be computed by dividing the seven-day annualized yield as defined above by
365, adding 1 to the quotient, raising the sum to the 365th power, and
subtracting 1 from the result.
Current and effective yields fluctuate daily and will vary with
factors such as interest rates and the quality, length of maturities, and
type of investments in the portfolio.
<TABLE>
<S> <C>
Yield For 7-day Period Ended 10/31/97...................... 4.74%
Effective Yield For 7-day Period Ended 10/31/97............ 4.85%
</TABLE>
ACCRUED EXPENSES
Accrued expenses include all recurring expenses that are charged to
all shareholder accounts in proportion to the length of the base period. The
average annual total return and yield results take sales charges, if
applicable, into account, although the results do not take into account
recurring and nonrecurring charges for optional services which only certain
shareholders elect and which involve nominal fees.
Accrued expenses include the subsidization by Fund affiliates of
fees or expenses relating to a Fund, during the subject period.
NONSTANDARDIZED TOTAL RETURN
A Fund may provide the above described average annual total return
results for periods which end no earlier than the most recent calendar
quarter end and which begin one, five and ten years before such quarter end
and at the commencement of such Fund's operations. In addition, a Fund may
provide nonstandardized total return results for differing periods, such as
for the most recent six months, and/or without taking sales charges into
account. Such nonstandardized total return is computed as otherwise
described under "Total Return" except that the result may or may not be
annualized, and as noted any applicable sales charge may not be taken into
account and therefore not deducted from the hypothetical initial payment of
$1,000.
<PAGE>
PART C
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
PART C
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- -------------------------------------------
(a) Financial Statements
(1) Financial Statements included in PART A (Prospectus) of this
Registration Statement:
(A) Financial Highlights for Lutheran Brotherhood Opportunity
Growth Fund for the fiscal year ended October 31, 1997
(B) Financial Highlights for Lutheran Brotherhood Mid Cap
Growth Fund for the fiscal year ended October 31, 1997
(C) Financial Highlights for Lutheran Brotherhood World
Growth Fund for the fiscal year ended October 31, 1997
(D) Financial Highlights for Lutheran Brotherhood Fund for
the fiscal year ended October 31, 1997
(E) Financial Highlights for Lutheran Brotherhood High Yield
Fund for the fiscal year ended October 31, 1997
(F) Financial Highlights for Lutheran Brotherhood Income Fund
for the fiscal year ended October 31, 1997
(G) Financial Highlights for Lutheran Brotherhood Municipal
Bond Fund for the fiscal year ended October 31, 1997
(H) Financial Highlights for Lutheran Brotherhood Money
Market Fund for the fiscal year ended October 31, 1997
(2) Financial Statements included in the Annual Report to Shareholders
for the period ended October 31, 1997 as incorporated by reference
into PART B (Statement of Additional Information) of this
Registration Statement for Lutheran Brotherhood Opportunity Growth
Fund, Lutheran Brotherhood Mid Cap Growth Fund, Lutheran
Brotherhood World Growth Fund, Lutheran Brotherhood Fund, Lutheran
Brotherhood High Yield Fund, Lutheran Brotherhood Income Fund,
Lutheran Brotherhood Municipal Bond Fund, Lutheran Brotherhood
Money Market Fund:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements (including Financial
Highlights referenced to the Prospectus)
Report of Independent Accountants
(b) Exhibits
(1) First Amended and Restated Master Trust Agreement of the
Registrant (1)
(1)(b) Form of Amendment No. 1 to First Amended and Restated Master
Trust Agreement (2)
(1)(c) Form of Amendment No. 2 to First Amended and Restated Master
Trust Agreement (3)
(1)(d) Form of Amendment No. 3 to First Amended and Restated Master
Trust Agreement (4)
(2) By-Laws of the Registrant (1)
(3) Not applicable
(4) Not applicable
(5)(a) Form of Master Advisory Contract between the Registrant and
Lutheran Brotherhood Research Corp. (1)
(5)(b) Form of Amendment to Master Advisory Contract (2)
(5)(c) Form of Sub-Advisory Agreement between Lutheran Brotherhood
Research Corp. and Rowe Price-Fleming International, Inc. (2)
(6) Form of Amended and Restated Distribution Contract (4)
(7) Not applicable
(8)(a) Form of Custodian Contract between the Registrant and State
Street Bank and Trust Company (1)
(8)(b) Form of Amended and Restated Transfer Agency Agreement between
the Registrant and Lutheran Brotherhood Securities Corp. (4)
(8)(c) Form of Administrative Services Agreement between the Registrant
and Lutheran Brotherhood Securities Corp. (1)
(8)(d) Form of Amendment to Custodian Contract (2)
(8)(f) Administration Contract Between The Lutheran Brotherhood Family
of Funds and Lutheran Brotherhood Securities Corp. (2)
(8)(g) Form of Amendment to Administrative Services Agreement (2)
(8)(h) Form of Amendment to Custodian Contract (3)
(8)(j) Form of Amendment to Administration Contract (3)
(9) Not applicable
(10) Opinion and consent of counsel (1)
(11) Consent of Independent Accountants (1)
(12) Not applicable
(13)(a) Subscription and Investment Letter with respect to each of
Lutheran Brotherhood Opportunity Growth Fund, Lutheran
Brotherhood Fund, Lutheran Brotherhood High Yield Fund, Lutheran
Brotherhood Income Fund, Lutheran Brotherhood Municipal Bond Fund
and Lutheran Brotherhood Money Market Fund (1)
(13)(b) Form of Subscription and Investment Letter with respect to
Lutheran Brotherhood World Growth Fund (2)
(13)(c) Form of Subscription and Investment Letter with respect to
Lutheran Brotherhood Mid Cap Growth Fund (3)
(14)(a)(i) Lutheran Brotherhood Defined Contribution Plan and Trust,
Standardized Target Benefit Plan and Trust Adoption
Agreement, Target Benefit Plan and Trust Adoption Agreement,
Standardized Nonintegrated Profit Sharing Plan and Trust
Adoption Agreement, Standardized Nonintegrated Money Purchase
Plan and Trust Adoption Agreement, Standardized Integrated
Profit Sharing Plan and Trust Adoption Agreement,
Standardized Integrated Money Purchase Plan and Trust
Adoption Agreement, Integrated Money Purchase Plan and Trust
Adoption Agreement, Nonintegrated Money Purchase Plan and
Trust Adoption Agreement, Nonintegrated Profit Sharing Plan
and Trust Adoption Agreement and Integrated Profit Sharing
Plan and Trust Adoption Agreement (1)
(14)(a)(ii) Lutheran Brotherhood Defined Benefit Plan and Trust,
Standardized Nonintegrated Defined Benefit Plan Adoption
Agreement and Standardized Integrated Defined Benefit Plan
and Trust Adoption Agreement (1)
(14)(b) Lutheran Brotherhood Individual Retirement Account, Disclosure
Statement and Custodial Agreement (1)
(14)(c) Lutheran Brotherhood Self-Directed Individual Retirement Account,
Supplemental Disclosure Statement, Disclosure Statement and
Custodial Agreement (1)
(14)(d) Lutheran Brotherhood Tax Sheltered Custodial Account (1)
(14)(e) Lutheran Brotherhood Prototype Simplified Employee Pension Plan
(1)
(15)(a) Plan of Distribution Pursuant to Rule 12b-1 with respect to the
Class B Shares (4)
(15)(b) Shareholder Servicing Plan with respect to the Class A Shares (4)
(15)(c) Shareholder Servicing Plan with respect to the Class B Shares (4)
(16) Schedule of computation of performance data provided in response
to Item 22 of this Registration Statement (1)
(17) Financial Data Schedule (1)
(18) Multiple Class Expense Allocation Plan Adopted Pursuant to Rule
18f-3 (4)
(19)(a) Powers of Attorney for:
(i) Rolf F. Bjelland, Wade M. Voigt, Charles W. Arnason,
Herbert F. Eggerding, Jr., and Ruth E. Randall (1)
(ii) Connie M. Levi (1)
(19)(b) Power of Attorney for Bruce J. Nicholson (2)
(19)(c) Power of Attorney for Noel K. Estenson (4)
- --------------------
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote
Reference Securities Act of 1933 Amendment Date Filed
--------- -------------------------------- ----------
(1) Filed herein
(2) Post-Effective Amendment No. 55 June 16, 1995
(3) Post-Effective Amendment No. 58 March 10, 1997
(4) Post-Effective Amendment No. 60 October 28, 1997
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
As of December 1, 1997 the numbers of record holders of shares of the
Registrant was as follows:
(1) (2)
Number of
Title of Class Record Holders
Shares of Beneficial Interest
Lutheran Brotherhood Opportunity Growth Fund 57,970
Lutheran Brotherhood Mid Cap Growth Fund 4,885
Lutheran Brotherhood World Growth Fund 17,583
Lutheran Brotherhood Fund 90,955
Lutheran Brotherhood High Yield Fund 58,459
Lutheran Brotherhood Income Fund 55,084
Lutheran Brotherhood Municipal Bond Fund 21,730
Lutheran Brotherhood Money Market Fund 53,340
Item 27. Indemnification
Under Article VI of the Registrant's Master Trust Agreement each
of its Trustees and officers or persons serving in such capacity with
another entity at the request of the Registrant ("Covered Person") shall be
indemnified against all liabilities, including, but not limited to, amounts
paid in satisfaction of judgments, in compromises or as fines or penalties,
and expenses, including reasonable legal and accounting fees, 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 Covered Person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office (such
conduct referred to hereafter as "Disabling Conduct"). A determination that
the Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before which the proceeding
was brought that the person to be indemnified was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of
Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling
Conduct by (a) a vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Registrant as defined in section 2(a)(19) of the
1940 Act nor parties to the proceeding, or (b) an independent legal counsel
in a written opinion.
Under the Distribution Agreement between the Registrant and
Lutheran Brotherhood Securities Corp., the Registrant's distributor, the
Registrant has agreed to indemnify, defend and hold Lutheran Brotherhood
Securities Corp., its officers, directors, employees and agents and any
person who controls Lutheran Brotherhood Securities Corp. free and harmless
from and against any loss, claim, damage, liability and expense incurred by
any of them arising out of or based upon any untrue or alleged untrue
statement of material fact, or the omission or alleged omission to state a
material fact necessary to make the statements made not misleading, in a
Registration Statement, the Prospectus or Statement of Additional
Information of the Registrant, or any amendment or supplement thereto,
unless such statement or omission was made in reliance upon written
information furnished by Lutheran Brotherhood Securities Corp.
Under the Amended and Restated Transfer Agent and Service
Agreement between the Registrant and Lutheran Brotherhood Securities Corp.,
the Registrant has agreed, provided that Lutheran Brotherhood Securities
Corp. has at all relevant times acted in good faith and without negligence
or willful misconduct, to indemnify and hold Lutheran Brotherhood Securities
Corp. harmless from and against any and all losses, damages, costs, charges,
attorneys fees, payments, expenses and liability arising out of or
attributable to (a) all actions of Lutheran Brotherhood Securities Corp. or
its agents or subcontractors required to be taken under the Transfer Agency
and Service Agreement or which arise out of the Registrant's lack of good
faith, negligence, or willful misconduct or the breach of any representation
or warranty of the Registrant under the Transfer Agency and Service
Agreement, (c) the reliance on or use by Lutheran Brotherhood Securities
Corp. or its agents or subcontractors of information, records or documents
which are furnished by or on behalf of Registrant, (d) the reliance on or
the carrying out by Lutheran Brotherhood Securities Corp. or its agents or
subcontractors of any instructions or requests by Registrant, or (e) the
offer or sale of shares of the Registrant unknown by Lutheran Brotherhood
Securities Corp. to be in violation of law.
Insofar as indemnification by the Registrant for liabilities
arising under the Securities Act of 1933 may be permitted to trustees,
officers, underwriters and controlling persons of the Registrant, pursuant
to Article VI of the Registrant's Master Trust Agreement, 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 against the Registrant 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 of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
Lutheran Brotherhood Research Corp. has been engaged in the investment
advisory business since 1970. Lutheran Brotherhood, the indirect parent
company of LB Research, also acts as investment adviser to LB Series Fund,
Inc.
The directors and officers of Lutheran Brotherhood Research Corp. are
listed below, together with their principal occupations during the past two
years. (Their titles may have varied during that period.)
Directors:
Robert P. Gandrud, Chairman (President and Chief Executive Officer of
Lutheran Brotherhood)
Rolf F. Bjelland (Executive Vice President of Lutheran Brotherhood)
Bruce J. Nicholson (Executive Vice President of Lutheran Brotherhood)
Paul R. Ramseth (Executive Vice President of Lutheran Brotherhood)
William H. Reichwald (Executive Vice President of Lutheran Brotherhood)
Officers:
Rolf F. Bjelland, President
David K. Stewart, Treasurer (Vice President and Treasurer of Lutheran
Brotherhood)
Otis F. Hilbert, Secretary (Vice President of Lutheran Brotherhood)
Jerald E. Sourdiff, Controller (Senior Vice President and Controller of
Lutheran Brotherhood)
Charles E. Heeren, Vice President (Vice President of Lutheran
Brotherhood)
James R. Olson, Vice President (Vice President of Lutheran Brotherhood)
James M. Walline, Vice President (Vice President of Lutheran
Brotherhood)
Michael A. Binger, Assistant Vice President (Associate Portfolio
Manager of Lutheran Brotherhood)
Randall L. Boushek, Assistant Vice President (Vice President of
Lutheran Brotherhood)
Janet I. Grangaard, Assistant Vice President (Associate Portfolio
Manager of Lutheran Brotherhood)
Thomas N. Haag, Assistant Vice President (Assistant Vice President of
Lutheran Brotherhood)
Fred P. Johnson, Assistant Vice President (Assistant Vice President of
Lutheran Brotherhood)
Michael G. Landreville, Assistant Vice President (Associate Portfolio
Manager of Lutheran Brotherhood)
Gail R. Onan, Assistant Vice President (Associate Portfolio Manager of
Lutheran Brotherhood)
Brian L. Thorkelson, Assistant Vice President (???????)
Scott A. Vergin, Assistant Vice President (Associate Portfolio Manager
of Lutheran Brotherhood)
Marie A. Sorensen, Assistant Vice President (Assistant Vice President
of Lutheran Brotherhood)
James M. Odland, Assistant Secretary (Assistant Vice President of
Lutheran Brotherhood)
Randall L. Wetherille, Assistant Secretary (Assistant Vice President of
Lutheran Brotherhood)
The business address of each of the above directors and officers
employed by Lutheran Brotherhood is 625 Fourth Avenue South, Minneapolis,
Minnesota 55415.
The business and other connections of the officers and directors of Rowe
Price-Fleming International, Inc. ("Sub-advisor") are set forth in the Form
ADV of Sub-advisor currently on file with the Securities and Exchange
Commission (File No. 801-14713)
Item 29. Principal Underwriters
(a) Lutheran Brotherhood Securities Corp. also serves as principal
underwriter for LB Series Fund, Inc.
(b) Directors and officers of Lutheran Brotherhood Securities Corp.
are as follows:
(1) (2) (3)
Positions
Name and Principal and Offices Positions and Offices
Business Address with Underwriter with Registrant
------------------ ---------------- --------------------
William H. Reichwald President --
625 Fourth Avenue South
Minneapolis, MN 55415
Robert P. Gandrud Chairman and Director --
625 Fourth Avenue South
Minneapolis, MN 55415
Otis F. Hilbert Vice President, Counsel and Vice President and
625 Fourth Avenue South Secretary Secretary
Minneapolis, MN 55415
David K. Stewart Treasurer --
625 Fourth Avenue South
Minneapolis, MN 55415
(c) Not Applicable.
Item 30. Location of Accounts and Records
The Registrant maintains the records required to be maintained by it
under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the Investment Company
Act of 1940 at its principal executive offices at 625 Fourth Avenue South,
Minneapolis, Minnesota 55415. Certain records, including records relating to
Registrant's shareholders and the physical possession of its securities, may
be maintained pursuant to Rule 31a-3 under the Investment Company Act of
1940 by the Registrant's transfer agent or custodian at the following
locations:
Name Address
---- -------
Lutheran Brotherhood Securities Corp. 625 Fourth Avenue South
Minneapolis, Minnesota 55415
Norwest Bank Minnesota, N.A. Sixth and Marquette Avenue
Minneapolis, Minnesota 55402
State Street Bank and Trust Company 225 Franklin Street
Boston, Massachusetts 02110
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders upon request and without charge.
The Registrant hereby undertakes, if requested to do so by the holders
of at least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
trustee or trustees and to assist in communications with other shareholders
as required by Section 16(c) of the Investment Company Act of 1940.
The Registrant hereby undertakes to file a post-effective amendment to
its registration for the purposes of filing updated financial statements
(which need not be audited) within the time limit specified by Item 32(b) of
Form N-1A.
Notice
A copy of the Master Trust Agreement of the Registrant is on file with
the Secretary of State of the State of Delaware and notice is hereby given
that the obligations of the Registrant hereunder, and the authorization,
execution and delivery of this amendment to the Registrant's Registration
Statement, shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Registrant as individuals or
personally, but shall bind only the property of the Funds of the Registrant,
as provided in the Master Trust Agreement. Each Fund of the Registrant shall
be solely and exclusively responsible for the payment of any of its direct
or indirect debts, liabilities and obligations, and no other Fund shall be
responsible for the same.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant certifies that it meets all of
the
requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this amendment to its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of
Minneapolis and State of Minnesota, on the 30th day of December, 1997.
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS
By: /s/ Randall L. Wetherille
-------------------------------
Randall L. Wetherille,
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to this registration statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
* Trustee and President December 30, 1997
- ------------------------ (Principal Executive Officer)
Rolf F. Bjelland
* Treasurer December 30, 1997
- ------------------------ (Principal Financial and
Wade M. Voigt Accounting Officer)
* Trustee December 30, 1997
- ------------------------
Charles W. Arnason
* Trustee December 30, 1997
- -------------------------
Herbert F. Eggerding, Jr.
* Trustee December 30, 1997
- -------------------------
Noel K. Estenson
* Trustee December 30, 1997
- ------------------------
Connie M. Levi
* Trustee December 30, 1997
- ------------------------
Bruce J. Nicholson
* Trustee December 30, 1997
- ------------------------
Ruth E. Randall
* By: /s/ Randall L. Wetherille
----------------------------
Randall L. Wetherille,
Attorney-in-Fact Under Powers
of Attorney filed herewith and
incorporated by reference from
Post-Effective Amendment Nos. 51,
52, 55 and 60.
<PAGE>
INDEX TO EXHIBITS
(1) First Amended and Restated Master Trust Agreement of the
Registrant
(2) By-Laws of the Registrant
(5) Form of Master Advisory Contract between the Registrant and
Lutheran Brotherhood Research Corp.
(8)(a) Form of Custodian Contract between the Registrant and State
Street Bank and Trust Company
(8)(c) Form of Administrative Services Agreement between the Registrant
and Lutheran Brotherhood Securities Corp.
(10) Opinion and Consent of Counsel
(11) Consent of Independent Accountants
(13)(a) Subscription and Investment Letter with respect to each of
Lutheran Brotherhood Opportunity Growth Fund, Lutheran
Brotherhood Fund, Lutheran Brotherhood High Yield Fund,
Lutheran Brotherhood Income Fund, Lutheran Brotherhood
Municipal Bond Fund and Lutheran Brotherhood Money Market
Fund
14(a)(i) Lutheran Brotherhood Defined Contribution Plan and Trust,
Standardized Target Benefit Plan and Trust Adoption Agreement,
Target Benefit Plan and Trust Adoption Agreement, Standardized
Nonintegrated Profit Sharing Plan and Trust Adoption Agreement,
Standardized Nonintegrated Money Purchase Plan and Trust Adoption
Agreement, Standardized Integrated Profit Sharing Plan and Trust
Adoption Agreement, Standardized Integrated Money Purchase Plan
and Trust Adoption Agreement, Integrated Money Purchase Plan and
Trust Adoption Agreement, Nonintegrated Money Purchase Plan and
Trust Adoption Agreement, Nonintegrated Profit Sharing Plan and
Trust Adoption Agreement and Integrated Profit Sharing Plan and
Trust Adoption Agreement
14(a)(ii) Lutheran Brotherhood Defined Benefit Plan and Trust, Standardized
Nonintegrated Defined Benefit Plan Adoption Agreement and
Standardized Integrated Defined Benefit Plan and Trust Adoption
Agreement
14(b) Lutheran Brotherhood Individual Retirement Account, Disclosure
Statement and Custodial Agreement
14(c) Lutheran Brotherhood Self-Directed Individual Retirement Account,
Supplemental Disclosure
Statement, Disclosure Statement and Custodial Agreement
14(d) Lutheran Brotherhood Tax Sheltered Custodial Account
14(e) Lutheran Brotherhood Prototype Simplified Employee Pension Plan
(16) Schedule of computation of performance data provided in
response to Item 22 of the Registration Statement
(17) Financial Data Schedule
(19)(a) Powers of Attorney for:
(i) Rolf F. Bjelland, Wade M. Voigt, Charles W. Arnason, Herbert
F. Eggerding, Jr., and Ruth E. Randall (1)
(ii) Connie M. Levi (1)
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 288,569
<INVESTMENTS-AT-VALUE> 316,507
<RECEIVABLES> 925
<ASSETS-OTHER> 987
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 318,419
<PAYABLE-FOR-SECURITIES> 6,384
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 611
<TOTAL-LIABILITIES> 6,995
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 273,657
<SHARES-COMMON-STOCK> 24,005
<SHARES-COMMON-PRIOR> 19,515
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,514
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,256
<NET-ASSETS> 311,424
<DIVIDEND-INCOME> 399
<INTEREST-INCOME> 1,471
<OTHER-INCOME> 0
<EXPENSES-NET> 3,523
<NET-INVESTMENT-INCOME> (1,653)
<REALIZED-GAINS-CURRENT> 11,991
<APPREC-INCREASE-CURRENT> 13,348
<NET-CHANGE-FROM-OPS> 23,685
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 29,850
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,176
<NUMBER-OF-SHARES-REDEEMED> 4,241
<SHARES-REINVESTED> 2,556
<NET-CHANGE-IN-ASSETS> 45,586
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 29,400
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,868
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,523
<AVERAGE-NET-ASSETS> 273,913
<PER-SHARE-NAV-BEGIN> 13.62
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.49
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.97
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> LUTHERAN BROTHERHOOD FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 754,146
<INVESTMENTS-AT-VALUE> 986,629
<RECEIVABLES> 32,996
<ASSETS-OTHER> 98
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,019,723
<PAYABLE-FOR-SECURITIES> 29,633
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 283
<TOTAL-LIABILITIES> 29,916
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 661,072
<SHARES-COMMON-STOCK> 36,690
<SHARES-COMMON-PRIOR> 33,322
<ACCUMULATED-NII-CURRENT> 380
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 95,871
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 232,483
<NET-ASSETS> 989,807
<DIVIDEND-INCOME> 13,120
<INTEREST-INCOME> 1,686
<OTHER-INCOME> 0
<EXPENSES-NET> 7,951
<NET-INVESTMENT-INCOME> 6,855
<REALIZED-GAINS-CURRENT> 99,986
<APPREC-INCREASE-CURRENT> 101,726
<NET-CHANGE-FROM-OPS> 208,567
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,141
<DISTRIBUTIONS-OF-GAINS> 58,599
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,750
<NUMBER-OF-SHARES-REDEEMED> 4,179
<SHARES-REINVESTED> 2,797
<NET-CHANGE-IN-ASSETS> 220,964
<ACCUMULATED-NII-PRIOR> 666
<ACCUMULATED-GAINS-PRIOR> 58,374
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,687
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,337
<AVERAGE-NET-ASSETS> 906,124
<PER-SHARE-NAV-BEGIN> 23.07
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 5.68
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 1.76
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.98
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> LUTHERAN BROTHERHOOD HIGH YIELD FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 832,313
<INVESTMENTS-AT-VALUE> 852,055
<RECEIVABLES> 27,808
<ASSETS-OTHER> 1,408
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 881,271
<PAYABLE-FOR-SECURITIES> 18,100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 221
<TOTAL-LIABILITIES> 18,321
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 824,942
<SHARES-COMMON-STOCK> 90,114
<SHARES-COMMON-PRIOR> 76,324
<ACCUMULATED-NII-CURRENT> 2,736
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,530
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,742
<NET-ASSETS> 862,950
<DIVIDEND-INCOME> 6,791
<INTEREST-INCOME> 70,520
<OTHER-INCOME> 0
<EXPENSES-NET> 6,515
<NET-INVESTMENT-INCOME> 70,796
<REALIZED-GAINS-CURRENT> 16,964
<APPREC-INCREASE-CURRENT> 17,586
<NET-CHANGE-FROM-OPS> 105,346
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 71,373
<DISTRIBUTIONS-OF-GAINS> 2,451
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,532
<NUMBER-OF-SHARES-REDEEMED> 16,218
<SHARES-REINVESTED> 5,476
<NET-CHANGE-IN-ASSETS> 159,803
<ACCUMULATED-NII-PRIOR> 3,313
<ACCUMULATED-GAINS-PRIOR> 1,517
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,911
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,844
<AVERAGE-NET-ASSETS> 776,915
<PER-SHARE-NAV-BEGIN> 9.21
<PER-SHARE-NII> 0.85
<PER-SHARE-GAIN-APPREC> 0.41
<PER-SHARE-DIVIDEND> 0.86
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.58
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> LUTHERAN BROTHERHOOD INCOME FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 795,997
<INVESTMENTS-AT-VALUE> 807,568
<RECEIVABLES> 33,691
<ASSETS-OTHER> 68
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 841,327
<PAYABLE-FOR-SECURITIES> 62,791
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 518
<TOTAL-LIABILITIES> 63,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 810,834
<SHARES-COMMON-STOCK> 90,324
<SHARES-COMMON-PRIOR> 102,485
<ACCUMULATED-NII-CURRENT> 1,620
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (45,822)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,385
<NET-ASSETS> 778,018
<DIVIDEND-INCOME> 1,178
<INTEREST-INCOME> 57,676
<OTHER-INCOME> 0
<EXPENSES-NET> 6,491
<NET-INVESTMENT-INCOME> 52,363
<REALIZED-GAINS-CURRENT> 3,329
<APPREC-INCREASE-CURRENT> 6,683
<NET-CHANGE-FROM-OPS> 62,375
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 52,271
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,449
<NUMBER-OF-SHARES-REDEEMED> 23,297
<SHARES-REINVESTED> 4,687
<NET-CHANGE-IN-ASSETS> (92,958)
<ACCUMULATED-NII-PRIOR> 1,511
<ACCUMULATED-GAINS-PRIOR> (49,133)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,799
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,825
<AVERAGE-NET-ASSETS> 812,912
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.61
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 530,292
<INVESTMENTS-AT-VALUE> 585,787
<RECEIVABLES> 9,751
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 595,540
<PAYABLE-FOR-SECURITIES> 3,584
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93
<TOTAL-LIABILITIES> 3,677
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 540,115
<SHARES-COMMON-STOCK> 66,863
<SHARES-COMMON-PRIOR> 70,896
<ACCUMULATED-NII-CURRENT> 2,082
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,830)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 55,495
<NET-ASSETS> 591,862
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 34,822
<OTHER-INCOME> 0
<EXPENSES-NET> 4,165
<NET-INVESTMENT-INCOME> 30,657
<REALIZED-GAINS-CURRENT> 2,152
<APPREC-INCREASE-CURRENT> 15,005
<NET-CHANGE-FROM-OPS> 47,814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (30,372)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,954
<NUMBER-OF-SHARES-REDEEMED> 10,687
<SHARES-REINVESTED> 2,700
<NET-CHANGE-IN-ASSETS> (17,610)
<ACCUMULATED-NII-PRIOR> 1,804
<ACCUMULATED-GAINS-PRIOR> (7,989)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,413
<AVERAGE-NET-ASSETS> 597,646
<PER-SHARE-NAV-BEGIN> 8.6
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.24
<PER-SHARE-DIVIDEND> 0.44
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.85
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> LUTHERAN BROTHERHOOD MONEY MARKET FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 467,939
<INVESTMENTS-AT-VALUE> 467,939
<RECEIVABLES> 1,114
<ASSETS-OTHER> 677
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 469,730
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 506
<TOTAL-LIABILITIES> 506
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 469,224
<SHARES-COMMON-STOCK> 469,224
<SHARES-COMMON-PRIOR> 417,609
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 469,224
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,727
<OTHER-INCOME> 0
<EXPENSES-NET> 4,199
<NET-INVESTMENT-INCOME> 20,528
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 20,528
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,528
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 807,465
<NUMBER-OF-SHARES-REDEEMED> 775,767
<SHARES-REINVESTED> 19,916
<NET-CHANGE-IN-ASSETS> 51,615
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,210
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,635
<AVERAGE-NET-ASSETS> 442,051
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> LUTHERAN BROTHERHOOD WORLD GROWTH FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 69,492
<INVESTMENTS-AT-VALUE> 74,730
<RECEIVABLES> 178
<ASSETS-OTHER> 370
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 75,278
<PAYABLE-FOR-SECURITIES> 85
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61
<TOTAL-LIABILITIES> 146
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 68,716
<SHARES-COMMON-STOCK> 7,449
<SHARES-COMMON-PRIOR> 5,585
<ACCUMULATED-NII-CURRENT> 304
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 869
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,243
<NET-ASSETS> 75,132
<DIVIDEND-INCOME> 1,170
<INTEREST-INCOME> 182
<OTHER-INCOME> 0
<EXPENSES-NET> 1,234
<NET-INVESTMENT-INCOME> 119
<REALIZED-GAINS-CURRENT> 1,182
<APPREC-INCREASE-CURRENT> 2,471
<NET-CHANGE-FROM-OPS> 3,772
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 258
<DISTRIBUTIONS-OF-GAINS> 248
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,497
<NUMBER-OF-SHARES-REDEEMED> 1,679
<SHARES-REINVESTED> 46
<NET-CHANGE-IN-ASSETS> 22,196
<ACCUMULATED-NII-PRIOR> 255
<ACCUMULATED-GAINS-PRIOR> 173
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 682
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,234
<AVERAGE-NET-ASSETS> 67,960
<PER-SHARE-NAV-BEGIN> 9.48
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.67
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> 1.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
</SERIES>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAY-30-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 15,392
<INVESTMENTS-AT-VALUE> 15,284
<RECEIVABLES> 254
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,570
<PAYABLE-FOR-SECURITIES> 952
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16
<TOTAL-LIABILITIES> 968
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,325
<SHARES-COMMON-STOCK> 1,413
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (26)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 412
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (108)
<NET-ASSETS> 14,603
<DIVIDEND-INCOME> 14
<INTEREST-INCOME> 20
<OTHER-INCOME> 0
<EXPENSES-NET> 60
<NET-INVESTMENT-INCOME> (26)
<REALIZED-GAINS-CURRENT> 412
<APPREC-INCREASE-CURRENT> (108)
<NET-CHANGE-FROM-OPS> 278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,505
<NUMBER-OF-SHARES-REDEEMED> 91
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,603
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 67
<AVERAGE-NET-ASSETS> 7,309
<PER-SHARE-NAV-BEGIN> 9.25
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 1.10
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT (1)
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
----------------------------------------
FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT
as of
September 1, 1993
(C)1993 Goodwin, Procter & Hoar
All Rights Reserved
<PAGE>
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
----------------------
ARTICLE I. NAME AND DEFINITIONS
- --------- --------------------
Section 1.1 Name and Principal Office
Section 1.2 Definitions
(a) "Act"
(b) "By-laws"
(c) "class"
(d) "Commission"
(e) "Declaration of Trust"
(f) "Majority of the Outstanding Voting Shares"
(g) "1940 Act"
(h) "person"
(i) "Shareholder"
(j) "Shares"
(k) "Sub-Trust" or "Series"
(l) "Trust"
(m) "Trustees"
ARTICLE II. PURPOSE OF TRUST
- ---------- ----------------
ARTICLE III. THE TRUSTEES
- ----------- ------------
Section 3.1 Number, Designation, Election, Term, etc.
(a) Initial Trustees
(b) Number
(c) Election and Term
(d) Resignation and Retirement
(e) Removal
(f) Vacancies
(g) Effect of Death, Resignation, etc.
(h) No Accounting
Section 3.2 Powers of Trustees
(a) Investments
(b) Disposition of Assets
(c) Ownership Powers
(d) Subscription
(e) Form of Holding
(f) Reorganization, etc.
(g) Voting Trusts, etc.
(h) Compromise
(i) Partnerships, etc.
(j) Borrowing and Security
(k) Guarantees, etc.
(l) Insurance
(m) Pensions, etc.
(n) Distribution Plans
Section 3.3 Certain Contracts
(a) Advisory
(b) Administration
(c) Distribution
(d) Custodian and Depository
(e) Transfer and Dividend Disbursing Agency
(f) Shareholder Servicing
(g) Accounting
Section 3.4 Payment of Trust Expenses and Compensation of Trustees
Section 3.5 Ownership of Assets of the Trust
Section 3.6 Action by Trustees
ARTICLE IV. SHARES
- ---------- ------
Section 4.1 Description of Shares
Section 4.2 Establishment and Designation of Sub-Trusts and Classes
(a) Assets Belonging to Sub-Trusts
(b) Liabilities Belonging to Sub-Trusts
(c) Dividends
(d) Liquidation
(e) Voting
(f) Redemption by Shareholder
(g) Redemption by Trust
(h) Net Asset Value
(i) Transfer
(j) Equality
(k) Fractions
(1) Conversion Rights
(m) Class Differences
Section 4.3 Ownership of Shares
Section 4.4 Investments in the Trust
Section 4.5 No Pre-emptive Rights
Section 4.6 Status of Shares and Limitation of Personal Liability
Section 4.7 No Appraisal Rights
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS
- --------- ----------------------------------------
Section 5.1 Voting Powers
Section 5.2 Meetings
Section 5.3 Record Dates
Section 5.4 Quorum and Required Vote
Section 5.5 Action by Written Consent
Section 5.6 Inspection of Records
Section 5.7 Additional Provisions
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION
- ---------- ----------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety
Section 6.3 Indemnification of Shareholders
Section 6.4 Indemnification of Trustees, Officers, etc.
Section 6.5 Compromise Payment
Section 6.6 Indemnification Not Exclusive, etc.
Section 6.7 Liability of Third Persons Dealing with Trustees
Section 6.8 Discretion
ARTICLE VII. MISCELLANEOUS
- ----------- -------------
Section 7.1 Duration and Termination of Trust
Section 7.2 Reorganization
Section 7.3 Amendments
Section 7.4 Filing of Copies; References; Headings
Section 7.5 Applicable Law
Section 7.6 Registered Agent
Section 7.7 Name Registration
Section 7.8 Integration
<PAGE>
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
----------------------
FIRST AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made as
of this 1st day of September, 1993, by the Trustees hereunder, and by the
holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust
hereunder, and to issue classes of Shares of any Sub-Trust or divide Shares
of any Sub-Trust into two or more classes, all in accordance with the
provisions hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Delaware business trust in accordance with the
provisions of the Delaware Business Trust Act (12 Del. C. Section 3801, et
seq.), as from time to time amended and including any successor statute of
similar import (the "Act"), and the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby amend and restate the Declaration
of Trust dated July 15, 1993 in its entirety and 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 benefit of the
holders from time to time of shares of beneficial interest in this Trust and
the Sub-Trusts created hereunder as hereinafter set forth.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
Section 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as
"The Lutheran Brotherhood Family of Funds" 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 625 Fourth Avenue South, Minneapolis, Minnesota or such location
as the Trustees may from time to time determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "Act" shall have the meaning given to it in the recitals of this
Declaration of Trust.
(b) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(c) "class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of
Article IV;
(d) "Commission" shall have the meaning given it in the 1940 Act;
(e) "Declaration of Trust" shall mean this First Amended and Restated
Agreement and Declaration of Trust as amended or restated from time to time;
(f) "Majority Of the Outstanding Voting Shares" of the Trust or
Sub-Trust or of a class of a Sub-Trust shall mean the vote, at the annual or
a special meeting of Shareholders duly called, (A) of 67 per centum or more
of the Shares of the Trust or Sub-Trust present at such meeting, (or of a
class of a Sub-Trust, as the case may be) if holders of more than 50 per
centum of the outstanding Shares of the Trust or Sub-Trust (or of a class of
a Sub-Trust, as the case may be) are present or represented by proxy; or (B)
of more than 50 per centum of the outstanding voting Shares of the Trust or
Sub-Trust or of a class of a Sub-Trust, as the case may be, whichever is the
less.
(g) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(h) "person" means a natural person, corporation, limited liability
company, trust, association, partnership (whether general, limited or
otherwise), joint venture or any other entity.
(i) "Shareholder" means a beneficial owner of record of Shares;
(j) "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust and each Sub-Trust of the Trust and/or
any class of any Sub-Trust (as the context may require) shall be divided
from time to time;
(k) "Sub-Trust" or "Series" refers to a series of Shares established
and designated under or in accordance with the provisions of Article IV;
(l) "Trust" refers to the Delaware business trust established by this
Declaration of Trust, inclusive of each and every Sub-Trust established
hereunder; and
(m) "Trustees" refers to the trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article III.
ARTICLE II
----------
PURPOSE OF TRUST
----------------
The purposes of the Trust are (i) to operate as an investment company
and to offer Shareholders of the Trust and each Sub-Trust of the Trust one
or more investment programs primarily in securities and debt instruments,
and (ii) to engage in such activities that are necessary, suitable,
incidental or convenient to the accomplishment of the foregoing.
ARTICLE III
-----------
THE TRUSTEES
------------
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) TRUSTEES. The Trustees hereof and of each Sub-Trust hereunder
shall be Rolf F. Bjelland, Charles W. Arnason, Herbert F. Eggerding, Jr.,
Luther 0. Forde, Bobby I. Griffin, Connie M. Levi and Ruth E. Randall.
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase or decrease the number of Trustees
to a number other than the number theretofore determined. No decrease in
the number of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of such Trustee's term, but the number of
Trustees may be decreased in conjunction with the removal of a Trustee
pursuant to subsection (e) of this Section 3.1.
(c) ELECTION AND TERM. Trustees, in addition to those named above,
may become such by election by Shareholders or the Trustees in office
pursuant to Section 3.1(f). Each Trustee, whether named above or hereafter
becoming a Trustee, shall serve as a Trustee of the Trust and of each Sub-
Trust hereunder during the lifetime of this Trust and until its termination
as hereinafter provided except as such Trustee sooner dies, resigns, retires
or is removed. Subject to Section 16(a) of the 1940 Act, the Trustees may
elect successors and may, pursuant to Section 3.1(f) hereof, appoint
Trustees to fill vacancies. Notwithstanding anything to the contrary
contained in this Section 3.1(c), no person shall serve as a Trustee beyond
the earlier of the end of the month in which he or she attains the age of 70
years, or the end of the month in which he or she completes ten continuous
years of service as Trustee, except that the limitation contained in this
sentence with respect to not serving as Trustee for more than ten years
shall not apply to Rolf F. Bjelland, Charles W. Arnason and Ruth E. Randall,
or any person who is an interested person of the Trust as defined in Section
2(a)(19) of the 1940 Act.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign or retire as a
trustee of the Trust, by written instrument signed by such Trustee and
delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument and shall be effective as to
the Trust and each Sub-Trust hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least three-fourths of the
number of Trustees in office immediately prior to such removal, specifying
the date upon which such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds of the Shares then
outstanding, cast in person or by proxy at any meeting called for the
purpose; or (iii) by a written declaration signed by Shareholders holding
not less than two-thirds of the Shares then outstanding and filed with the
minutes of the Trust. Any such removal shall be effective as to the Trust
and each Sub-Trust hereunder.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement,
removal or incapacity of any of the Trustees, or resulting from an increase
in the number of Trustees by the other Trustees may (but so long as there
are at least two remaining Trustees, need not unless required by the 1940
Act) be filled by a majority of the remaining Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, through the appointment in
writing of such other person as such remaining Trustees in their discretion
shall determine and such appointment shall be effective upon the written
acceptance of the person named therein to serve as a trustee of the Trust
and agreement by such person to be bound by the provisions of this
Declaration of Trust, except that any such appointment in anticipation of a
vacancy to occur by reason of voluntary or mandatory retirement, resignation
or increase in number of Trustees to be effective at a later date shall be
deemed effective upon the effective date of said retirement, resignation or
increase in number of Trustees. As soon as any Trustee so appointed shall
have accepted such appointment and shall have agreed in writing to be bound
by this Declaration of Trust and the appointment is effective, the Trust
estate shall vest in the new Trustee, together with the continuing Trustees,
without any further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
voluntary or mandatory retirement, removal or incapacity of the Trustees, or
any one of them, shall cause a Trustee to cease to be a trustee of the Trust
but shall not operate to annul or terminate the Trust or any Sub-Trust
hereunder or to revoke or terminate any existing agency or contract created
or entered into pursuant to the terms of this Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or
under circumstances which would justify removal for cause, no person ceasing
to be a trustee of the Trust as a result of death, resignation, voluntary or
mandatory retirement, removal or incapacity (nor the estate of any such
person) shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
Section 3.2 POWERS OF TRUSTEES. 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 and the purpose of the Trust. The Trustees in all
instances shall act as principals, and are and shall be free from the
control of the Shareholders. The Trustees shall have full power and
authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not be
bound or limited by present or future laws or customs with regard to
investment by trustees or fiduciaries, but shall have full authority and
absolute power and control over the assets of the Trust and the business of
the Trust to the same extent as if the Trustees were the sole owners of the
assets of the Trust and the business in their own right, including such
authority, power and control to do all acts and things as they, in their
sole discretion, shall deem proper to accomplish the purposes of this Trust.
Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business and 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 from time to time in accordance with the provisions of Section 4.1
hereof establish Sub-Trusts, each such Sub-Trust to operate as a separate
and distinct investment medium and with separately defined investment
objectives and policies and distinct investment purposes; they may from time
to time in accordance with the provisions of Section 4.1 hereof establish
Series or establish classes of Shares of any Series or Sub-Trust or divide
the Shares of any Series or Sub-Trust into classes; they may as they
consider appropriate designate employees and agents who may be denominated
as officers with titles, including, but not limited to, "president," "vice-
president," "treasurer," "secretary," "assistant secretary," "assistant
treasurer," "managing director," "chairman of the board" and "vice chairman
of the board" and who in such capacity may act for and on behalf of the
Trust, as and to the extent authorized by the Trustees, and appoint and
terminate agents and consultants and hire and terminate employees, any one
or more of the foregoing of whom may be a Trustee, and may provide for the
compensation of all of the foregoing; they may appoint from their own
number, and terminate, any one or more committees consisting of two or more
Trustees, including without implied limitation an executive committee, which
may, when the Trustees are not in session and subject to the 1940 Act,
exercise some or all of the power and authority of the Trustees as the
Trustees may determine; in accordance with Section 3.3 they may employ one
or more advisers, administrators, depositories and custodians and may
authorize any depository or custodian to employ subcustodians or agents and
to deposit all or any part of such assets in a system or systems for the
central handling of securities and debt instruments, retain transfer,
dividend, accounting or Shareholder servicing agents or any of the
foregoing, provide for the distribution of Shares by the Trust through one
or more distributors, principal underwriters or otherwise, and subject to
Section 5.3, set record dates or times for the determination of Shareholders
or various of them with respect to various matters; they may compensate or
provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the
Trust or the Trustees on such terms as they deem appropriate; and in general
they may delegate to any officer of the Trust, to any committee of the
Trustees and to any employee, adviser, administrator, distributor,
depository, custodian, transfer and dividend disbursing agent, or any other
agent or consultant of the Trust such authority, powers, functions and
duties as they consider desirable or appropriate for the conduct of the
business and affairs of the Trust, including without implied limitation, the
power and authority to act in the name of the Trust and any Sub-Trust and of
the Trustees, to sign documents and to act as attorney-in-fact for the
Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority for and on behalf of the Trust and each separate Sub-Trust
established hereunder:
(a) INVESTMENTS. To invest and reinvest cash and other property, and
to hold cash or other property uninvested without in any event being bound
or limited by any present or future law or custom in regard to investments
by trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the
Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights
of ownership, with respect to stock or other securities, debt instruments 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, debt
instruments or property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or
property in a form not indicating any trust, whether in bearer, unregistered
or other negotiable form, or in the name of the Trustees or of the Trust or
of any Sub-Trust or in the name of a custodian, subcustodian or other
depository or a nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or issuer,
any security or debt instrument of which is or was 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 or debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities
or debt instruments in acting through a committee, depositary, voting
trustee or otherwise, and in that connection to deposit any security or debt
instrument with, or transfer any security or debt instrument to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security or debt instrument (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) COMPROMISE. To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any Sub-Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or
limited partnerships, limited liability companies and any other combinations
or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and
pledge the assets of the Trust or any part thereof to secure obligations
arising in connection with such borrowing;
(k) GUARANTEES, ETC. 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; and to
mortgage and pledge the Trust property or any part thereof to secure any of
or all such obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance and/or bonding 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, consultants, investment
advisers, managers, administrators,, distributors, principal underwriters,
or independent contractors, or any thereof (or any person connected
therewith), 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 in any such capacity, 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 such
liability;
(m) PENSIONS, ETC. To pay pensions for faithful service, 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; and
(n) DISTRIBUTION PLANS. To adopt on behalf of the Trust or any Sub-
Trust, including with respect to any class thereof, a plan of distribution
and related agreements thereto pursuant to the terms of Rule 12b-1 of the
1940 Act and to make payments from the assets of the Trust or the relevant
Sub-Trust or Sub-Trusts pursuant to said Rule 12b-1 Plan.
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present
and future law or custom in regard to delegation of powers by trustees
generally, the Trustees may, at any time and from time to time and without
limiting the generality of their powers and authority otherwise set forth
herein, enter into one or more contracts with any one or more corporations,
trusts, associations, partnerships, limited partnerships, limited liability
companies, other type of organizations, or individuals (a "Contracting
Party"), to provide for the performance and assumption of some or all of the
following services, duties and responsibilities to, for or on behalf of the
Trust and/or any Sub-Trust, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and
responsibilities in addition to those set forth below as the Trustees may
determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and
in conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust of the
Trust (as that phrase is defined in subsection (a) of Section 4.2), to
manage such investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio transactions
relating to such investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees with respect to
the operations of the Trust and each Sub-Trust (including each class
thereof), to supervise all or any part of the operations of the Trust and
each Sub-Trust, and to provide all or any part of the administrative and
clerical personnel, office space and office equipment and services
appropriate for the efficient administration and operations of the Trust and
each Sub-Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust and each
Sub-Trust (including any classes thereof), to be principal underwriter of
such Shares, and/or to act as agent of the Trust and each Sub-Trust in the
sale of Shares and the acceptance or rejection of orders for the purchase of
Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to
maintain custody of the property of the Trust and each Sub-Trust and
accounting records in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of
the ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the Trustees and
in accordance with the policies of the Trustees and/or the instructions of
any particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or the
Trustees and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the services, duties
and responsibilities provided for, including provisions that are not
inconsistent with the 1940 Act relating to the standard of duty of and the
rights to indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent or limit the
Trust or a Contracting Party from entering into sub-contractual arrangements
relating to any of the matters referred to in Sections 3.3(a) through (g)
hereof.
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 or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships, limited
liability companies or other organizations, or have other business or
interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust
or any Sub-Trust and/or the Trustees 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, any Sub-Trust or its Shareholders,
provided that in the case of any relationship or interest referred to in the
preceding clause (i) on the part of any Trustee or officer of the Trust
either (x) the material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such relationship
or interest and the contract involved is approved in good faith by a
majority of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of
all of the Trustees), (y) the material facts as to such relationship or
interest and as to the contract have been disclosed to or are known by the
Shareholders entitled to vote thereon and the contract involved is
specifically approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is
authorized, approved or ratified by the Trustees or by the Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES.
The Trustees are authorized to pay or to cause to be paid out of the
principal or income of the Trust or any Sub-Trust, or partly out of
principal and partly out of income, and to charge or allocate the same to,
between or among such one or more of the Sub-Trusts and/or one or more
classes of Shares thereof that may be established and designated pursuant to
Article IV, as the Trustees deem fair, all expenses, fees, charges, taxes
and liabilities incurred or arising in connection with the Trust, any Sub-
Trust and/or any class of Shares thereof, 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, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer
agent, dividend disbursing agent, accounting agent, Shareholder servicing
agent, and such other agents, consultants, and independent contractors and
such other expenses and charges as the Trustees may deem necessary or proper
to incur. Without limiting the generality of any other provision hereof,
the Trustees shall be entitled to reasonable compensation from the Trust for
their services as trustees of the Trust and may fix the amount of such
compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust and of each Sub-Trust shall at all times be considered
as vested in the Trust.
Section 3.6 ACTION BY TRUSTEES. Except as otherwise provided by the
1940 Act or other applicable law, this Declaration of Trust or the By-Laws,
any action to be taken by the Trustees on behalf of or with respect to the
Trust or any Sub-Trust or class thereof may be taken by a majority of the
Trustees present at a meeting of Trustees (a quorum, consisting of at least
one-half of the Trustees then in office, being present), within or without
Delaware, including any meeting held by means of a conference telephone or
other 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, or by written
consents of a majority of the Trustees then in office (or such larger or
different number as may be required by the 1940 Act or other applicable
law).
ARTICLE IV
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SHARES
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Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the
Trust shall be divided into Shares, all with $.001 par value, but the
Trustees shall have the authority from time to time to issue Shares in one
or more Series (each of which Series of Shares shall represent the
beneficial interest in a separate and distinct Sub-Trust of the Trust,
including without limitation each Sub-Trust specifically established and
designated in Section 4.2), as they deem necessary or desirable. For all
purposes under this Declaration of Trust or otherwise, including, without
implied limitation, (i) with respect to the rights of creditors and (ii) for
purposes of interpreting the relevant rights of each Sub-Trust and the
Shareholders of each Sub-Trust, each Sub-Trust established hereunder shall
be deemed to be a separate trust. Notice of the limitation of liabilities
of a Sub-Trust shall be set forth in the certificate of trust of the Trust,
and debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Sub-Trust shall be
enforceable against the assets of such Sub-Trust only, and not against the
assets of the Trust generally or any other Sub-Trust. The Trustees shall
have exclusive power without the requirement of Shareholder approval to
establish and designate such separate and distinct Sub-Trusts, and to fix
and determine the relative rights and preferences as between the shares of
the separate Sub-Trusts as to right of redemption and the price, terms and
manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Sub-Trusts shall
have separate voting rights or no voting rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any
Sub-Trust or divide the Shares of any Sub-Trust into classes, each class
having such different dividend, liquidation, voting and other rights as the
Trustees may determine in their sole discretion, and may establish and
designate the specific classes of Shares of each Sub-Trust. The fact that a
Sub-Trust shall have initially been established and designated without any
specific establishment or designation of classes (i.e., that all Shares of
such Sub-Trust are initially of a single class), or that a Sub-Trust shall
have more than one established and designated class, shall not limit the
authority of the Trustees to establish and designate separate classes, or
one or more further classes, of said Sub-Trust without approval of the
holders of the initial class thereof, or previously established and
designated class or classes thereof.
The number of authorized Shares and the number of Shares of each
Sub-Trust or class thereof that may be issued is unlimited, and the Trustees
may issue Shares of any Sub-Trust or class thereof for such consideration
and on such terms as they may determine (or for no consideration if pursuant
to a Share dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in subsection (h) of
Section 4.2). The Trustees may classify or reclassify any unissued Shares
or any Shares previously issued and reacquired of any Sub-Trust or class
thereof into one or more Sub-Trusts or classes thereof that may be
established and designated from time to time. The Trustees may hold as
treasury Shares, reissue for such consideration and on such terms as they
may determine, or cancel, at their discretion from time to time, any Shares
of any Sub-Trust or class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders
of Shares entitled to be treated as such, to the extent provided or referred
to in Section 5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the
then Trustees of an instrument setting forth such establishment and
designation of the relative rights and preferences of the Shares of such
Sub-Trust or class, (ii) upon the execution of an instrument in writing by
an officer of the Trust pursuant to the vote of a majority of the Trustees,
or (iii) as otherwise provided in either such instrument. At any time that
there are no Shares outstanding of any particular Sub-Trust or class
previously established and designated, the Trustees may by an instrument
executed by a majority of their number (or by an instrument executed by an
officer of the Trust pursuant to the vote of a majority of the Trustees)
abolish that Sub-Trust or class and the establishment and designation
thereof. Each instrument establishing and designating any Sub-Trust shall
have the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Sub-Trust (including any classes thereof) of the Trust to the
same extent as if such person were not a Trustee, officer or other agent of
the Trust; and the Trust may issue and sell or cause to be issued and sold
and may purchase Shares of any Sub-Trust (including any classes thereof)
from any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Sub-Trust (including any classes thereof)
generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate six Sub-Trusts: "Lutheran Brotherhood Fund",
"Lutheran Brotherhood Opportunity Growth Fund", "Lutheran Brotherhood Income
Fund", "Lutheran Brotherhood Municipal Bond Fund", "Lutheran Brotherhood
Money Market Fund", and "Lutheran Brotherhood High Yield Fund", each of
which shall initially consist of a single class of Shares. The Shares of
such Sub-Trusts and any Shares of any further Sub-Trust or class thereof
that may from time to time be established and designated by the Trustees
shall (unless the Trustees otherwise determine with respect to some further
Sub-Trust at the time of establishing and designating the same) have the
following relative rights and preferences:
(a) ASSETS BELONGING TO SUB-TRUSTS. All consideration received by the
Trust for the issue or sale of Shares of a particular Sub-Trust or any
classes thereof, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including 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 be held by the Trustees in
trust for the benefit of the holders of Shares of that Sub-Trust or class
thereof and shall irrevocably belong to that Sub-Trust (and be allocable to
any classes thereof) for all purposes, and shall be so recorded upon the
books of account of the Trust. Separate and distinct records shall be
maintained for each Sub-Trust and the assets associated with a Sub-Trust
shall be held and accounted for separately from the other assets of the
Trust, or any other Sub-Trust. Such consideration, assets, income,
earnings, profits, and proceeds thereof, including 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, together with any General Items (as hereinafter defined) allocated
to that Sub-Trust as provided in the following sentence, are herein referred
to as "assets belonging to" that Sub-Trust (and allocable to any classes
thereof). 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 Sub-Trust (collectively "General
Items"), the Trustees shall allocate such General Items to and among any one
or more of the Sub-Trusts 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 Items so allocated to a particular Sub-Trust
shall belong to that Sub-Trust (and be allocable to any classes thereof).
Each such allocation by the Trustees shall be conclusive and binding upon
the holders of all Shares of all Sub-Trusts (including any classes thereof)
for all purposes.
(b) LIABILITIES BELONGING TO SUB-TRUSTS. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect of
that Sub-Trust and all expenses, costs, charges and reserves belonging to
that Sub-Trust, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging to any
particular Sub-Trust shall be allocated and charged by the Trustees to and
among any one or more of the Sub-Trusts established and designated from time
to time in such manner and on such basis as the Trustees in their sole
discretion shall determine. In addition, the liabilities in respect of a
particular class of Shares of a particular Sub-Trust and all expenses,
costs, charges and reserves belonging to that class of Shares, and any
general liabilities, expenses,, costs, charges or reserves of that
particular Sub-Trust which are not readily identifiable as belonging to any
particular class of Shares of that Sub-Trust shall be allocated and charged
by the Trustees to and among any one or more of the classes of Shares of
that Sub-Trust established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion shall determine.
The liabilities, expenses, costs, charges and reserves allocated and so
charged to a Sub-Trust or class thereof are herein referred to as
"liabilities belonging to" that Sub-Trust or class thereof. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall
be conclusive and binding upon the Shareholders, creditors and any other
persons dealing with the Trust or any Sub-Trust (including any classes
thereof) for all purposes. Any creditor of any Sub-Trust may look only to
the assets of that Sub-Trust to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and
which items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof may be paid with such frequency as the
Trustees in their sole discretion may determine, which may be daily or
otherwise pursuant to a standing resolution or resolutions adopted only once
or with such frequency as the Trustees in their sole discretion may
determine, to the holders of Shares of that Sub-Trust or class, from such of
the income and capital gains, accrued or realized, from the assets belonging
to that Sub-Trust, or in the case of a class, belonging to that Sub-Trust
and allocable to that class, as the Trustees in their sole discretion may
determine, after providing for actual and accrued liabilities belonging to
that Sub-Trust or class. All dividends and distributions on Shares of a
particular Sub-Trust or class thereof shall be distributed pro rata to the
holders of Shares of that Sub-Trust or class in proportion to the number of
Shares of that Sub-Trust or class held by such holders at the date and time
of record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees in their sole discretion may determine that no
dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by the
time or times established by the Trustees under such program or procedure.
Such dividends and distributions may be made in cash or Shares of that Sub-
Trust or class or a combination thereof as determined by the Trustees in
their sole discretion or pursuant to any program that the Trustees may have
in effect at the time for the election by each Shareholder of the mode of
the making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with subsection (h) of this Section 4.2.
The Trustees shall have full discretion to the extent not inconsistent
with the 1940 Act to determine which items shall be treated as income and
which items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(d) LIQUIDATION. In the event of the liquidation or dissolution of
the Trust, subject to Section 7.1 hereof, the holders of Shares of each Sub-
Trust or any class thereof that has been established and designated shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Sub-Trust, or in the case of a class, belonging to
that Sub-Trust and allocable to that class, over the liabilities belonging
to that Sub-Trust or class. The assets so distributable to the holders of
Shares of any particular Sub-Trust or class thereof shall be distributed
among such holders in proportion to the number of Shares of that Sub-Trust
or class thereof held by them and recorded on the books of the Trust. The
liquidation of any particular Sub-Trust or class thereof may be authorized
at any time by vote of a majority of the Trustees then in office.
(e) VOTING. On each matter submitted to a vote of the Shareholders,
each holder of a Share shall be entitled to one vote for each whole Share
standing in such Shareholder's name on the books of the Trust irrespective
of the Series thereof or class thereof and all Shares of all Series and
classes thereof shall vote together as a single class; provided, however,
that as to any matter (i) with respect to which a separate vote of one or
more Series or classes thereof is required by the 1940 Act or the provisions
of the writing establishing and designating the Sub-Trust or class, such
requirements as to a separate vote by such Series or class thereof shall
apply in lieu of all Shares of all Series and classes thereof voting
together; and (ii) as to any matter which affects the interests of one or
more particular Series or classes thereof, only the holders of Shares of the
one or more affected Series or classes shall be entitled to vote, and each
such Series or class shall vote as a separate class.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Sub-Trust or any class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part of
such holder's Shares of that Sub-Trust or class thereof at a redemption
price equal to the net asset value per Share of that Sub-Trust or class
thereof next determined in accordance with subsection (h) of this Section
4.2 after the Shares are properly tendered for redemption, subject to any
contingent deferred sales charge or redemption charge in effect at the time
of redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may, subject to the requirements of the 1940 Act,
make payment wholly or partly in securities or other assets belonging to the
Sub-Trust of which the Shares being redeemed are part at the value of such
securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require the Trust to redeem Shares of that
Sub-Trust during any period or at any time when and to the extent
permissible under the 1940 Act.
(g) REDEMPTION BY TRUST. Each Share of each Sub-Trust or class
thereof that has been established and designated is subject to redemption by
the Trust at the redemption price which would be applicable if such Share
was then being redeemed by the Shareholder pursuant to subsection (f) of
this Section 4.2: (i) at any time, in the sole discretion of the Trustees,
or (ii) upon such other conditions as may from time to time be determined by
the Trustees and set forth in the then current Prospectus of the Trust.
Upon such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
(h) NET ASSET VALUE. The net asset value per Share of any Sub-Trust
shall be (i) in the case of a Sub-Trust whose Shares are not divided into
classes, the quotient obtained by dividing the value of the net assets of
that Sub-Trust (being the value of the assets belonging to that Sub-Trust
less the liabilities belonging to that Sub-Trust) by the total number of
Shares of that Sub-Trust outstanding, and (ii) in the case of a class of
Shares of a Sub-Trust whose Shares are divided into classes, the quotient
obtained by dividing the value of the net assets of that Sub-Trust allocable
to such class (being the value of the assets belonging to that Sub-Trust
allocable to such class less the liabilities belonging to such class) by the
total number of Shares of such class outstanding; all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time.
The Trustees may in their sole discretion determine to maintain the net
asset value per Share of any Sub-Trust at a designated constant dollar
amount and in connection therewith may adopt procedures not inconsistent
with the 1940 Act for the continuing declarations of income attributable to
that Sub-Trust as dividends payable in additional Shares of that Sub-Trust
at the designated constant dollar amount and for the handling of any losses
attributable to that Sub-Trust. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed to
the capital of the Trust attributable to that Sub-Trust such Shareholder's
pro rata portion of the total number of Shares required to be cancelled in
order to permit the net asset value per Share of that Sub-Trust to be
maintained, after reflecting such loss, at the designated constant dollar
amount. Each Shareholder of the Trust shall be deemed to have agreed, by
making an investment in any Sub-Trust with respect to which the Trustees
shall have adopted any such procedure, to make the contribution referred to
in the preceding sentence in the event of any such loss.
(i) TRANSFER. All Shares of each particular Sub-Trust or class
thereof shall be transferable, but transfers of Shares of a particular Sub-
Trust or class thereof will be recorded on the Share transfer records of the
Trust applicable to that Sub-Trust or class only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
that Sub-Trust or class and at such other times as may be permitted by the
Trustees.
(j) EQUALITY. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all
Shares of each particular Sub-Trust or class thereof shall represent an
equal proportionate interest in the assets belonging to that Sub-Trust, or
in the case of a class, belonging to that Sub-Trust and allocable to that
class, subject to the liabilities belonging to that Sub-Trust or class, and
each Share of any particular Sub-Trust or class shall be equal to each other
Share of that Sub-Trust or class; but the provisions of this sentence shall
not restrict any distinctions permissible under subsection (c) of this
Section 4.2 that may exist with respect to dividends and distributions on
Shares of the same Sub-Trust or class. The Trustees in their sole
discretion may from time to time divide or combine the Shares of any
particular Sub-Trust or class into a greater or lesser number of Shares of
that Sub-Trust or class without thereby changing the proportionate
beneficial interest in the assets belonging to that Sub-Trust or class or in
any way affecting the rights of Shares of any other Sub-Trust or class.
(k) FRACTIONS. Any fractional Share of any Sub-Trust or class, if any
such fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Sub-Trust or class,
including rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares, and liquidation of the
Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide that holders
of Shares of any Sub-Trust or class thereof shall have the right to convert
said Shares into Shares of one or more other Sub-Trust or class thereof in
accordance with such requirements and procedures as may be established by
the Trustees.
(m) CLASS DIFFERENCES. Subject to Section 4.1, the relative rights
and preferences of the classes of any Sub-Trust may differ in such other
respects as the Trustees may determine to be appropriate in their sole
discretion, provided that such differences are set forth in the instrument
establishing and designating such classes and executed by a majority of the
Trustees (or by an instrument executed by an officer of the Trust pursuant
to a vote of a majority of the Trustees).
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Sub-Trust and each class thereof that has been established and designated.
No certificates certifying the ownership of Shares need be issued except as
the Trustees in their sole discretion may otherwise determine from time to
time. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the use of facsimile signatures, the
transfer of Shares 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 and as to the number of
Shares of each Sub-Trust and class thereof held from time to time by each
such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept or
reject investments in the Trust and each Sub-Trust from such persons and on
such terms and for such consideration, not inconsistent with the provisions
of the 1940 Act, as they from time to time authorize or determine. The
Trustees may authorize any distributor, principal underwriter, custodian,
transfer agent or other person to accept orders for the purchase of Shares
that conform to such authorized terms and to reject any purchase orders for
Shares whether or not conforming to such authorized terms.
Section 4.5 NO PRE-EMPTIVE RIGHTS. Shareholders shall have no
pre-emptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or any Sub-Trust.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights
provided in this Declaration of Trust. Every Shareholder by virtue of
acquiring Shares shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death, incapacity,
dissolution, termination or bankruptcy of a Shareholder during the
continuance of the Trust shall not operate to dissolve or terminate the
Trust or any Sub-Trust thereof nor entitle the representative of such
Shareholder to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of such
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 Shareholder,
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 4.7 NO APPRAISAL RIGHTS. Shareholders shall have no right to
demand payment for their shares or to any other rights of dissenting
shareholders in the event the Trust participates in any transaction which
would give rise to appraisal or dissenters' rights by a shareholder of a
corporation organized under the General Corporation Law of the State of
Delaware, or otherwise.
ARTICLE V
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SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act,
(iii) with respect to any termination or reorganization of the Trust to the
extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in
Section 7.3, and (v) with respect to such additional matters relating to the
Trust as may be required by the 1940 Act, 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. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. Proxies may be given orally or
in writing or pursuant to any computerized or mechanical data gathering
process specifically approved by the Trustees. 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. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
Section 5.2 MEETINGS. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees
from time to time for the purpose of taking action upon any matter requiring
the vote or authority of the Shareholders as herein provided or upon any
other matter deemed by the Trustees in their sole discretion to be necessary
or desirable. Shareholder meetings may be held at such time and place
within the continental United States as may be fixed 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 seven days and not
more than 90 days before such meeting, postage prepaid, stating the time,
place and purpose of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. The Trustees shall
promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so
in writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any
meeting of Shareholders for a period of 30 days after written application by
Shareholders holding at least 10% of the Shares then outstanding requesting
a meeting be called for any other purpose requiring action by the
Shareholders as provided herein or in the By-Laws, then Shareholders holding
at least 10% of the Shares then outstanding may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner provided for
herein in case of call thereof by the Trustees.
Section 5.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any
adjournment thereof, or who are entitled to participate in any dividend or
distribution, or for the purpose of any other action, the Trustees may from
time to time close the transfer books for such period, not exceeding 30 days
(except at or in connection with the termination of the Trust), as the
Trustees may determine; or without closing the transfer books the Trustees
may fix a date and time not more than 90 days prior to the date of any
meeting of Shareholders or other action as the date and time of record for
the determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes
of such other action, and any Shareholder who was a Shareholder at the date
and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action, even though such Shareholder has since that date and
time disposed of such Shareholder's Shares, and no Shareholder becoming such
after that date and time shall be so entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
Section 5.4 QUORUM AND REQUIRED VOTE. Except as otherwise provided by
the 1940 Act or other applicable law, thirty percent of the Shares entitled
to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any meeting of shareholders, whether or not a quorum is
present, may be adjourned for any lawful purpose provided that no meeting
shall be adjourned for more than six months beyond the originally scheduled
meeting date. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting without the
necessity of further notice. A majority of the Shares voted, at a meeting
of which a quorum is present shall decide any questions and a plurality
shall elect a Trustee, except when a different vote is required or permitted
by any provision of the 1940 Act or other applicable law or by this
Declaration of Trust or the By-Laws.
Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may
be taken without a meeting if a majority of Shareholders entitled to vote on
the matter (or such larger proportion thereof as shall be required by the
1940 Act or by any express provision of this Declaration of Trust or the By-
Laws) 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 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders for any lawful purpose reasonably related
to a Shareholder's interest as a Shareholder. The Trustees may from time to
time establish reasonable standards, including standards governing what
information and documents are to be furnished, at what time and location and
at whose expense, with respect to Shareholders' inspection of Trust records.
Section 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
----------
LIMITATION OF LIABILITY; INDEMNIFICATION
----------------------------------------
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE;
NOTICE. All persons extending credit to, contracting with or having any
claim against the Trust shall look only to the assets of the Sub-Trust with
which such person dealt for payment under such credit, contract or claim;
and neither the Shareholders of any Sub-Trust nor the Trustees, nor any of
the Trust's officers, employees or agents, whether past, present or future,
nor any other Sub-Trust shall be personally liable therefor. Every note,
bond, contract, instrument, certificate or undertaking and every other act
or thing whatsoever executed or done by or on behalf of the Trust, any
Sub-Trust or the Trustees or any of them in connection with the Trust shall
be conclusively deemed to have been executed or done only by or for the
Trust (or the Sub-Trust) or the Trustees and not personally. The Trustees
and the Trust's officers, employees and agents shall not be liable to the
Trust or the Shareholders; provided however, that nothing in this
Declaration of Trust shall protect any Trustee or officer, employee or agent
against any liability to the Trust or the Shareholders to which such Trustee
or officer, employee or agent 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 or of such
officer, employee or agent.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice
that the same was executed or made by or on behalf of the Trust or by them
as Trustees or Trustee or as officers or officer 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 the particular Sub-Trust in question, as the case
may be, but the omission thereof shall not operate to bind any Trustees or
Trustee or officers or officer or Shareholders or Shareholder individually
or otherwise invalidate any such note, bond, contract, instrument,
certificate or undertaking.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion
hereunder shall be binding upon everyone interested. A Trustee shall be
liable to the Trust and the Shareholders for such Trustee's 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.
Subject to the foregoing, (a) the Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer, agent,
employee, consultant, adviser, administrator, distributor or principal
underwriter, custodian or transfer, dividend disbursing, Shareholder
servicing or accounting agent of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee; (b) the Trustees
may take advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust and their duties as Trustees, and
shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice; and (c) in discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports made to the
Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract
involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as
such shall not be required to give any bond or surety or any other security
for the performance of their duties. To the extent that, at law or in
equity, a Trustee has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to a Shareholder, any such Trustee acting
under this Declaration of Trust shall not be liable to the Trust or to any
such Shareholder for the Trustee's good faith reliance on the provisions of
this Declaration of Trust. The provisions of this Declaration of Trust, to
the extent that they restrict the duties and liabilities of a Trustee
otherwise existing at law or in equity, are agreed by the Shareholders to
replace such other duties and liabilities of such Trustee.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder
(or former Shareholder) of any Sub-Trust of the Trust shall be charged or
held to be personally liable for any obligation or liability of the Trust
solely by reason of being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other reason, the Trust on
behalf of said Sub-Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment
thereon, and, to the fullest extent permitted by law, the Shareholder or
former Shareholder (or such Shareholder's 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 said Sub-Trust estate to be held harmless from and indemnified
against all loss-and expense arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. To the
fullest extent permitted by law, the Trust shall indemnify (from the assets
of the Sub-Trust or Sub-Trusts in question) 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, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
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 being or having been such a Trustee or officer,
director or trustee, except with respect to any matter as to which it has
been determined that such Covered Person had acted with willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office (such conduct referred to
hereafter as "Disabling Conduct"). A determination that the Covered Person
is entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative proceeding against a
Covered Person for insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the facts, that the
Covered Person was not liable by reason of Disabling Conduct by (a) a vote
of a majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in section 2(a)(19) of the 1940 Act nor parties to
the proceeding, or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time from
funds attributable to the Sub-Trust in question in advance of the final
disposition of any such action, suit or proceeding, provided that the
Covered Person shall have undertaken to repay the amounts so paid to the
Sub-Trust in question if it is ultimately determined that indemnification of
such expenses is not authorized under this Article VI and (i) the Covered
Person shall have provided security for such undertaking, (ii) the Trust
shall be insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested Trustees who are not a
party to the proceeding, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe
that the Covered Person ultimately will be found entitled to
indemnification.
Section 6.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either
for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not parties to the proceeding or (b) by an independent
legal counsel in a written opinion. Approval by the Trustees pursuant to
clause (a) or by independent legal counsel pursuant to clause (b) 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 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.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled.
As used in this Article VI, "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 or threatened, and a "disinterested" person is 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 or threatened. 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.
Section 6.7 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 6.8 DISCRETION. Whenever in this Declaration of Trust the
Trustees are permitted or required to make a decision (a) in their "sole
discretion," "sole and absolute discretion," "full discretion" or
"discretion," or under a similar grant of authority or latitude, the
Trustees shall be entitled to consider only such interests and factors as
they desire, whether reasonable or unreasonable, and may consider their own
interests, and shall have no duty or obligation to give any consideration to
any interests of or factors affecting the Trust or the Shareholders, or (b)
in their "good faith" or under another express standard, the Trustees shall
act under such express standard and shall not be subject to any other or
different standards imposed by this Declaration of Trust or by law or any
other agreement contemplated herein. Each Shareholder and Trustee hereby
agrees that any standard of care or duty imposed in this Declaration of
Trust or any other agreement contemplated herein or under the Act or any
other applicable law, rule or regulation shall be modified, waived or
limited in each case as required to permit the Trustees to act under this
Declaration of Trust or any other agreement contemplated herein and to make
any decision pursuant to the authority prescribed in this Declaration of
Trust.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Sub-Trust or class thereof shall operate to
terminate the Trust. The Trust may be terminated at any time by a majority
of the Trustees then in office subject to a favorable vote of a Majority of
the Outstanding Voting Shares of the Trust.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, 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
to distributable form in cash, securities or other property, or any
combination thereof, and distribute the proceeds to the Shareholders, in
conformity with the provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trust, or any one or more Sub-Trusts,
may, either as the successor, survivor, or non-survivor, (1) consolidate or
merge with one or more other trusts, Sub-Trusts, partnerships, limited
liability companies, associations or corporations organized under the laws
of the State of Delaware or any other state of the United States, to form a
consolidated or merged trust, partnership, limited liability company,
association or corporation under the laws of which any one of the
constituent entities is organized, with the Trust in the case of a merger to
be the survivor or non-survivor of such merger, or (2) transfer a
substantial portion of its assets to one or more other trusts, Sub-Trusts,
partnerships, limited liability companies, associations or corporations
organized under the laws of the State of Delaware or any other state of the
United States, or have one or more such trusts, Sub-Trusts, partnerships,
limited liability companies, associations or corporations merged into or
transfer a substantial portion of its assets to it, any such consolidation,
merger or transfer to be upon such terms and conditions as are specified in
an agreement and plan of reorganization authorized and approved by the
Trustees and entered into by the Trust, or one or more Sub-Trusts as the
case may be, in connection therewith. Any such consolidation, merger or
transfer shall require the affirmative vote of the holders of a Majority of
the Outstanding Voting Shares of the Trust (or each Sub-Trust affected
thereby, as the case may be), except that (a) such affirmative vote of the
holders of Shares shall not be required if the Trust (or Sub-Trust affected
thereby, as the case may be) shall be the survivor of such consolidation or
merger or transferee of such assets; (b) the Trustees may, without
shareholder approval, cause the Trust or any series of the Trust to invest
any or all of its assets in securities issued by a registered investment
company or series thereof, subject to the provisions of the 1940 Act; and
(c) the Trustees may, without shareholder approval, cause the Trust, or any
series of the Trust, to transfer all or substantially all of its assets and
liabilities to another registered investment company having substantially
identical investment objectives and policies in exchange for shares of such
other investment company if, but only if, the Trust or series, as the case
may be, retains the shares of such other investment company as an
investment.
Section 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any
Shareholder or Trustee or repeal the prohibition of assessment upon the
Shareholders without the express consent of each Shareholder or Trustee
involved. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Shareholders) may be amended
at any time, so long as such amendment does not materially adversely affect
the rights of any Shareholder with respect to which such amendment is or
purports to be applicable and so long as such amendment is not in
contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the
Trust pursuant to the vote of a majority of such Trustees). Any amendment
to this Declaration of Trust that materially adversely affects the rights of
Shareholders may be adopted at any time by an instrument in writing signed
by a majority of the then Trustees (or by an officer of the Trust pursuant
to a vote of a majority of such Trustees) when authorized to do so by the
vote in accordance with subsection (e) of Section 4.2 of Shareholders as
specified in Section 5.4 hereof. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the
terms of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate
(which may be a part of such instrument) executed by a Trustee or officer of
the Trust to the effect that such amendment has been duly adopted.
Section 7.4 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. 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, as to the
identities of the Trustees and officers, 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 a whole as the same may be 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 7.5 APPLICABLE LAW. This Declaration of Trust is created
under and is to be governed by and construed and administered according to
the laws of the State of Delaware. The Trust shall be of the type referred
to in Section 3801 of the Act and of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust may exercise
all powers which are ordinarily exercised by such a trust.
Section 7.6 REGISTERED AGENT. RL&F Service Corp. of One Rodney
Square, 10th Floor, 10th and King Streets, City of Wilmington, County of New
Castle, Delaware 19801 is hereby designated as the initial registered agent
for service of process on the Trust in Delaware. The address of the
registered office of the Trust in the State of Delaware is One Rodney
Square, 10th Floor, 10th and King Streets, City of Wilmington, County of New
Castle, Delaware 19801.
Section 7.7 NAME RESERVATION. The Trustees acknowledge that the name
Lutheran Brotherhood or any derivation thereof is the property of Lutheran
Brotherhood and may be used by the Trust or Sub-Trust only so long as
Lutheran Brotherhood consents thereto, which consent may be revoked at any
time.
Section 7.8 INTEGRATION. This Declaration of Trust constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of the day and year first above
written.
/s/Rolf F. Bjelland
------------------------------
Rolf F. Bjelland
/s/Charles W. Arnason
------------------------------
Charles W. Arnason
/s/Herbert f. Eggerding, Jr.
------------------------------
Herbert F. Eggerding, Jr.
/s/Luther O. Forde
------------------------------
Luther O. Forde
/s/Bobby I. Griffin
------------------------------
Bobby I. Griffin
/s/Connie M. Levi
------------------------------
Connie M. Levi
/s/Ruth E. Randall
------------------------------
Ruth E. Randall
famofund\scan-doc\post-#52\exh-1
EXHIBIT (2)
BY-LAWS
OF
LUTHERAN BROTHERHOOD FAMILY OF FUNDS
(A Delaware Business 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 Master Trust Agreement, as from time to time in effect (the "Declaration
of Trust"), of Lutheran Brotherhood Family of Funds, the Delaware business
trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall
be located in Minneapolis, Minnesota.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places either within or without the State of Delaware
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, the Vice Chairman of the Board, the President or
the Treasurer or by two or more Trustees, sufficient notice thereof being
given to each Trustee by the Secretary or an Assistant Secretary or by the
officer of the Trust 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
or her usual or last known business or residence address or to give notice
to him or 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 or her 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 or her. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
2.4 Quorum; Adjournment; Vote Required for Action. 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. At the adjourned
meeting, the Trustees may transact any business which might have been
transacted at the original meeting. Except in cases where the Declaration
of Trust or these By-Laws otherwise provide, the vote of a majority of the
Trustees present at a meeting at which a quorum is present shall be the act
of the Trustees.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a
meeting.
2.6 Attendance. Each Trustee will at all times use his or best efforts to
attend every meeting of the Board of Trustees. If a Trustee is absent from
two consecutive meetings of the Board and if a majority of the Board of
Trustees excluding such Trustee) determine that such absences were without
sufficient cause, then such Board of Trustees shall request the resignation
of the Trustee who was absent. Further, any such Trustee shall not be
included on the slate of candidates recommended by management for reelection
contained in the proxy materials or other proposals for any meeting of the
shareholders.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, 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. The Chairman
of the Board shall be a Trustee and may but need not be a beneficial owner
of the Trust (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. The Chairman of the Board, the President, the Treasurer, and
the Secretary shall be elected annually by the Trustees at a meeting held
within the first four months of the Trust's fiscal year. The meeting at
which the officers are elected shall be known as the annual meeting of
Trustees. Other officers, if any, may be elected or appointed by the
Trustees at said meeting or at any other time. Vacancies in any office may
be filled at any time.
3.3 Tenure. The Chairman of the Board, the President, the Treasurer, and
the Secretary shall hold office until the next annual meeting of the
Trustees and until their respective successors are chosen and qualified, or
in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.4 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 Delaware business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise provide, the
Chairman of the Board, or, if there is none, or in the absence of the
Chairman, the President shall preside at all meetings of the shareholders
and of the Trustees.
3.6 Vice President. The Vice President, or if there be more than one Vice
President, the Vice Presidents in the order determined by the Trustees (or
if there be no such determination, then in the order of their election)
shall in the absence of the President or in the event of his or her
inability or refusal to act, perform the duties of the President, and when
so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice Presidents shall perform such
other duties and have such other powers as the Trustees may from time to
time prescribe.
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 Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the
Trustees (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his or
her inability or refusal to act, perform the duties and exercise powers of
the Treasurer and shall perform such other duties have such other powers as
the Board of Trustees may from time to time prescribe.
3.9 Secretary. The secretary 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 Secretary from any meeting of the Shareholders or Trustees,
an assistant secretary, or if there be none or if he or she is absent, a
temporary secretary chosen at such meeting shall record the proceedings
thereof in the aforesaid books.
3.10 Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees
(or if there be no determination, then in the order of their election),
shall, in the absence of Secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as
the Board of Trustees may from time to time prescribe.
3.11 Resignations and Removals. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the
Chairman, the President or the Secretary 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 elected
by them with or without cause. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee or officer resigning and no
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on
account of such removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such
committee may make rules for the conduct of its business, but unless
otherwise provided by the Trustees or in such rules, its business shall be
conducted so far as possible in the same manner as is provided by these By-
Laws for the Trustees themselves. All members of such committees shall hold
such offices at the pleasure of the Trustees. The Trustees may abolish any
such committee at any time. Any committee to which the Trustees delegate
any of their powers or duties shall keep records of its meetings and shall
report its action to the Trustees. The Trustees shall have power to rescind
any action of any committee, but no such rescission shall have retroactive
effect.
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 and Committees 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. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced die with
the word "Delaware", 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 deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed
by the President, any Vice President, or by the Treasurer and need not bear
the seal of the Trust.
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for shares of the
Trust, the Trustees or the transfer agent may either issue receipts therefor
or may keep accounts upon the books of the Trust for the record holders of
such shares, who shall in either case be deemed, for all purposes hereunder,
to be the holders of certificates for such shares as if they had accepted
such certificates and shall be held to have expressly assented and agreed to
the terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all Shareholders. In that event, a
Shareholder may receive a certificate stating the number of shares owned by
him or her, in such form as shall be prescribed from time to time by the
Trustees. Such certificate shall be signed by the President or a Vice
President and by the Treasurer or Assistant Treasurer. Such signatures may
be facsimiles if the certificate is signed by a transfer agent, or by a
registrar, other than a Trustee, officer or employee of the Trust. In case
any officer who has signed or whose facsimile signature has been placed on
such certificate shall cease to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he were
such officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustees shall prescribe. The
Trust may require the owner of the lost, destroyed or mutilated share
certificate, or his or her legal representative, to give the Trust a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, destruction or mutilation of any such
certificate or the issuance of such new certificate.
9.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if
the instrument of transfer substantially describes the debt or duty that is
intended to be secured thereby. Such new certificate shall express on its
face that it is held as collateral security, and the name of the pledgor
shall be stated thereon, who alone shall be liable as a Shareholder, and
entitled to vote thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written
notice to each Shareholder, require the surrender of shares certificates to
the Trust for cancellation. Such surrender and cancellation shall not
affect the ownership of shares in the Trust.
ARTICLE 10
Dealings with Trustees and Officers
10.1 General. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he
or she were not a Trustee, officer or agent and the Trustees may accept
subscriptions to shares or repurchase shares from any firm or company in
which any Trustee, officer or other agent of the Trust may have an interest.
ARTICLE 11
Amendments to the By-Laws
11.1 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, or by one or more writings signed by such a majority.
EXHIBIT (5)
MASTER ADVISORY CONTRACT
AGREEMENT made as of the day of , 1993 between
Brotherhood Research Corp., a corporation organized under the laws of the
State of Minnesota and having its principal place of business in
Minneapolis, Minnesota (the "Adviser"), and The Lutheran Brotherhood Family
of Funds, a Delaware business trust having its principal place of business
in Minneapolis, Minnesota (the "Trust").
WHEREAS, the Adviser is engaged principally in the business of rendering
investment management services and is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust engages in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust presently offers shares in six series, the Lutheran
Brotherhood Fund, Lutheran Brotherhood Opportunity Growth Fund, Lutheran
Brotherhood Income Fund, Lutheran Brotherhood Municipal Bond Fund, Lutheran
Brotherhood Money Market Fund and Lutheran Brotherhood High Yield Fund, such
six series (the "Initial Funds"), together with all other series
subsequently established by the Trust with respect to which the Adviser
renders investment advisory services pursuant to the terms of this
Agreement, being herein collectively referred to as the "Funds" and
individually as a "Fund".
NOW THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Funds. The Trust hereby appoints the Adviser to act as
investment adviser to the Initial Funds for the period and on the terms
herein set forth. The Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or more
series of shares other than the Initial Funds with respect to which it
desires to retain the Adviser to render management and investment advisory
services hereunder, it shall so notify the Adviser in writing (the
"Notice"), indicating the advisory fee to be payable with respect to the
additional series of shares. If the Adviser is willing to render such
services on the terms provided for herein, it shall execute and deliver the
Notice to the Trust, whereupon such series of shares shall become a Fund
hereunder and said Notice shall be attached to this agreement and when
attached shall be a part hereof.
2. DUTIES OF ADVISER.
The Adviser, at its own expense, shall furnish the following services and
facilities to the Trust and each of the Funds:
(a) Investment Program. The Adviser shall, subject to the provisions of
paragraph 11 hereof, (i) furnish continuously an investment program for each
Fund in compliance with that Fund's investment objective and policies as set
forth in the Trust's current Registration Statement, (ii) determine (subject
to the overall supervision and review of the Board of Trustees of the Trust)
what investments shall be purchased, held, sold or exchanged by each Fund
and what portion if any, of the assets of each Fund shall be held
uninvested, and (iii) make changes on behalf of the Trust in the investments
of each Fund.
3. ALLOCATION OF EXPENSES.
Except for the services or facilities to be provided by the Adviser set
forth in Paragraph 2 above, the Trust and Funds assume and shall pay all
expenses for all other Trust and Funds operations and activities and shall
reimburse the Adviser for any such expense incurred by the Adviser (it being
understood that the Trust shall allocate such expenses between or among its
funds to the extent contemplated by its Master Trust Agreement). The
expenses to be borne by the Trust and Funds shall include, without
limitation:
(a) all expenses of organizing the Trust or forming any series thereof;
(b) all expenses (including information, materials and services other than
services of the Adviser) of preparing, printing and mailing all annual,
semiannual and periodic reports, proxy materials and other communications
(including registration statements, prospectuses and amendments and
revisions thereto) furnished to existing shareholders of the Trust and/or
regulatory authorities;
(c) fees involved in registering and maintaining registration of the Trust
and its shares with the Securities and Exchange Commission and state
regulatory authorities;
(d) any other registration, filing or other fees in connection with
requirements of regulatory authorities;
(e) expenses, including the cost of printing of certificates relating to
the issuance of shares of the Trust and the Funds;
(f) to the extent not paid by the Trust's distributor, the expenses of
maintaining a shareholder account and furnishing, or causing to be
furnished, to each shareholder a statement of account, including the expense
of mailing such statements;
(g) taxes and fees payable by the Trust to federal, state or other
governmental agencies;
(h) expenses related to the redemption of its shares, including expenses
attributable to any program of periodic redemption;
(i) all issue and transfer taxes, brokers' commissions and other costs
chargeable to the Trust or the Funds in connection with securities
transactions to which the Trust is a party, including any portion of such
commissions attributable to research and brokerage services as defined by
Section 28(e) of the Securities Exchange Act of 1934, as amended from time
to time;
(j) the charges and expenses of the custodian appointed by the Trust, or
any depository utilized by such custodian, for the safekeeping of its
property;
(k) charges and expenses of any shareholder servicing agents, transfer
agents and registrars appointed by the Trust, including costs of servicing
shareholder investment accounts;
(l) charges and expenses of independent accountants retained by the Trust;
(m) legal fees and expenses in connection with the affairs of the Trust,
including legal fees and expenses in connection with registering and
qualifying its shares with federal and state regulatory authorities;
(n) compensation and expenses of Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act);
(o) expenses of shareholders' and Trustees' meetings;
(p) membership dues in, and assessments of, the Investment Company
Institute or similar organizations;
(q) insurance premiums on fidelity, errors and omissions and other
coverages;
(r) expenses incurred in connection with any distribution plan adopted by
the Trust in compliance with Rule 12b-1 of the 1940 Act; and
(s) such other non-recurring expenses of the Trust as may arise, including
expenses of actions, suits, or proceedings to which the Trust is a party and
the legal obligation which the Trust may have to indemnify its Trustees or
shareholders with respect thereto.
4. ADVISORY FEE.
For the services and facilities to be provided by the Adviser as set forth
in Paragraph 2 hereof, the Funds shall pay to the Adviser and the Adviser
agrees to accept as full compensation for all services rendered hereunder,
an annual investment advisory fee equal to a percentage of the average daily
net assets of the applicable Fund as set forth on the following Annexes
hereto.
Lutheran Brotherhood Fund - Annex A
Lutheran Brotherhood Opportunity Growth Fund - Annex B
Lutheran Brotherhood Income Fund - Annex C
Lutheran Brotherhood Municipal Bond Fund - Annex D
Lutheran Brotherhood Money Market Fund - Annex E
Lutheran Brotherhood High Yield Fund - Annex F
The advisory fee of each Fund shall be accrued at the rate of 1/365th of the
annual rates shown in the aforementioned Annexes applied to the daily net
assets of such Fund computed as of the close of the New York Stock Exchange
on each day on which the Exchange is open and in the case of Saturdays,
Sundays and other days on which said Exchange will not be open, as of the
close of the last preceding day on which the Exchange shall have been open.
The fee so accrued during each calendar month shall be paid to the Adviser
monthly in arrears.
In the case of commencement or termination of this Agreement with respect to
any Fund during any calendar month, the fee with respect to such Fund for
that month shall be reduced proportionately based upon the number of
calendar days during which it is in effect, and the fee shall be computed
upon the average daily net assets of such Fund for the days during which it
is in effect.
The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation hereunder to the extent the Adviser may,
by notice to the Trust, voluntarily declare.
The Adviser agrees that if the total expenses of any Fund (exclusive of
interest, taxes, brokerage expenses, distribution expenses, extraordinary
items and any other items allowed to be excluded by applicable state law)
for any fiscal year of the Trust exceed the lowest expense limitation
imposed in any jurisdiction in which such Fund is then making sales of its
shares or in which its shares are then qualified for sale, the Adviser will
pay or reimburse such Fund for that excess up to the amount of its advisory
fee payable with respect to that Fund during that fiscal year. The amount
of the monthly advisory fee payable hereunder shall be reduced to the extent
that the monthly expenses of any Fund, on an annualized basis, would exceed
the foregoing limitation. At the end of each fiscal year of the Trust, if
the aggregate annual expenses chargeable to any Fund for that year exceed
the foregoing limitation based upon the average of the monthly average net
asset value of such Fund for the year, the Adviser will promptly reimburse
such Fund for the amount of such excess to the extent not already reimbursed
by reduction of the monthly advisory fee, but if such expenses are within
the foregoing limitation, any excess amount previously withheld from the
advisory fee during that fiscal year will be promptly paid over to the
Adviser.
In the event that this Agreement (i) is terminated with respect to any Fund
as of a date other than the last day of the fiscal year of the Trust or (ii)
commences with respect to any Fund as of a date other than the first day of
the fiscal year of the Trust, then the expenses of such Fund shall be
annualized and the Adviser shall pay to, or receive from, such Fund a pro
rata portion of the amount that the Adviser would have been required to pay
or would have received, if any, had this Agreement remained in effect with
respect to such Fund for the full fiscal year.
5. PORTFOLIO TRANSACTIONS.
In connection with the management of the investment and reinvestment of the
assets of the Trust, the Adviser, acting by its own officers, directors or
employees or by a duly authorized subcontractor, is authorized to select the
brokers or dealers that will execute purchase and sale transactions for the
Trust. In executing portfolio transactions and selecting brokers or
dealers, if any, the Adviser will use reasonable efforts to seek on behalf
of a Fund the best overall terms available. In assessing the best overall
terms available for any transaction, the Adviser shall consider all factors
it deems relevant, including the breadth of the market in and the price of
the 'security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). In evaluating the best
overall terms available, and in selecting the broker or dealer, if any, to
execute a particular transaction, the Adviser may also consider the
brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934) provided to any Fund of the Trust
and/or other accounts over which the Adviser or an affiliate of the Adviser
exercises investment discretion. The Adviser may pay to a broker or dealer
who provides such brokerage and research services a commission for executing
a portfolio transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if, but only if, the Adviser determines in good faith that such commission
was reasonable in relation to the value of the brokerage and research
services provided.
6. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and By-laws of
the Trust it is understood that Trustees, officers, agents and shareholders
of the Trust are or may be interested in the Adviser (or any successor
thereof) as directors, officers, or otherwise, that directors, officers,
agents and shareholders of the Adviser (or any successor) are or may be
interested in the Trust as Trustees, officers, shareholders or otherwise,
that the Adviser (or any such successor thereof) is or may be interested in
the Trust as a shareholder or otherwise and that the effect of any such
adverse interests shall be governed by said Agreement and Declaration of
Trust.
7. LIABILITY OF ADVISER.
Neither the Adviser nor its officers, directors, employees, agents or
controlling persons or assigns shall be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust or its shareholders in
connection with the matters to which this Agreement relates; provided that
no provision of this Agreement shall be deemed to protect the Adviser
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of its duties or the reckless disregard
of its obligations and duties under this Agreement.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
Initial Funds on the date hereof and, with respect to any additional Fund,
on the date of receipt by the Trust of the Notice in accordance with
paragraph l(b) hereof that the Adviser is willing to serve as Adviser with
respect to such Fund. Unless terminated as herein provided, this Agreement
shall remain in full force and effect for two years from the date hereof
with respect to the Initial Funds and, with respect to each additional Fund,
for two years from the date on which such Fund becomes a Fund hereunder.
Subsequent to such initial periods of effectiveness, this Agreement shall
continue in full force and effect for periods of one year thereafter with
respect to each Fund so long as such continuance with respect to such Fund
is approved at least annually (a) by either the Trustees of the Trust or by
vote of a majority of the, outstanding voting securities (as defined in the
1940 Act) of such Fund, and (b), in either event, by the vote of a majority
of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) Amendment. Any amendment to this Agreement shall become effective with
respect to a Fund upon approval of the Adviser and a majority of the
outstanding voting securities (as defined in the 1940 Act) of that Fund.
(c) Termination. This Agreement may be terminated with 'respect to any
Fund at any time, without payment of any penalty, by vote of the Trustees or
by vote of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that Fund, or by the Adviser, in each case on sixty (60)
days' prior written notice to the other party.
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
(e) Approval, Amendment or Termination by Individual Fund. Any approval,
amendment or termination of this Agreement by the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of any Fund
shall be effective to continue, amend or terminate this Agreement with
respect to any such Fund notwithstanding (i) that such action has not been
approved by the holders of a majority of the outstanding voting securities
of any other Fund affected thereby, and (ii) that such action has not been
approved by the vote of a majority of the outstanding voting securities of
the Trust, unless such action shall be required by any applicable law or
otherwise.
9. SERVICES NOT EXCLUSIVE.
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.
10. SUBCONTRACTORS.
The Trust hereby agrees that the Adviser may subcontract for the performance
of any of the services contemplated to be rendered by the Adviser to any
Fund hereunder.
11. LIMITATION OF LIABILITY.
The term "The Lutheran Brotherhood Family of Funds" means and refers to the
Trustees from time to time serving under the Master Trust Agreement of the
Trust dated July 15, 1993 as the same may subsequently thereto have been, or
subsequently hereto may be, amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust
personally, but shall bind only the trust property of the Trust, as provided
in the Master Trust Agreement. The execution and delivery of this Agreement
have been authorized by the Trustees and signed by the President of the
Trust, acting as such, and neither such authorization by such Trustees and
shareholder nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any liability on
any of them personally, but shall bind only the trust property of the Trust
as provided in its Master Trust Agreement. The obligations of any Fund
hereunder shall be the exclusive obligation of that Fund and the Adviser can
only look to the assets of that Fund to satisfy any debt or obligation
incurred by that Fund hereunder.
12. RESERVATION OF NAME.
The parties hereby acknowledge that Lutheran Brotherhood has reserved the
right to grant the non-exclusive use of the name "Lutheran Brotherhood" or
any derivative thereof to any other investment company, investment adviser,
distributor or other business enterprise, and to withdraw from the Trust the
use of the name "Lutheran Brotherhood". The name "Lutheran Brotherhood"
will continue to be used by the Trust and any Fund hereunder only so long as
such use is agreeable to Lutheran Brotherhood.
13. MISCELLANEOUS
(a) Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address
as such other party may designate in writing for the receipt of such
notices.
(b) Severability. I any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall
not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
ATTEST: THE LUTHERAN BROTHERHOOD FAMILY
OF FUNDS
- --------------------------------- By: ----------------------------------
, Secretary , President
ATTEST: LUTHERAN BROTHERHOOD RESEARCH CORP.
- --------------------------------- By: ----------------------------------
, Secretary , President
ANNEX A
Lutheran Brotherhood Fund
Rates of Annual
Advisory Fee as
a Percentage of
Average Daily Average Daily
Net Assets Net Assets
- ------------- ---------------
On the portion of the Fund which is:
$500,000,000 or less .65%
over $500,000,000 but not over $1,000,000,000 .60%
Over $1,000,000,000 .55%
ANNEX B
Lutheran Brotherhood Opportunity Growth Fund
Rates of Annual
Advisory Fee as
a Percentage of
Average Daily Average Daily
Net Assets Net Assets
- ------------- ---------------
On the portion of the Fund which is:
$100.000.000 or less .75%
Over $100,000,000 but not over $250,000,000 .65%
Over $250,000,000 but not over $500,000,000 .60%
Over $500,000,000 but not over $1,000,000,000 .55%
Over $1,000,000,000 .50%
ANNEX C
Lutheran Brotherhood Income Fund
Rates of Annual
Advisory Fee as
a Percentage of
Average Daily Average Daily
Net Assets Net Assets
- ------------- ---------------
On the portion of the Fund which is:
$500,000.000 or less .60%
Over $500,000,000 but not over $1,000,000,000 .575%
Over $1,000,000,000 .55%
ANNEX D
Lutheran Brotherhood Municipal Bond Fund
Rates of Annual
Advisory Fee as
a Percentage of
Average Daily Average Daily
Net Assets Net Assets
- ------------- ---------------
On the portion of the Fund which is:
$500,000,000 or less .575%
Over $500,000,000 but not over $1,000,000,000 .5625%
Over $1,000,000,000 .55%
ANNEX E
Lutheran Brotherhood Money Market Fund
Rates of Annual
Advisory Fee as
a Percentage of
Average Daily Average Daily
Net Assets Net Assets
- ------------- ---------------
On the portion of the Fund which is:
$500,000,000 or less .50%
Over $500,000,000 but not over $1,000,000,000 .475%
Over $1,000,000,000 but not over $1,500,000,000 .45%
Over $1,500,000,000 but not over $2,000,000,000 .425%
Over $2,000,000,000 .40%
ANNEX F
Lutheran Brotherhood High Yield Fund
Rates of Annual
Advisory Fee as
a Percentage of
Average Daily Average Daily
Net Assets Net Assets
- ------------- ---------------
On the portion of the Fund which is:
$500,000,000 or less .65%
Over $500,000,000 but not over $1,000,000,000 .60%
Over $1,000,000,000 .55%
EXHIBIT (8)(a)
CUSTODIAN CONTRACT
Between
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
and
STATE STREET BANK AND TRUST COMPANY
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 3
2.3 Registration of Securities 8
2.4 Bank Accounts 9
2.5 Payments for Shares 10
2.6 Availability of Federal Funds 10
2.7 Collection of Income 10
2.8 Payment of Fund Monies 11
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased 14
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund 15
2.11 Appointment of Agents 15
2.12 Deposit of Fund Assets in Securities System 16
2.12A Fund Assets Held in the Custodian's Direct
Paper System 19
2.13 Segregated Account 21
2.14 Ownership Certificates for Tax Purposes 22
2.15 Proxies 22
2.16 Communications Relating to Portfolio
Securities 23
2.17 Proper Instructions 23
2.18 Actions Permitted Without Express Authority 24
2.19 Evidence of Authority 25
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income 24
4. Records 26
5. Opinion of Fund's Independent Accountants 27
6. Reports to Fund by Independent Public Accountants 27
7. Compensation of Custodian 28
8. Responsibility of Custodian 28
9. Effective Period, Termination and Amendment 30
10. Successor Custodian 31
11. Interpretive and Additional Provisions 33
12. Additional Funds 33
13. Massachusetts Law to Apply 24
14. Prior Contracts 34
15. Shareholder Communications Election 34
CUSTODIAN CONTRACT
This Contract between The Lutheran Brotherhood Family of Funds, a business
trust organized and existing under the laws of Delaware, having its
principal place of business at 625 Fourth Avenue South, Minneapolis,
Minnesota, 55415 hereinafter called the "Fund", and State Street Bank and
Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in six series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in separate series, The
Lutheran Brotherhood High Yield Fund, The Lutheran Brotherhood Money Market
Fund, The Lutheran Brotherhood Municipal Bond Fund, The Lutheran Brotherhood
Fund, The Lutheran Brotherhood Income Fund, and The Lutheran Brotherhood
Opportunity Growth Fund (such series together with all other series
subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 12, being herein referred to as the
"Portfolio(s)");
NOW THEREFORE, 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 the assets of the Portfolios of
the Fund pursuant to the provisions of the Declaration of Trust. The Fund
on behalf of the Portfolio(s) agrees to deliver to the Custodian all
securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be
responsible for any property of a Portfolio held or received by the
Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section 2.17),
the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, but only in accordance with an
applicable vote by the Board of Trustees of the Fund on behalf of the
applicable Portfolio(s), 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.
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 each Portfolio all non-cash property, including all
securities owned by such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street Bank
and Trust Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may 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 Portfolio 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 Portfolio;
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 securities of the Portfolio;
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
Portfolio or into the name of any nominee or nominees of 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) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such case,
the Custodian shall have no responsibility or liability for any loss arising
from the delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own negligence or
willful misconduct;
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
Portfolio, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund on behalf of the Portfolio,
which may be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in connection
with any loans for which collateral is to be credited to the Custodian's
account in the book entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowings by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by the Portfolio of the
Fund;
14) 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 currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio ("Prospectus"),
in satisfaction of requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of 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 of the
Portfolio to be delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper corporate purpose, 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 Portfolio or
in the name of any nominee of the Fund on behalf of the Portfolio or of any
nominee of the Custodian which nominee shall be assigned exclusively to the
Portfolio, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies
having the same investment adviser as the Portfolio, 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 Portfolio under the
terms of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to notify the Fund on a
best efforts basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of each Portfolio 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
Portfolio, other than cash maintained by the Portfolio 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 a Portfolio 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 on
behalf of each applicable Portfolio be approved by vote of a majority of the
Board of Trustees of the Fund. 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 Shares or from the Transfer Agent of the Fund and deposit into the
account of the appropriate Portfolio such payments as are received for
Shares of that Portfolio issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund on behalf of each
such Portfolio and the Transfer Agent of any receipt by it of payments for
Shares of such Portfolio.
2.6 Availability of Federal Funds. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt, of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio 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 such Portfolio which are
deposited into the Portfolio's account.
2.7 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments with
respect to registered securities held hereunder to which each Portfolio
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 its agent thereof and shall
credit such income, as collected, to such Portfolio'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. Income due each Portfolio on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund with
such information or data as may be necessary to assist the Fund in arranging
for the timely delivery to the Custodian of the income to which the
Portfolio is properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall pay
out monies of a Portfolio in the following cases only:
1) Upon the purchase of securities, options, futures contracts or options
on futures contracts for the account of the Portfolio but only (a) against
the delivery of such securities or evidence of title to such options,
futures contracts or options on futures contracts 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 or
its agent for this purpose) registered in the name of the Portfolio or in
the name of a nominee of the Custodian referred to in Section 2.3 hereof or
in proper form for transfer; (b) in the case of a purchase effected through
a Securities System, in accordance with the conditions set forth in Section
2.12 hereof; (c) in the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth in Section 2.12A; (d) in
the case of repurchase agreements entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank, or a broker-dealer which
is a member of NASD, (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 Portfolio of securities owned by the
Custodian along with written evidence of the agreement by the Custodian to
repurchase such securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions from the Fund as
defined in Section 2.17;
2) In connection with conversion, exchange or surrender of securities owned
by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of the
Portfolio: 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 any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of securities
sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the Portfolio, a certified
copy of a resolution of the Board of 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.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of securities for the account of a Portfolio
is made by the Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the Fund on behalf of
such Portfolio 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.
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 Declaration of Trust and any applicable votes of the
Board of 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 a Portfolio, 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. In connection with the redemption or repurchase of Shares of
the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the holder
of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
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, however, 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 a Portfolio 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, collectively referred to herein as
"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 Portfolio 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 Portfolio
which are maintained in a Securities System shall identify by book-entry
those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the
Portfolio 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 Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon (i) receipt of advice from the
Securities System that payment 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 Portfolio.
Copies of all advices from the Securities System of transfers of securities
for the account of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on behalf of
the Portfolio confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall furnish to the
Fund on behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the Securities System for the account
of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio 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 from the Fund on behalf of the
Portfolio 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 the benefit of the Portfolio for any loss or
damage to the Portfolio 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 Portfolio has not been made whole for any such loss or damage.
2.12A Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will be
effected in the absence of Proper Instructions from the Fund on behalf of
the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account ('Account') of
the Custodian in the Direct Paper System which shall not include any assets
of the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the portfolio
which are maintained in the Direct Paper System shall identify by book-entry
those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of the
Portfolio upon the making of an entry on the records of the Custodian to
reflect such payment and transfer of securities to the account of the
Portfolio. The Custodian shall transfer securities sold for the account of
the Portfolio upon the making of an entry on the records of the Custodian to
reflect such transfer and receipt of payment for the account of the
Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio, in
the form of a written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each day's
transaction in the Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with any
report on its system of internal accounting control as the Fund may
reasonably request from time to time.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio establish
and maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii) for
purposes of segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for
the purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and
(iv) for other proper corporate purposes, but only, in the case of clause
(iv), upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary, setting forth
the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.14 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 each Portfolio held by it and in connection with
transfers of securities.
2.15 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 Portfolio or a nominee of the Portfolio, all proxies, without indication
of the manner in which such proxies are to be voted, and shall promptly
deliver to the Portfolio such proxies, all proxy soliciting materials and
all notices relating to such securities.
2.16 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the Fund
for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put options written
by the Fund on behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from issuers
of the securities being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Portfolio 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 Portfolio desires to take action with
respect to any tender offer, exchange offer or any other similar
transaction, the Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
2.17 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 Board of Trustees 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 if the Custodian reasonably believes them 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 Board of Trustees of the
Fund accompanied by a detailed description of procedures approved by the
Board of Trustees, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied that such procedures
afford adequate safeguards for the Portfolios' assets. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a segregated
asset account in accordance with Section 2.13.
2.18 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund on behalf of each
applicable Portfolio:
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 accounted for to the
Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, 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 Portfolio except as otherwise directed by
the Board of Trustees of the Fund.
2.19 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other
instrument or paper 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 Board of 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 Board of
Trustees pursuant to the Declaration of Trust as described in such 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 Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value
per share of the outstanding shares of each Portfolio or, if directed in
writing to do so by the Fund on behalf of the Portfolio, 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
Portfolio as described in the Fund's currently effective prospectus related
to such Portfolio 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 each
Portfolio shall be made at the time or times described from time to time in
the Fund's currently effective prospectus related to such Portfolio.
4. Records
The Custodian shall with respect to each Portfolio 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 3la-1 and 3la-2 thereunder. 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 each Portfolio 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.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the preparation of
the Fund's Form N-lA, 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, on behalf of each of the Portfolios 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, futures contracts and options on
futures contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian under
this Contract; such reports, 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, the reports 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
on behalf of each applicable Portfolio 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, including any futures commission merchant acting pursuant to the
terms of a three-party futures or options agreement. 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 on behalf of a Portfolio 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 or the Portfolio being liable
for the payment of money or incurring liability of some other form, the Fund
on behalf of the Portfolio, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an amount and
form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumes settlement)
for the benefit of a Portfolio 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, any
property at any time held for the account of the applicable Portfolio 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 such Portfolio's assets to the extent necessary to obtain
reimbursement.
9. Effective Period, Termination and Agreement
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 thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not with respect to a Portfolio
act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Fund has approved the initial use of a particular Securities
System by such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has reviewed
the use by such Portfolio of such Securities System, as required in each
case by Rule 17f-4 under the Investment Company Act of 1940, as amended and
that the Custodian shall not with respect to a Portfolio act under Section
2.12A hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved
the initial use of the Direct Paper System by such Portfolio and the receipt
of an annual certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has reviewed the use by such Portfolio of the Direct Paper
System; 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 Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may at
any time by action of its Board of 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 on behalf of each applicable
Portfolio 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 for the Fund or one or more of the Portfolios shall
be appointed by the Board of 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 of
each applicable Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each such
Portfolio held in a Securities System.
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 Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer
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 Board of 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 on behalf of each applicable
Portfolio and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor custodian all of
the securities of each such Portfolio held in any Securities System.
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 owing to
failure of the Fund to procure the certified copy of the vote referred to or
of the Board of 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 on behalf of each of the Portfolios, 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 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. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to The Lutheran Brotherhood High Yield Fund, The Lutheran
Brotherhood Money Market Fund, The Lutheran Brotherhood Municipal Bond Fund,
The Lutheran Brotherhood Fund, The Lutheran Brotherhood Income Fund, and The
Lutheran Brotherhood Opportunity Growth Fund with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
13. 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.
14. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
15. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether it
authorizes the Custodian to provide the Fund's name, address, and share
position to requesting companies whose securities the Fund owns. If the
Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes"
or does not check either "yes" or "no" below, the Custodian is required by
the rule to treat the Fund as consenting to disclosure of this information
for all securities owned by the Fund or any funds or accounts established by
the Fund. For the Fund's protection, the Rule prohibits the requesting
company from using the Fund's name and address for any purpose other than
corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the
Fund's name, address, and share positions.
NO [ ] The Custodian is not authorized to release
the Fund's name, address, and share positions.
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 _________ day of ______________,
1993.
ATTEST THE LUTHERAN BROTHERHOOD FAMILY
OF FUNDS
- ------------------------------------ By--------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
- ------------------------------------ By---------------------------------
Assistant Secretary Executive Vice President
EXHIBIT (8)(c)
ADMINISTRATION CONTRACT
LUTHERAN BROTHERHOOD FUNDS TRUST
This Agreement is made as of this day of , 1993,
------ ----------------
between Lutheran Brotherhood Securities Corp., a Pennsylvania corporation
("LBSC"), as provider of administrative management and services, and The
Lutheran Brotherhood Family of Funds Trust, a Delaware business trust (the
"Trust").
WHEREAS, the Trust engages in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust presently offers shares in six series, the
[ ], such six series (the "Initial Funds"), together with all
---------
other series subsequently established by the Trust with respect to which
LBSC services pursuant to the terms of this Agreement, being herein
collectively referred to as the "Funds" and individually as a "Fund."
WHEREAS, LBSC is, and has been since 1970, a qualified broker-dealer of
mutual funds, and has the experience and competence to provide
administrative management and service to each of the Funds; and
WHEREAS, the Trust desires to retain LBSC to furnish administrative
management and services to the Fund and LBSC is willing to furnish such
administrative management and services:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT AND ACCEPTANCE. The Trust appoints LBSC as
administrative manager of the Initial Funds, and LBSC accepts such
appointment and agrees to render the services hereby set forth for the
compensation herein provided.
In the event that the Trust establishes one or more series of shares
other than the Initial Funds with respect to which it desires to retain LBSC
to render administrative services hereunder, it shall so notify LBSC in
writing (the "Notice"). If LBSC is willing to render such services on the
terms as provided for herein, it shall execute and deliver the Notice to the
Trust whereupon such series of shares shall become a Fund hereunder and said
Notice shall be attached to this agreement and when attached shall be a part
hereof.
2. DUTIES OF ADMINISTRATIVE MANAGER. LBSC will provide or procure
administrative services from Lutheran Brotherhood (or one or more of its
subsidiaries) or other vendors as appropriate for the Trust and each of the
Funds and, in so doing, will act in conformity with the Master Trust
Agreement and Bylaws of the Trust, the current registration statement of the
Trust, the requirements of the 1940 Act and all other applicable federal and
state laws and regulations.
3. ADMINISTRATIVE SERVICES. The term administrative services means
all services necessary to conduct the business operations of the Trust and
each of the Funds, except those certain services that are provided to the
Trust and each of the Funds pursuant to the following contracts:
CONTRACT SERVICE PROVIDER
-------- ----------------
Investment Advisory Contract Lutheran Brotherhood Research Corp.
Transfer Agent Contract LBSC
Distribution Contract LBSC
Custodian Contract State Street Bank
Administrative Services include, but are not necessarily limited to, the
following:
(a) Preparation, printing, filing and distribution of all material
required by the Securities and Exchange Commission and state regulatory
authorities such as registration statements, proxy materials, audited
financial statements, and other similar documents.
(b) Preparation and filing of federal and state tax returns.
(c) Internal Auditing services.
(d) In-house legal services.
(e) Accounting Services including preparation of financial
statements.
4. PRICE. Administrative Services provided by LBSC or procured from
Lutheran Brotherhood will be billed to the Trust or the particular Fund to
which the services were provided, as the case may be, at approximate cost as
determined by Lutheran Brotherhood's customary cost accounting system and
approved or ratified by a majority of the Trustees of the Trust including a
majority of the Trust's disinterested Trustees. Administrative services
procured from other vendors will be billed to the Trust or the particular
Fund to which the services were provided, as the case may be, at actual
cost. The Trust agrees to pay or to cause the applicable Fund to pay the
amounts so determined on a monthly basis.
5. BOOKS AND RECORDS. LBSC agrees to provide reports and records
reasonably necessary for the Board of Trustees of the Trust to determine the
accuracy of any item of expense charged to the Trust by LBSC pursuant to
this agreement. LBSC agrees (a) that all records which it maintains for the
Trust are the property of the Trust and shall surrender promptly to the
Trust any such records upon written request, and (b) to properly retain all
records required to be maintained.
6. SERVICES NOT EXCLUSIVE. The services furnished by LBSC hereunder
are not to be deemed exclusive to the Trust and LBSC shall be free to
furnish similar and other services to others.
7. AUDIT, INSPECTION AND VISITATION. LBSC shall make available during
regular business hours all records and other data created and maintained
pursuant to the provisions of this Agreement for the reasonable audit and
inspection by the Trust, any person retained by the Trust, or any regulatory
agency having authority over the Trust.
8. LIMITATION OF LIABILITY OF LBSC AND VERIFICATION OF INFORMATION.
LBSC shall not be liable for any error of judgment or mistake of law for any
loss suffered by the Trust or any Fund in connection with the matters to
which this Agreement relates except a loss resulting from negligence on its
part or the part of Lutheran Brotherhood or any subsidiary in the
performance of services under this Agreement.
LBSC shall have no obligation to verify the accuracy of any information
provided by State Street Bank and Trust Company or affiliates to LBSC in
order to assist LBSC with the terms of this Agreement.
9. DURATION AND TERMINATION.
(a) This Agreement shall become effective on the date hereof,
provided that it has been approved on behalf of the Fund by a majority of
the Trustees of the Trust including a majority of the Trust's disinterested
Trustees.
(b) This Agreement shall continue in effect for one year from the
above effective date unless sooner terminated as provided herein.
Thereafter, this Agreement shall continue for successive periods of twelve
months each, provided that such continuance is approved at least annually by
a majority of the Trustees of the Trust including a majority of the Trust's
disinterested Trustees.
(c) This Agreement may be terminated on behalf of the Trust or any
Fund at any time, without the payment of any penalty, by vote of a majority
of the Trust's Trustees or by vote of a majority of the outstanding voting
securities of the terminating Fund on sixty days' written notice to LBSC.
LBSC may terminate this Agreement without the payment of any penalty, on
sixty days' written notice to the Trust or any particular Fund. Termination
of this Agreement with respect to a particular Fund, shall not affect this
Agreement's continuation with respect to any non-terminating Fund or the
Trust.
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, except by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall
be effective until approved by a majority of the Trustees of the Trust
including a majority of the Trust's disinterested Trustees, or by a vote of
a majority of the outstanding voting securities of the Trust.
11. USE OF NAMES. The Trust shall not use the names of LBSC or
Lutheran Brotherhood in any material without prior approval by LBSC. LBSC
hereby consents to the use of its name which merely refers in accurate terms
to its appointment hereunder or which is required by the Securities and
Exchange Commission or other regulatory authorities.
12. RELATIONS WITH TRUST. Subject to and in accordance with the Master
Trust Agreement and By-laws of the Trust it is understood that Trustees,
officers, agents and shareholders of the Trust are or may be interested in
the LBSC (or any successor thereof) as directors, officers, or otherwise,
that directors, officers, agents and shareholders of the LBSC (or any
successor) are or may be interested in the Trust as Trustees, officers,
shareholders or otherwise, that LBSC (or any such successor thereof) is or
may be interested in the Trust as a shareholder or otherwise and that the
effect of any such adverse interests shall be governed by said Agreement and
Declaration of Trust.
13. LIMITATION OF LIABILITY. The term [name of Trust] means and refers
to the Trustees from time to time serving under the Master Trust Agreement
of the Trust dated [date of Trust Instrument] as the same may subsequently
thereto have been, or subsequently hereto may be, amended. It is expressly
agreed that the obligations of the Trust hereunder shall not be binding upon
any of the Trustees, shareholders, nominees, officers, agents or employees
of the Trust personally, but shall bind only the trust property of the
Trust, as provided in the Master Trust Agreement. The execution and
delivery of this Agreement have been authorized by the Trustees and signed
by the President of the Trust, acting as such, and neither such
authorization by such Trustees and shareholder nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust as provided in its Master Trust
Agreement. The obligations of any Fund hereunder shall be the exclusive
obligation of that Fund and LBSC can only look to the assets of that Fund to
satisfy any debt or obligation incurred by that Fund hereunder.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
15. CHOICE OF LAW. This agreement shall be construed in accordance
with the laws of the State of Delaware and any applicable federal law.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their officers designated below as of the day and year first
above written.
Attest: Lutheran Brotherhood Funds Trust
By: By:
--------------------------- ------------------------------
Attest: Lutheran Brotherhood Securities Corp.
By: By:
----------------------------- --------------------------------
EXHIBIT (10)
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
TELEX 94-0640
CABLE - GOODPROCT, BOSTON
August 26, 1993
The Lutheran Brotherhood Family of Funds
625 Fourth Avenue South
Minneapolis, MN 55415
Gentlemen:
As counsel to The Lutheran Brotherhood Family of Funds, a business
trust organized under the laws of the State of Delaware (the "Trust"), we
have been asked to render our opinion in connection with the proposed
issuance by the Trust of shares of beneficial interest of Lutheran
Brotherhood Opportunity Growth Fund, Lutheran Brotherhood Fund, Lutheran
Brotherhood High Yield Fund, Lutheran Brotherhood Income Fund, Lutheran
Brotherhood Municipal Bond Fund and Lutheran Brotherhood Money Market Fund
(the "Funds"), each of which is a series of the Trust which has been
established and designated pursuant to Section 4.2 of Article IV of the
Trust's Master Trust Agreement dated July 15, 1993, all as more fully
described in the Prospectus and Statement of Additional Information
contained in Post-Effective Amendment No. 51 under the Securities Act of
1933 to the Registration Statement on Form N-lA (Securities Act File No. 33-
10327) to be filed by the Trust with the Securities and Exchange Commission
(as amended, the "Registration Statement").
We wish to advise you that we have examined such documents and
questions of law as we have deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Trust has been duly organized and is validly existing pursuant
to the laws of the State of Delaware; and
2. The shares of beneficial interest of the Funds which are described
in the foregoing Registration Statement will, when sold in accordance with
the terms of the Prospectus and Statement of Additional Information in
effect at the time of the sale, be legally issued, fully paid and non-
assessable by the Trust.
We consent to a copy of this opinion being filed as an exhibit to the
foregoing Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar
GOODWIN, PROCTER & HOAR
EXHIBIT 13(a)
LUTHERAN BROTHERHOOD MONEY MARKET FUND
SUBSCRIPTION AGREEMENT
--------------------------------------
Lutheran Brotherhood Money Market Fund (the "Fund"), a series of The
Lutheran Brotherhood Family of Funds, an unincorporated association of the
type commonly referred to as a business trust organized under the laws of
the State of Delaware (the "Trust"), and Lutheran Brotherhood Money Market
Fund, Inc., an unincorporated association of the type commonly referred to
as a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Purchaser"), hereby agree with each other as follows:
1. The Fund hereby offers the Purchaser and the Purchaser hereby
purchases one (1) share of beneficial interest, $.001 par value per share,
of the Fund (the "Share") at a price of $10.00. The Fund hereby
acknowledges receipt from the Purchaser of payment in full for the Share.
2. The Purchaser represents and warrants to the Fund that in
connection with its purchase of the Share hereunder, it understands that:
(i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) the sale of the Share to the Purchaser is
made in reliance on such sale being exempt under Section 4(2) of the 1933
Act as not involving any public offering; and (iii) in part, the reliance
of the Fund on such exemption is predicated on the representation, which the
Purchaser hereby confirms, that the Purchaser is acquiring the Share for
investment for its own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Share
or of any interest therein. The Purchaser hereby agrees that it will not
sell, assign or transfer the Share or any interest therein unless and until
the Share has been registered under the 1933 Act or the Fund has received an
opinion of counsel indicating that said sale, assignment or transfer will
not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
3. The names "The Lutheran Brotherhood Family of Funds", "Lutheran
Brotherhood Money Market Fund", "Trustees of The Lutheran Brotherhood Family
of Funds" and "Trustees of Lutheran Brotherhood Money Market Fund" refer,
respectively, to the Trust, the Fund, and the Trustees of the Trust as
trustees but not individually or personally, acting from time to time under
the Trust's Master Trust Agreement dated July 15, 1993, which is hereby
referred to and a copy of which is on file at the principal office of the
Trust. The obligations of "The Lutheran Brotherhood Family of Funds" and
the "Lutheran Brotherhood Money Market Fund" entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents of the
Trust or the Fund are made not individually, but in such capacities, and are
not binding upon any of the Trustees, holders of shares of beneficial
interest of the Fund or representatives of the Trustees personally, but bind
only the Trust assets, and all persons dealing with the Fund or the Trust
must look solely to the Trust property for the enforcement of any claims
against the Fund or the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 21st day of July, 1993.
--------
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS, on behalf
of its Lutheran Brotherhood
Money Market Fund series
By: /s/Rolf F. Bjelland
---------------------------
LUTHERAN BROTHERHOOD
MONEY MARKET FUND
By: /s/Rolf F. Bjelland
---------------------------
<PAGE>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
SUBSCRIPTION AGREEMENT
--------------------------------------------
Lutheran Brotherhood Opportunity Growth Fund (the "Fund"), a series of
The Lutheran Brotherhood Family of Funds, an unincorporated association of
the type commonly referred to as a business trust organized under the laws
of the State of Delaware (the "Trust"), and Lutheran Brotherhood Opportunity
Growth Fund, Inc., a corporation organized under the laws of the State of
Minnesota (the "Purchaser"), hereby agree with each other as follows:
1. The Fund hereby offers the Purchaser and the Purchaser hereby
purchases one (1) share of beneficial interest, $.001 par value per share,
of the Fund (the "Share") at a price of $10.00. The Fund hereby
acknowledges receipt from the Purchaser of payment in full for the Share.
2. The Purchaser represents and warrants to the Fund that in
connection with its purchase of the Share hereunder, it understands that:
(i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) the sale of the Share to the Purchaser is
made in reliance on such sale being exempt under Section 4(2) of the 1933
Act as not involving any public offering; and (iii) in part, the reliance
of the Fund on such exemption is predicated on the representation, which the
Purchaser hereby confirms, that the Purchaser is acquiring the Share for
investment for its own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Share
or of any interest therein. The Purchaser hereby agrees that it will not
sell, assign or transfer the Share or any interest therein unless and until
the Share has been registered under the 1933 Act or the Fund has received an
opinion of counsel indicating that said sale, assignment or transfer will
not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
3. The names "The Lutheran Brotherhood Family of Funds", "Lutheran
Brotherhood Opportunity Growth Fund", "Trustees of The Lutheran Brotherhood
Family of Funds" and "Trustees of Lutheran Brotherhood Opportunity Growth
Fund" refer, respectively, to the Trust, the Fund, and the Trustees of the
Trust as trustees but not individually or personally, acting from time to
time under the Trust's Master Trust Agreement dated July 15, 1993, which is
hereby referred to and a copy of which is on file at the principal office of
the Trust. The obligations of "The Lutheran Brotherhood Family of Funds"
and the "Lutheran Brotherhood Opportunity Growth Fund" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents
of the Trust or the Fund are made not individually, but in such capacities,
and are not binding upon any of the Trustees, holders of shares of
beneficial interest of the Fund or representatives of the Trustees
personally, but bind only the Trust assets, and all persons dealing with the
Fund or the Trust must look solely to the Trust property for the enforcement
of any claims against the Fund or the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 21st day of July, 1993.
--------
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS, on behalf
of its Lutheran Brotherhood
Opportunity Growth Fund series
By: /s/Rolf F. Bjelland
---------------------------
LUTHERAN BROTHERHOOD
OPPORTUNITY GROWTH FUND, INC.
By: /s/Rolf F. Bjelland
---------------------------
<PAGE>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
SUBSCRIPTION AGREEMENT
----------------------------------------
Lutheran Brotherhood Municipal Bond Fund (the "Fund"), a series of The
Lutheran Brotherhood Family of Funds, an unincorporated association of the
type commonly referred to as a business trust organized under the laws of
the State of Delaware (the "Trust"), and Lutheran Brotherhood Municipal Bond
Fund, Inc., a corporation organized under the laws of the State of Minnesota
(the "Purchaser"), hereby agree with each other as follows:
1. The Fund hereby offers the Purchaser and the Purchaser hereby
purchases one (1) share of beneficial interest, $.001 par value per share,
of the Fund (the "Share") at a price of $10.00. The Fund hereby
acknowledges receipt from the Purchaser of payment in full for the Share.
2. The Purchaser represents and warrants to the Fund that in
connection with its purchase of the Share hereunder, it understands that:
(i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) the sale of the Share to the Purchaser is
made in reliance on such sale being exempt under Section 4(2) of the 1933
Act as not involving any public offering; and (iii) in part, the reliance
of the Fund on such exemption is predicated on the representation, which the
Purchaser hereby confirms, that the Purchaser is acquiring the Share for
investment for its own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Share
or of any interest therein. The Purchaser hereby agrees that it will not
sell, assign or transfer the Share or any interest therein unless and until
the Share has been registered under the 1933 Act or the Fund has received an
opinion of counsel indicating that said sale, assignment or transfer will
not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
3. The names "The Lutheran Brotherhood Family of Funds", "Lutheran
Brotherhood Municipal Bond Fund", "Trustees of The Lutheran Brotherhood
Family of Funds" and "Trustees of Lutheran Brotherhood Municipal Bond Fund"
refer, respectively, to the Trust, the Fund, and the Trustees of the Trust
as trustees but not individually or personally, acting from time to time
under the Trust's Master Trust Agreement dated July 15, 1993, which is
hereby referred to and a copy of which is on file at the principal office of
the Trust. The obligations of "The Lutheran Brotherhood Family of Funds"
and the "Lutheran Brotherhood Municipal Bond Fund" entered into in the name
or on behalf thereof by any of the Trustees, representatives or agents of
the Trust or the Fund are made not individually, but in such capacities, and
are not binding upon any of the Trustees, holders of shares of beneficial
interest of the Fund or representatives of the Trustees personally, but bind
only the Trust assets, and all persons dealing with the Fund or the Trust
must look solely to the Trust property for the enforcement of any claims
against the Fund or the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 21st day of July, 1993.
--------
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS, on behalf
of its Lutheran Brotherhood
Municipal Bond Fund series
By: /s/Rolf F. Bjelland
---------------------------
LUTHERAN BROTHERHOOD
MUNICIPAL BOND FUND, INC.
By: /s/Rolf F. Bjelland
---------------------------
<PAGE>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
SUBSCRIPTION AGREEMENT
------------------------------------
Lutheran Brotherhood High Yield Fund (the "Fund"), a series of The
Lutheran Brotherhood Family of Funds, an unincorporated association of the
type commonly referred to as a business trust organized under the laws of
the State of Delaware (the "Trust"), and Lutheran Brotherhood High Yield
Fund, Inc., a corporation organized under the laws of the State of Minnesota
(the "Purchaser"), hereby agree with each other as follows:
1. The Fund hereby offers the Purchaser and the Purchaser hereby
purchases one (1) share of beneficial interest, $.001 par value per share,
of the Fund (the "Share") at a price of $10.00. The Fund hereby
acknowledges receipt from the Purchaser of payment in full for the Share.
2. The Purchaser represents and warrants to the Fund that in
connection with its purchase of the Share hereunder, it understands that:
(i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) the sale of the Share to the Purchaser is
made in reliance on such sale being exempt under Section 4(2) of the 1933
Act as not involving any public offering; and (iii) in part, the reliance
of the Fund on such exemption is predicated on the representation, which the
Purchaser hereby confirms, that the Purchaser is acquiring the Share for
investment for its own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Share
or of any interest therein. The Purchaser hereby agrees that it will not
sell, assign or transfer the Share or any interest therein unless and until
the Share has been registered under the 1933 Act or the Fund has received an
opinion of counsel indicating that said sale, assignment or transfer will
not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
3. The names "The Lutheran Brotherhood Family of Funds", "Lutheran
Brotherhood High Yield Fund", "Trustees of The Lutheran Brotherhood Family
of Funds" and "Trustees of Lutheran Brotherhood High Yield Fund" refer,
respectively, to the Trust, the Fund, and the Trustees of the Trust as
trustees but not individually or personally, acting from time to time under
the Trust's Master Trust Agreement dated July 15, 1993, which is hereby
referred to and a copy of which is on file at the principal office of the
Trust. The obligations of "The Lutheran Brotherhood Family of Funds" and
the "Lutheran Brotherhood High Yield Fund" entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents of the
Trust or the Fund are made not individually, but in such capacities, and are
not binding upon any of the Trustees, holders of shares of beneficial
interest of the Fund or representatives of the Trustees personally, but bind
only the Trust assets, and all persons dealing with the Fund or the Trust
must look solely to the Trust property for the enforcement of any claims
against the Fund or the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 21st day of July, 1993.
--------
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS, on behalf
of its Lutheran Brotherhood
High Yield Fund series
By: /s/Rolf F. Bjelland
---------------------------
LUTHERAN BROTHERHOOD
HIGH YIELD FUND, INC.
By: /s/Rolf F. Bjelland
---------------------------
<PAGE>
LUTHERAN BROTHERHOOD INCOME FUND
SUBSCRIPTION AGREEMENT
--------------------------------
Lutheran Brotherhood Income Fund (the "Fund"), a series of The
Lutheran Brotherhood Family of Funds, an unincorporated association of the
type commonly referred to as a business trust organized under the laws of
the State of Delaware (the "Trust"), and Lutheran Brotherhood Income Fund,
Inc., a corporation organized under the laws of the State of Minnesota
(the "Purchaser"), hereby agree with each other as follows:
1. The Fund hereby offers the Purchaser and the Purchaser hereby
purchases one (1) share of beneficial interest, $.001 par value per share,
of the Fund (the "Share") at a price of $10.00. The Fund hereby
acknowledges receipt from the Purchaser of payment in full for the Share.
2. The Purchaser represents and warrants to the Fund that in
connection with its purchase of the Share hereunder, it understands that:
(i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) the sale of the Share to the Purchaser is
made in reliance on such sale being exempt under Section 4(2) of the 1933
Act as not involving any public offering; and (iii) in part, the reliance
of the Fund on such exemption is predicated on the representation, which the
Purchaser hereby confirms, that the Purchaser is acquiring the Share for
investment for its own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Share
or of any interest therein. The Purchaser hereby agrees that it will not
sell, assign or transfer the Share or any interest therein unless and until
the Share has been registered under the 1933 Act or the Fund has received an
opinion of counsel indicating that said sale, assignment or transfer will
not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
3. The names "The Lutheran Brotherhood Family of Funds", "Lutheran
Brotherhood Income Fund", "Trustees of The Lutheran Brotherhood Family of
Funds" and "Trustees of Lutheran Brotherhood Income Fund" refer,
respectively, to the Trust, the Fund, and the Trustees of the Trust as
trustees but not individually or personally, acting from time to time under
the Trust's Master Trust Agreement dated July 15, 1993, which is hereby
referred to and a copy of which is on file at the principal office of the
Trust. The obligations of "The Lutheran Brotherhood Family of Funds" and
the "Lutheran Brotherhood Income Fund" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents of the Trust or
the Fund are made not individually, but in such capacities, and are not
binding upon any of the Trustees, holders of shares of beneficial interest
of the Fund or representatives of the Trustees personally, but bind only the
Trust assets, and all persons dealing with the Fund or the Trust must look
solely to the Trust property for the enforcement of any claims against the
Fund or the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 21st day of July, 1993.
--------
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS, on behalf
of its Lutheran Brotherhood
Income Fund series
By: /s/Rolf F. Bjelland
---------------------------
LUTHERAN BROTHERHOOD
INCOME FUND, INC.
By: /s/Rolf F. Bjelland
---------------------------
<PAGE>
LUTHERAN BROTHERHOOD FUND
SUBSCRIPTION AGREEMENT
-------------------------
Lutheran Brotherhood Fund (the "Fund"), a series of The Lutheran
Brotherhood Family of Funds, an unincorporated association of the type
commonly referred to as a business trust organized under the laws of the
State of Delaware (the "Trust"), and Lutheran Brotherhood Fund, Inc., a
corporation organized under the laws of the State of Minnesota (the
"Purchaser"), hereby agree with each other as follows:
1. The Fund hereby offers the Purchaser and the Purchaser hereby
purchases one (1) share of beneficial interest, $.001 par value per share,
of the Fund (the "Share") at a price of $10.00. The Fund hereby
acknowledges receipt from the Purchaser of payment in full for the Share.
2. The Purchaser represents and warrants to the Fund that in
connection with its purchase of the Share hereunder, it understands that:
(i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) the sale of the Share to the Purchaser is
made in reliance on such sale being exempt under Section 4(2) of the 1933
Act as not involving any public offering; and (iii) in part, the reliance
of the Fund on such exemption is predicated on the representation, which the
Purchaser hereby confirms, that the Purchaser is acquiring the Share for
investment for its own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Share
or of any interest therein. The Purchaser hereby agrees that it will not
sell, assign or transfer the Share or any interest therein unless and until
the Share has been registered under the 1933 Act or the Fund has received an
opinion of counsel indicating that said sale, assignment or transfer will
not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
3. The names "The Lutheran Brotherhood Family of Funds", "Lutheran
Brotherhood Fund", "Trustees of The Lutheran Brotherhood Family of Funds"
and "Trustees of Lutheran Brotherhood Fund" refer, respectively, to the
Trust, the Fund, and the Trustees of the Trust as trustees but not
individually or personally, acting from time to time under the Trust's
Master Trust Agreement dated July 15, 1993, which is hereby referred to and
a copy of which is on file at the principal office of the Trust. The
obligations of "The Lutheran Brotherhood Family of Funds" and the "Lutheran
Brotherhood Fund" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents of the Trust or the Fund are made
not individually, but in such capacities, and are not binding upon any of
the Trustees, holders of shares of beneficial interest of the Fund or
representatives of the Trustees personally, but bind only the Trust assets,
and all persons dealing with the Fund or the Trust must look solely to the
Trust property for the enforcement of any claims against the Fund or the
Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 21st day of July, 1993.
--------
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS, on behalf
of its Lutheran Brotherhood
Fund series
By: /s/Rolf F. Bjelland
---------------------------
LUTHERAN BROTHERHOOD FUND
By: /s/Rolf F. Bjelland
---------------------------
EXHIBIT 14(a)(i)
LUTHERAN BROTHERHOOD
DEFINED CONTRIBUTION PLAN AND TRUST
DOCUMENT #01
INTRODUCTION
Lutheran Brotherhood is the Sponsor of this Plan. An Employer may adopt
this Plan by executing an Adoption Agreement as provided hereunder. This
Plan together with the Trust established by the Adoption Agreement of the
Employer shall constitute a Plan and Trust. It is intended that this Plan
and Trust shall qualify under the Employee Retirement Income Security Act of
1974 (ERISA), as amended, the Internal Revenue Code of 1986, as amended, and
other applicable Federal statutes for the purpose of providing retirement
benefits and other related benefits to participating employees and, in the
case of any ambiguity, shall be interpreted to accomplish this result.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I -- ESTABLISHMENT, PURPOSE AND ADOPTION OF PLAN AND TRUST
1.1 Purpose
1.2 Adoption
1.3 Intent to Qualify
1.4 Exclusive Benefit
1.5 Right of Employer to Delegate and Allocate Duties
ARTICLE II -- DEFINITIONS
2.1 Account Balance
2.2 Administrative Committee
2.3 Age
2.4 Allocation Date
2.5 Anniversary Date
2.6 Annual Addition
2.7 Beneficiary
2.8 Break in Service
2.9 Compensation
2.10 Contract
2.11 Disability
2.12 Earned Income
2.13 Eligibility Computation Period
2.14 Employee
2.15 Employer
2.16 Fiduciary
2.17 Forfeiture
2.18 Hours of Service
2.19 Individual Account
2.20 Insurer
2.21 Investment Manager
2.22 Leased Employee
2.23 Limitation Year
2.24 Net Profit
2.25 Nontransferable Contract
2.26 Normal Retirement Age
2.27 Normal Retirement Date
2.28 Owner-Employee
2.29 Participant
2.30 Plan Administrator
2.31 Plan Sponsor
2.32 Plan Year
2.33 Predecessor Plan
2.34 Qualified Joint and Survivor Annuity
2.35 Self-Employed Individual
2.36 Spouse (Surviving Spouse)
2.37 Target Normal Retirement Benefit
2.38 Taxable Wage Base
2.39 Top Heavy Plan
2.40 Trustees
2.41 Trust Fund or Fund
2.42 Valuation Date
2.43 Vested Interest
2.44 Vesting Computation Period
2.45 Voluntary Employee Contributions
2.46 Year Of Service
ARTICLE III -- ELIGIBILITY AND PARTICIPATION
3.1 Eligibility - Amendment and Restatement
3.2 Eligibility - Initial Adoption of Plan
3.3 Manner of Becoming a Participant
3.4 Determination of Eligibility
3.5 Leave of Absence
3.6 Reinstatement or Rehire Following Termination of Employment
3.7 Ineligible Participant
3.8 Transfer to Eligible Class or Reinstatement of
Ineligible Participant
3.9 Service With Predecessor Employer
3.10 Application of Plan Provisions
ARTICLE IV -- METHOD OF FUNDING BENEFITS
4.1 Manner of Funding Benefits
4.2 Purchase of Contract
4.3 Limitation of Insurance Premiums
4.4 Borrowing to Pay Premiums
4.5 Discontinuance of Insurance in Certain Circumstances
4.6 Special Provision for Distribution of Life Insurance Contract
4.7 Dividends
4.8 Special Endorsements Required on Certain Distributions
4.9 Failure to Purchase Insurance Contract
ARTICLE V -- CONTRIBUTIONS
5.1 Employer Contributions
5.2 Control of Business by Owner-Employee
5.3 Limitations on Allocations
5.4 Voluntary Employee Contributions
5.5 Transfer of Rollovers
5.6 Transfers from Other Qualified Plans
5.7 Multiple Employers
ARTICLE VI -- DEATH BENEFITS
6.1 Beneficiary Designation
6.2 Amount of Death Benefits
6.3 Time for Payment of Death Benefits
6.4 Payment to Minors, Etc.
6.5 Failure of Beneficiary
6.6 Proof of Death
ARTICLE VII -- DISTRIBUTION OF RETIREMENT BENEFITS
7.1 Definitions Applicable to Article VII
7.2 General Distribution Rules
7.3 Commencement of Retirement Benefits
7.4 Amount of Normal Monthly Retirement Income
7.5 Normal Annuity Form
7.6 Optional Form of Benefits
7.7 Deferred Retirement
7.8 Early Retirement
7.9 Disability Retirement
7.10 Minimum Annual Distributions
7.11 Transitional Rule
ARTICLE VIII -- JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 Application of this Article
8.2 Qualified Joint and Survivor Annuity
8.3 Qualified Preretirement Survivor Annuity
8.4 Definitions
8.5 Election Revocable
8.6 Automatic Revocation
8.7 Notice Requirements
8.8 Safe Harbor Rules
8.9 Transitional Rules
ARTICLE IX -- BENEFITS UPON TERMINATION - VESTING
9.1 Termination of Participation
9.2 Vesting
9.3 Time and Manner of Payment of Vested Benefits
9.4 Cash-Out and Plan Repayment Provisions
9.5 Restrictions on Immediate Distribution; Consent
9.6 Amendments Affecting Vested and/or Accrued Benefits
9.7 Benefits Protected on Merger, Consolidation or Transfer
9.9 Effect of a Break in Service on Vesting
9.10 Vesting Upon Termination of Plan
ARTICLE X -- PLAN LOANS TO PARTICIPANTS
10.1 General Rules
10.2 Spousal Consent
10.3 Collateral
10.4 Interest Rate
10.5 Limitations on Loans
10.6 Repayment of Loan
10.7 Default in Repayment
10.8 Effect of Loan on Death Benefit
ARTICLE XI -- TOP-HEAVY PLAN
11.1 Application of Provisions
11.2 Definitions Applicable to Top-Heavy Plans
11.3 Minimum Allocation
11.4 Nonforfeitability
11.5 Minimum Vesting Schedules
ARTICLE XII -- CLAIMS PROCEDURE
12.1 Filing a Claim for Benefits
12.2 Denial of Claim
12.3 Remedies Available
ARTICLE XIII -- THE PLAN ADMINISTRATOR
13.1 Designation and Acceptance
13.2 Resignation and Removal - Appointment of Successor
13.3 Allocation and Delegation of Responsibility
13.4 Duty and Responsibility of Plan Administrator
13.5 Expenses and Compensation
13.6 Information From Employer
13.7 Administrative Committee
13.8 Notice of Change in Plan Administrator
13.9 Investment Manager
ARTICLE XIV -- TRUST FUND AND ITS ADMINISTRATION -- TRUSTEE'S POWER
AND RESPONSIBILITIES--
14.1 Trust Fund
14.2 Valuation of Trust Fund
14.3 Investment Functions
14.4 Records and Reports
14.5 Annual Accounting
14.6 Compensation and Expenses
14.7 Eligibility of Trustee to Participate in the Plan
14.8 Meetings - Majority to Govern - Delegation
14.9 Not Obligated to Question Data
14.10 Liability for Application of Funds
14.11 Manner of Payment
14.12 Unclaimed Benefits
14.13 Certification as to Trustees
14.14 Denial of Liability by Insurer
14.15 Degree of Care - Limitations on Liability
14.16 Prohibited Transactions
14.17 Resignation or Removal of Trustee
14.18 Appointment of Successor Trustee
ARTICLE XV -- AMENDMENT OF PLAN AND ADOPTION AGREEMENT
15.1 Right of Employer to Amend the Plan
15.2 Right of Lutheran Brotherhood (LB) to Amend the Plan
15.3 Limitations on Power to Amend
ARTICLE XVI -- TERMINATION AND DISCONTINUANCE
16.1 Permanency
16.2 Method and Procedure for Termination
16.3 Involuntary Termination
16.4 Distribution of Accounts
ARTICLE XVII -- MISCELLANEOUS
17.1 Standard of Conduct - Fiduciaries
17.2 Prohibition Against Diversion - Correction of Errors
17.3 Inalienability of Benefits
17.4 Invalidity of Certain Provisions
17.5 General Undertaking of All Parties
17.6 Agreement Binds Heirs, Etc.
17.7 Duration of Trust - Rule Against Perpetuities
17.8 Headings
17.9 Gender, Construction
17.10 Disqualification From use of Prototype Plan
17.11 Responsibility of Insurer Under This Plan
17.12 Savings Clause
17.14 Notification of Interested Parties
17.15 Overpayments, Recoupment
<PAGE>
ARTICLE I
ESTABLISHMENT, PURPOSE AND ADOPTION OF PLAN AND TRUST
1.1 - PURPOSE - The purpose of this Plan and Trust (hereinafter referred to
as the "Plan") is to provide, in accordance with its provisions, a
retirement plan providing benefits upon retirement and other related
benefits for the Employees of the Employer who are eligible to participate.
1.2 - ADOPTION - The Employer has adopted this Plan by completing and
signing the attached Adoption Agreement effective on the date indicated in
the Agreement.
1.3 - INTENT TO QUALIFY - It is the intent of the Employer that this Plan
shall qualify for approval under the Internal Revenue Code of 1986, as
amended, hereinafter referred to as "the Code", the Employee Retirement
Income Security Act of 1974 (ERISA), as amended, hereinafter referred to as
"ERISA", and related Federal statutes, and, in case of any ambiguity, shall
be interpreted to accomplish this result.
1.4 - EXCLUSIVE BENEFIT - It is the intent of the Employer that this Plan is
created for the exclusive benefit of the Employees of the Employer and their
Beneficiaries and shall be interpreted in a manner consistent with it being
an Employees' Plan as defined in section 401(a) of the Code.
1.5 - RIGHT OF EMPLOYER TO DELEGATE AND ALLOCATE DUTIES: The Employer
adopting this Plan has the overall right to appoint Fiduciaries and, to the
extent permitted under current statutes, rules and regulations, to allocate
powers, duties and responsibilities, including Fiduciary duties, among the
respective Fiduciaries.
ARTICLE II
DEFINITIONS
2.1 - ACCOUNT BALANCE: The cash value of any Contract purchased for a
Participant plus the value of his or her Individual Account, which is
derived from the Employer contributions to this Plan, adjusted for
withdrawals, income, expenses and realized and unrealized gains and losses
attributable thereto determined as of the applicable Valuation Date.
2.2 - ADMINISTRATIVE COMMITTEE: A group designated by the Employer in the
Adoption Agreement who signify their acceptance of this responsibility by
joining in the execution of the documents creating or amending this Plan; or
any successors appointed in accordance with Section 13.2 of this Plan who so
signify their acceptance in writing. The appointment of an Administrative
Committee is optional, but if so appointed, its members shall collectively
have the duties of the Plan Administrator, and all references to the Plan
Administrator shall be deemed to apply to the Committee. The Committee may
delegate among its members specific duties in the event assignments are not
made by the Employer.
2.3 - AGE: Age at last birthday unless otherwise specified.
2.4 - ALLOCATION DATE: The last day of the Plan Year; the date the
Employer's contributions, Employee's contributions and any other credits are
allocated to a Participant's Individual Account.
2.5 - ANNIVERSARY DATE: The first day of the Plan Year as specified in the
Adoption Agreement. Monthly Anniversary Date means the same day of each
month following the Anniversary Date.
2.6 - ANNUAL ADDITION: Annual Addition is defined in Section 5.3(m)(1).
Rollovers, contributions from an Individual Retirement Account or transfers
of assets from other plans are not included in the Annual Addition
computation.
2.7 - BENEFICIARY: Any person, trust or other recipient named by a
Participant to receive any benefits which may be due under this Plan after
his or her death provided that person, trust or other recipient survives the
Participant. Unless otherwise elected in the manner prescribed in Section
8.4(d), the Beneficiary shall be the Participant's Spouse. If there is no
Spouse, or if the designated Beneficiary has predeceased the Participant,
the Participant's estate shall be the Beneficiary. Any Beneficiary
designation by the Participant or election of a form of settlement must be
approved by the Plan Administrator after determining that the designation
complies with the Plan provisions. The designation must be in the form
prescribed by the Plan Administrator and filed with the Trustee.
2.8 - BREAK IN SERVICE: A twelve (12) consecutive month period (computation
period) during which an Employee has not completed more than five hundred
(500) Hours of Service with the Employer.
2.9 - COMPENSATION: The amount as defined in Section II.A. in the Adoption
Agreement. For any Self-Employed Individual covered under the Plan,
Compensation will mean Earned Income. Compensation shall include only that
Compensation which is actually paid to the Participant during the applicable
period. Except as provided elsewhere in this Plan, the applicable period
shall be the period elected by the Employer in the Adoption Agreement. If
the Employer makes no election, the applicable period shall be the Plan
Year.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not
includible in the gross income of the Employee under sections 125,
402(a)(8), 402(h) or 403(b) of the Code.
The annual Compensation of each Participant taken into account under the
Plan for any year shall not exceed $200,000, as adjusted by the Secretary at
the same time and in the same manner as under section 415(d) of the Code
except that the dollar increase in effect on January 1 of any calendar year
is effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effected on January 1, 1990. If a
plan determines Compensation on a period of time that contains fewer than
twelve (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 twelve (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 these rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the Participants who have not
attained age 19 before the close of the year. If, as a result of the
application of these 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 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.
2.10 - CONTRACT: Any life insurance or annuity contract, either fixed or
variable, or any combination thereof, including both group and individual
contracts issued by Insurer.
2.11 - DISABILITY: 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 twelve (12)
months. The permanence and degree of the impairment shall be supported by
medical evidence.
2.12 - EARNED INCOME: The net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in gross
income and the deductions allocable to these 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
Taxpayer by section 164(f) of the Code for taxable years beginning after
December 31, 1989.
2.13 - ELIGIBILITY COMPUTATION PERIOD: For purposes of determining Years of
Service and Breaks in Service for purposes of eligibility, the initial
Eligibility Computation Period is the twelve (12) consecutive month period
beginning on the date the Employee first performs an Hour of Service for the
Employer (employment commencement date).
The succeeding twelve (12) consecutive month periods commence with the first
anniversary of the Employee's employment commencement date.
Years of Service and Breaks in Service will be measured on the same
Eligibility Computation Period.
2.14 - EMPLOYEE: Any person who is currently employed by the Employer, and
who is a covered employee as defined in the Adoption Agreement; any Owner-
Employee including any self-employed individual. The term Employee shall
also mean any Employee of any other employer required to be aggregated with
the Employer under sections 414(b), (c), or (m) of the Code.
The term Employee shall also include any leased Employee deemed to be an
Employee of any Employer described in Section 2.15 of the Plan as provided
in sections 414(n) or (o) of the Code.
2.15 - EMPLOYER: The Employer or Employers specified in the Adoption
Agreement and any successor by merger, purchase, consolidation or otherwise
who assumes the obligations of this Plan.
The term Employer shall also include any other employer required to be
aggregated with the Employer under sections 414(b), (c), (m) or (o) of the
Code.
2.16 - FIDUCIARY: Any person who exercises any discretionary authority or
discretionary control respecting the management of the Plan or exercises any
authority or control respecting the management or disposition of Plan
assets; who renders investment advice for a fee or other compensation,
direct or indirect, with respect to any monies or other property of the
Plan, or has any authority or discretionary responsibility to do so (unless
and to the extent exempted under the provisions of the law); or who has any
discretionary authority or discretionary responsibility in the
administration of the Plan.
2.17 - FORFEITURE: The nonvested Account Balance of any Participant who
terminates in a Plan Year.
2.18 - HOURS OF SERVICE: 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 five hundred and one (501) Hours of Service
will be credited under this paragraph for any single continuous
period (whether or not this period occurs in a single computation
period). Hours under this paragraph will be calculated and credited
pursuant to section 2530.200b-2 of the Department of Labor
Regulations which are incorporated herein by this reference; 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 then the
computation period in which the award, agreement or payment is made.
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 sections 414(n) or 414(o) of the
Code and the regulations thereunder.
Solely for purposes of determining whether a Break in Service, as defined in
Section 2.8, for participation and vesting purposes has occurred in a
computation period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to that individual but for the absence, or in
any case in which the hours cannot be determined, eight (8) Hours of Service
per day of absence. For purposes of this paragraph, an absence from work
for maternity or paternity reasons means an absence by reason of the
pregnancy of the individual, by reason of a birth of a child of the
individual, by reason of the placement of a child with the individual in
connection with the adoption of a child by an individual, or for purposes of
caring for a child for a period beginning immediately following birth or
placement. The Hours of Service credited under this paragraph shall be
credited in the computation period in which the absence begins if the
crediting is necessary to prevent a Break in Service in that period, or in
all other cases, in the following computation period.
Hours of Service will be determined on the basis of the method set forth or
elected in the Adoption Agreement.
2.19 - INDIVIDUAL ACCOUNT: The account established and maintained in
accordance with the Plan for each Participant with respect to his or her
interest in assets accumulated under the Plan from the Employer and, if
applicable, his or her own voluntary contributions as described in
Section 5.4, and including his or her proportionate share of the net gains
less any amounts applied to purchase insurance and less his or her
proportionate share of the net losses as determined in accordance with this
Plan; provided, however, that a separate accounting shall be made for all
amounts attributable to a Participant's Voluntary Employee Contributions,
rollovers and predecessor plan assets. The maintenance of an Individual
Account is for accounting purposes only and segregation of the assets of the
Plan shall not be required. Investment in insurance Contracts shall satisfy
the requirement of separate accounting for each Participant's Account
Balance.
2.20 - INSURER: Lutheran Brotherhood, Minneapolis, Minnesota, or any legal
reserve life insurance company approved by Lutheran Brotherhood to issue an
annuity or a life insurance contract under the Plan.
2.21 - INVESTMENT MANAGER: The person, if any, so designated by the Plan
Administrator or Administrative Committee or the Employer to manage and
invest designated Plan assets and who acknowledges his or her acceptance in
writing.
2.22 - LEASED EMPLOYEE: 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 (1) year, and these 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:
i. The Employee is covered by a money purchase pension plan providing:
1. A nonintegrated Employer contribution rate of at least 10 percent
of Compensation as defined in section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction
agreement which are excludable from the Employee's gross income
under section 125, section 402(a)(8), section 402(h) or section
403(b) of the Code,
2. Immediate participation, and
3. Full and immediate vesting; and
ii. Leased Employees do not constitute more than twenty percent (20%) of
the recipient's nonhighly compensated workforce.
2.23 - LIMITATION YEAR: The Plan Year. If the Limitation Year is changed
from the Plan Year, the change must be made pursuant to the election in the
Adoption Agreement.
2.24 - NET PROFIT: The net operating profits or earnings of the Employer for
any fiscal year computed according to the normal and generally accepted
accounting practices, excluding any extraordinary gains or losses from non-
operational activities, excluding deductions for federal, state or local
income taxes and excluding contributions to this or any other plan qualified
under section 401(a) of the Code.
2.25 - NONTRANSFERABLE CONTRACT: A Contract which shall, by its terms or by
special endorsement, provide that it may not be assigned, sold, transferred,
discounted, or pledged for any purpose other than by the Trustee of the
Contract.
2.26 - NORMAL RETIREMENT AGE: Age sixty-five (65) unless otherwise elected
in the Adoption Agreement. If the Employer enforces a mandatory retirement
age, the Normal Retirement Age is the lesser of that mandatory age or the
age specified in the Adoption Agreement.
2.27 - NORMAL RETIREMENT DATE: The day on which a Participant attains age 65
unless a different Normal Retirement Age is elected in the Adoption
Agreement.
2.28 - OWNER-EMPLOYEE: An individual who is a sole proprietor, or who is a
partner owning more than ten percent (10%) of either the capital or profits
interest of the partnership.
2.29 - PARTICIPANT: Any Employee or former Employee of an Employer who has
met the eligibility requirements of the Adoption Agreement 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 benefit. A sole proprietor or
partner is eligible to become a Participant under this Plan.
2.30 - PLAN ADMINISTRATOR: The person designated in the Adoption Agreement
whose duties shall be to administer the Plan and who signified acceptance of
this responsibility by joining in the execution of the documents creating or
amending this Plan; or any successor, appointed in accordance with Section
13.2 of this Plan who so signifies acceptance in writing. If no Plan
Administrator is designated in the Adoption Agreement, then the Employer
shall be deemed to be the designated Plan Administrator.
2.31 - PLAN SPONSOR: Lutheran Brotherhood, Minneapolis, Minnesota.
2.32 - PLAN YEAR: The twelve (12) consecutive month period designated by the
Employer in the Adoption Agreement.
2.33 - PREDECESSOR PLAN: Any pension or profit sharing plan previously
established and maintained by the Employer.
2.34 - QUALIFIED JOINT AND SURVIVOR ANNUITY: An immediate annuity payable
for the life of the Participant with a survivor annuity for the life of the
Participant's spouse which is not less than one-half (1/2) of, nor greater
than one hundred percent (100%) of, the amount of the annuity payable during
the joint lives of the Participant and the Participant's spouse. The
survivor annuity under the Plan will be fifty percent (50%) unless a
different percentage is elected by the Employer in the Adoption Agreement.
The Joint and Survivor Annuity will be the amount of benefit which can be
purchased with the Participant's vested Account Balance.
2.35 - SELF-EMPLOYED INDIVIDUAL: 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.
2.36 - 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.
2.37 - TARGET BENEFIT: The retirement benefit used as a basis for computing
contributions to this Plan if the Employer executes a target benefit
Adoption Agreement.
2.38 - TAXABLE WAGE BASE: The contribution and benefit base in effect under
section 230 of the Social Security Act at the beginning of the Plan Year.
2.39 - TOP HEAVY PLAN: A plan described in Article XI.
2.40 - TRUSTEES: The individuals or the corporation named in the Adoption
Agreement and any successors to the original Trustee.
2.41 - TRUST FUND OR FUND: All cash, securities, life insurance, annuity
Contracts (individual or group), real estate and any other property held by
the Trustee pursuant to the terms of this Plan, together with income
therefrom.
2.42 - VALUATION DATE: The date the Individual Accounts and Trust Fund are
valued under the terms of the Plan. The annual Valuation Date shall be the
last day of the Plan Year. Other Valuation Dates shall be as required by
the provisions of the Plan or by the Plan Administrator.
2.43 - VESTED INTEREST: A nonforfeitable right to all or a portion of the
Account Balance from Employer contributions to the Plan and to all of the
Employee's contributions, if any.
2.44 - VESTING COMPUTATION PERIOD: The Period used for determining Years of
Service and Breaks in Service for purposes of computing an Employee's
nonforfeitable right to the Account Balance derived from Employer
contributions shall be the twelve-(12) consecutive month period commencing
on the date the Employee first performs an Hour of Service and each
subsequent twelve (12)-consecutive month period commencing on the
anniversary of that date.
2.45 - VOLUNTARY EMPLOYEE CONTRIBUTIONS: Nondeductible Employee
contributions as described in Section 5.4 of the Plan.
2.46 - YEAR OF SERVICE: A twelve (12) consecutive month period during which
an Employee completes at least one thousand (1,000) Hours of Service.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 - ELIGIBILITY - AMENDMENT AND RESTATEMENT: In those cases in which this
constitutes an amendment and restatement of an existing plan, any Employee
who was a Participant in the plan immediately prior to the effective date of
the amendment and restatement and who is an Employee of the Employer on the
effective date of the amendment and restatement shall continue to be a
Participant under this Plan. Any Employee who is not a Participant
immediately prior to the effective date of this amendment and any future
Employee shall be eligible to become a Participant upon satisfaction of the
eligibility requirements established in the Adoption Agreement.
3.2 - ELIGIBILITY - INITIAL ADOPTION OF PLAN: If the Adoption Agreement
constitutes the initial adoption of a Plan by the Employer, an Employee
shall be eligible to become a Participant upon satisfying the eligibility
requirements established in the Adoption Agreement.
3.3 - MANNER OF BECOMING A PARTICIPANT: The Plan Administrator shall notify
each Employee who becomes eligible to participate under this Plan and shall
furnish him or her with any application forms, enrollment forms, or other
documents which are required of Participants. The eligible Employee shall
execute any forms or documents and make available information as required
for the administration of the Plan. Eligible Employees must perform all
acts required within thirty (30) days of the date on which they are notified
of eligibility. Failure to comply with the requirements will result in
being excluded from the Plan.
3.4 - DETERMINATION OF ELIGIBILITY: The Plan Administrator or, if
applicable, the Administrative Committee, shall determine the eligibility of
each Employee for participation in the Plan in accordance with the Plan's
minimum age and service requirements. The determination shall be conclusive
and binding upon all persons except as otherwise provided herein or by law.
3.5 - LEAVE OF ABSENCE: An Employee on an authorized leave of absence shall
not be deemed to have incurred a Break in Service provided he or she resumes
employment with the Employer within the period specified in the leave. A
"leave of absence" means an absence authorized by the Employer under its
standard personnel practices as applied in a uniform and nondiscriminatory
manner to all persons similarly situated or a leave such as military service
during which the Employee's re-employment rights are guaranteed by law.
3.6 - REINSTATEMENT OR REHIRE FOLLOWING TERMINATION OF EMPLOYMENT: If a
Participant terminates employment other than by reason of retirement, death
or disability, the former Participant shall again participate in this Plan
in accordance with the following:
(a) PARTICIPANTS WHO HAD A VESTED INTEREST AT TERMINATION DATE: A former
Participant who has sustained a Break in Service and who had a
vested nonforfeitable interest in all or a portion of his or her
Individual Account which was derived from Employer contributions at
the time of termination shall become a Participant immediately upon
returning to the employ of the Employer.
(b) PARTICIPANTS WHO HAD NO VESTED INTEREST AT TERMINATION DATE: A
former Participant who has sustained a Break in Service and who had
no vested nonforfeitable interest in his or her Individual Account
which was derived from Employer contributions at the time of his or
her termination shall be considered a new Employee, for eligibility
purposes, if the number of consecutive one (1) year Breaks in
Service equals or exceeds the greater of five (5) or the aggregate
number of Years of Service before the break. The computation period
for Years of Service for eligibility purposes shall be made with
reference to the first date on which the Employee completes an Hour
of Service following his or her termination. If the former
Participant's Years of Service before the termination exceeds the
number of consecutive one year Breaks in Service after the
termination, the Participant shall participate immediately upon
reemployment.
3.7 - INELIGIBLE PARTICIPANT: If a Participant ceases to meet the
eligibility requirements of this Plan although still in the employment of
the Employer, the Participant shall become an ineligible Participant. The
Employer shall promptly notify the Plan Administrator and no further
allocations on his or her behalf shall be made. The Trustee shall preserve
the equities created in any life Contract(s) of the ineligible Participant.
Any life or annuity Contracts and allocable portion of the Trust Fund, if
any, shall be held for the benefit of the ineligible Participant until the
satisfaction of the necessary condition(s) for a distribution to occur in
accordance with the Plan's provisions.
If an ineligible Participant again meets the requirements for eligibility,
as provided in Section 3.8, the Employer shall give appropriate notice to
the Plan Administrator who shall notify the Trustee and the ineligible
Participant shall again become a Participant under this Plan.
For purposes of determining Years of Service and Breaks in Service in order
to compute an Employee's nonforfeitable right to their Account Balance
derived from Employer contributions, Years of Service completed while an
ineligible Participant shall be counted as though he or she were a
Participant.
3.8 - TRANSFER TO ELIGIBLE CLASS OR REINSTATEMENT OF INELIGIBLE PARTICIPANT:
In the event a Participant becomes ineligible to participate because he or
she is no longer a member of an eligible class of Covered Employees, but has
not incurred a Break in Service, that Employee shall participate immediately
upon returning to an eligible class of Employees. If the Participant incurs
a Break in Service, eligibility to participate shall be determined pursuant
to the provisions of Section 3.6(a) or (b).
In the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, the Employee shall
participate immediately if the Employee has satisfied the minimum age and
service requirements and would have previously become a Participant.
3.9 - SERVICE WITH PREDECESSOR EMPLOYER: If the Employer maintains the plan
of a predecessor Employer, service for that predecessor shall be treated as
service for the Employer.
3.10 - APPLICATION OF PLAN PROVISIONS: All Participants shall be bound by
the terms of the Plan, including all amendments made in the manner
authorized herein. Participants shall also be entitled to all of the rights
and privileges afforded under the Plan, including those specifically granted
by the Code and ERISA.
ARTICLE IV
METHOD OF FUNDING BENEFITS
4.1 - MANNER OF FUNDING BENEFITS: The monies in the Participant's Individual
Account shall be used to fund benefits. The benefits to be provided by this
Plan shall be funded either by means of a Contract as defined in Section
2.10, a combination of these Contracts, subject to the limitations in
Section 4.3, and/or contributions to the Trust Fund of any additional monies
constituting balances in the Participant's Individual Account. (See Section
14.3(b) for allowable investments.)
4.2 - PURCHASE OF CONTRACT: The Trustee may invest a portion of the
Employer's contributions allocated to the Individual Account of each
Participant in one or more life insurance or annuity Contracts. The
premiums shall be paid from the insured Participant's Individual Account.
The Trustee shall apply for and will be the owner of any insurance Contract
purchased under the terms of this Plan. The insurance Contract(s) must
provide that proceeds will be payable to the Trustee; however, the Trustee
shall be required to pay over all proceeds of the 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 8.4(d), if applicable. Under no
circumstances shall the trust retain any part of the proceeds. In the event
of any conflict between the terms of this Plan, and the terms of any
insurance Contract purchased hereunder, the Plan provisions shall control.
In the event that this Plan substitutes for a previous Plan which was
nontrusteed, any life insurance or annuity contract which was purchased
under the previously existing plan may be kept in force under this Plan even
though it is owned by the Participant and not by the Trustee. Each contract
shall be nontransferable. Any loan, partial surrender or assignment
privilege exercised by the owner shall be subject to the Joint and Survivor
Annuity requirements of Article VIII of the Plan.
4.3 - LIMITATION OF INSURANCE PREMIUMS: The premiums paid by the Trustee for
the purchase of life insurance for any Participant are subject to the
following limits:
(a) ORDINARY LIFE - For purposes of these incidental insurance
provisions, ordinary life insurance contracts are contracts with
both nondecreasing death benefits and nonincreasing premiums. If
these contracts are purchased, less than one half (1/2) of the
aggregate Employer contributions allocated to any Participant will
be used to pay the premiums attributable to them.
(b) TERM AND UNIVERSAL LIFE - No more than one fourth (1/4) of the
aggregate Employer contributions allocated to any Participant 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.
(c) COMBINATION - The sum of one half (1/2) of the ordinary life
insurance premiums and all other life insurance premiums will not
exceed one fourth (1/4) of the aggregate Employer contributions
allocated to any Participant.
4.4 - BORROWING TO PAY PREMIUMS: If, for any reason, there is insufficient
cash in the Individual Account of any Participant to pay premiums on a
Contract on his or her behalf, the Trustee, acting upon the request of the
Participant communicated to the Plan Administrator, shall borrow the amount
necessary to pay premiums, using the cash value of the Contract as security.
This borrowing shall be repaid by application of earnings, contributions or
Forfeitures to the Individual Account of the Participant insured by the
Contract. In the absence of the Participant's direction to borrow to pay
premiums, the Contract shall be put on a paid-up basis or, if it has no cash
value, cancelled.
4.5 - DISCONTINUANCE OF INSURANCE IN CERTAIN CIRCUMSTANCES: If payment of
premiums on a Contract on behalf of any Participant is not permitted
hereunder because of the limitations contained in Section 4.3, the Contract
shall be put on a paid-up basis or, if it has no cash value, cancelled.
4.6 - SPECIAL PROVISION FOR DISTRIBUTION OF LIFE INSURANCE CONTRACT: Subject
to the Joint and Survivor Annuity requirements of Article VIII, the Trustee
shall either surrender the Contract for its cash surrender value, convert it
to an annuity to provide a periodic income, or distribute the Contract to
the Participant. In no event shall the Contract provide life insurance
protection under the Plan beyond the date the Participant terminates his or
her employment, unless the Contract is distributed to the Participant at
that time. If the Participant becomes entitled to benefits prior to the
Normal Retirement Date and the Contract on his or her life has a cash value,
the Trustee shall, upon the direction of the Plan Administrator, borrow the
cash value on the security of the Contract, distribute the Contract to the
Participant, and the cash obtained shall be added to the Participant's
Account in the Plan.
4.7 - DIVIDENDS: Any dividends or credits earned on insurance Contracts will
be allocated to the Individual Account of the Participant on whose life the
Contract was issued.
4.8 - SPECIAL ENDORSEMENTS REQUIRED ON CERTAIN DISTRIBUTIONS: Prior to
making a distribution of any certificate or Contract providing monthly
income commencing on the date of distribution or at some future date in
accordance with the terms of this Plan, the Trustee shall direct the Insurer
to endorse the certificate or Contract in substantially the following form:
"Except when this Contract is owned by the Trustee or the custodial
account treated as a Trust, either of which is qualified under
Section 401(a) of the Internal Revenue Code, this Contract may not be
assigned, sold, transferred, discounted or pledged as collateral for a
loan or as security for the performance of an obligation or for any
other purpose to any person or entity other than the issuing company."
In addition, the words "Nontransferable" shall be placed on the face of the
certificate or Contract.
4.9 - FAILURE TO PURCHASE INSURANCE CONTRACT: If an eligible Employee dies
after having complied with all the requirements for participation but before
a Contract is purchased or is effective covering the initial amount or an
increase in Compensation, the death benefit payable from the Plan shall only
be the amount in the Individual Account.
ARTICLE V
CONTRIBUTIONS
5.1 - EMPLOYER CONTRIBUTIONS:
(a) OBLIGATION TO CONTRIBUTE - The Employer shall contribute an amount
determined in accordance with the selected provisions of the
Adoption Agreement. The Employer shall not contribute on behalf of
a Participant who performs less than a Year of Service during any
Plan Year unless required pursuant to Section 11.3, Minimum
Allocations for Top-Heavy Plans. A contribution will be made in any
Plan Year on behalf of any Participant with a prior account balance
who dies, becomes disabled or retired based on their Compensation
earned to that point regardless of their credit hours during that
year. The Employer's contribution for any year shall in no event
exceed the maximum amount which the Employer is permitted to deduct
as a retirement plan contribution expense under the Code.
(b) TIMING OF CONTRIBUTIONS - The Employer's contribution for any year
is due on the last day of the Plan Year, and shall be paid before
that date or as soon thereafter as practicable, but not later than
the time prescribed by law for filing the Employer's federal income
tax return (including extensions).
(c) ALLOCATION OF CONTRIBUTIONS - The Employer contributions shall be
allocated among and credited to the Individual Accounts of the
Participants entitled to share therein as of the Valuation Date at
the end of the Plan Year and as designated in the Adoption
Agreement.
(d) APPLICATION OF FORFEITURES - Any amounts not vested in accordance
with the vesting schedule selected in the Adoption Agreement in the
case of a Participant who terminated employment before reaching one
hundred percent (100%) on the vesting schedule shall continue to be
held in the Participant's name and shall not be distributed at
termination of employment until forfeited. Nonvested amounts shall
be forfeited after the Participant has incurred a five (5) year
Break in Service or, in the case of a Participant who received a
distribution of his or her vested Interest without incurring a five
(5) year Break in Service, upon failure to repay the distribution as
provided in Section 9.4.
Forfeitures and any accumulations shall then be reallocated
according to the Adoption Agreement. The reallocation of
Forfeitures shall be made as of the Valuation Date or the close of
the Plan Year in which the Forfeitures become final.
If more than one Employer has adopted this Plan and is defined as an
Employer in the Adoption Agreement, no Forfeitures resulting from
the Participants of one adopting Employer shall be reallocated for
the benefit of another adopting Employer's Participants.
5.2 - CONTROL OF BUSINESS BY OWNER-EMPLOYEE: If this Plan provides
contributions or benefits for one (1) or more Owner-Employees who control
both the business for which this Plan is established and one (1) or more
other trades or businesses, this Plan and the plan established for other
trades or businesses must, when looked at as a single plan, satisfy sections
401(a) and (d) of the Code for the Employees of this and the other trades or
businesses.
If the Plan provides contributions or benefits for one (1) or more
Owner-Employees who control one (1) or more other trades or businesses,
the Employees of the other trades or businesses must be included in a
plan which satisfies 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 (2)
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
Employees under the plan of the trades or businesses which are controlled
must be as favorable as those provided for the Owner-Employee under the most
favorable plan of the trade or business which is not controlled.
For purposes of the preceding paragraph, an Owner-Employee, or two (2) or
more Owner-Employees, will be considered to control a trade or business if
the Owner-Employee, or two (2) or more Owner-Employees together:
(1) own the entire interest in an unincorporated trade or business, or
(2) in the case of a partnership, own more than fifty percent (50%) of
either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an Owner-Employee, or two (2) or
more Owner-Employees, shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership which
the Owner-Employee, or two (2) or more Owner-Employees, are considered to
control within the meaning of the preceding sentence.
5.3 - LIMITATIONS ON ALLOCATIONS: The purpose of this Section is to set
forth the overall limitations on allocations.
(a) If the Participant does not participate in, and has never
participated in another qualified plan or a welfare benefit fund, as
defined in section 419(e) of the Code, maintained by the Employer,
or an individual medical account, as defined in section 415(l)(2) of
the Code, maintained by the Employer, which provides an Annual
Addition as defined in Section 5.3(m)(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.
(b) Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the maximum permissible
amount for a Participant on the basis of a reasonable estimation of
the Participant's Compensation for the Limitation Year, uniformly
determined for all Participants similarly situated.
(c) As soon as it is administratively feasible after the end of the
Limitation Year, the maximum permissible amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If pursuant to section 5.3(c) or as a result of the allocation of
Forfeitures there is an excess amount, the excess will be disposed
of as follows:
(1) Any nondeductible Voluntary Employee Contributions, to the
extent they would reduce the excess amount, will be returned to
the Participant;
(2) If after the application of Subsection (1) above 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 the
Participant in the next Limitation Year, and each succeeding
Limitation Year if necessary.
(3) If after the application of Subsection (1) above an excess
amount still exists, and the Participant is not covered by the
Plan at the end of 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.
(4) 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 Trust's investment gains
and losses. If a suspense account is in existence at any time
during a particular Limitation Year, all amounts in the suspense
account must be allocated and reallocated to Participants'
accounts before any Employer Contributions or any Employee
Contributions may be made to the Plan for that Limitation Year.
Excess amounts may not be distributed to Participants or former
Participants.
(e) This Section applies if, in addition to this Plan, the Participant
is covered under another qualified master or prototype defined
contribution plan maintained by the Employer, 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 5.3(m)(2) during any
Limitation Year. The Annual Additions which may be credited to a
Participant's Individual Account under this Plan for any 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 would cause the Annual Additions
for the Limitation Year to exceed this limitation, the amount
contributed or allocated will be reduced so that the Annual
Additions under all plans and funds for the Limitation Year will
equal the maximum permissible amount. If the Annual Additions with
respect to the Participant under 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.
(f) 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 Subsection (b).
(g) As soon as 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.
(h) If, pursuant to Subsection (g), or as a result of the allocation of
Forfeitures, a Participant's Annual Additions under this Plan and
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.
(i) 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,
(1) the total excess amount allocated as of that date, times
(2) the ratio of (i) the Annual Additions allocated to the
Participant for the Limitation Year as of that date under this
Plan, to (ii) the total Annual Additions allocated to the
Participant for the Limitation Year as of that date under this
and all the other qualified master or prototype defined
contribution plans.
(j) Any excess amount attributed to this Plan will be disposed in the
manner described in Subsection (d).
(k) 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 Subsections (e) through (j)
as though the other plan were a master or prototype plan unless the
Employer provides other limitations in Section IX.A in the Adoption
Agreement.
(l) 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 one (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 Section IX.B of the Adoption
Agreement.
(m) DEFINITIONS.
(1) ANNUAL ADDITIONS: The sum of the following amounts credited to a
Participant's 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 that date, which are attributable to
post-retirement medical benefits, allocated to the separate
account of a key employee, as defined in section 419A(d)(3)
of the Code, under a welfare benefit fund, as defined in
section 419(e) of the Code, maintained by the Employer are
treated as Annual Additions to a defined contribution plan.
For this purpose, any excess amount applied under Sections
5.3(d) or 5.3(j) in the Limitation Year to reduce Employer
contributions will be considered Annual Additions for the
Limitation Year.
(2) COMPENSATION: Depending upon the election by the Employer in the
Adoption Agreement, Compensation shall mean one of the
following:
(a) Section 415 Safe-Harbor Compensation: A Participant's 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
salespersons, 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:
(i) 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
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property)
held by the Employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in section 403(b) of
the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
(b) Section 3121 wages: A Participant's 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 limitations
on the exclusions from wages in section 3121(a)(5)(C) and
(D) for elective contributions and payments by reason of
salary reduction agreements, 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)).
(c) Section 3401(a) wages: 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)).
For any Self-Employed Individual covered under the Plan,
Compensation shall mean a Participant's Earned Income.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Article,
Compensation for a Limitation Year is the Compensation actually
paid or includible in gross income during the 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 the 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; the 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
the 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 one hundred twenty-five percent (125%) of the dollar
limitation determined for the limitation year under sections
415(b) and (d) of the Code or one hundred forty percent (140%)
of 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 one hundred twenty-five percent (125%) of the sum of the
annual benefits under those plans which the Participant had
accrued as of the close of the last Limitation Year beginning
before January 1, 1987, disregarding any changes in the terms
and conditions of the Plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans individually
and in the aggregate satisfied the requirements of section 415
of the Code for all Limitation Years beginning before
January 1, 1987.
(4) DEFINED CONTRIBUTION DOLLAR LIMITATION: Thirty thousand dollars
($30,000) or if greater, one-fourth (1/4) of the defined benefit
dollar limitation set forth in section 415(b)(1) of the Code as
in effect for the Limitation Year.
(5) DEFINED CONTRIBUTION FRACTION: A fraction, the numerator of
which is the sum of the Annual Additions to the Participant's
Individual 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 one hundred twenty-five percent (125%) of the
dollar limitation determined under sections 415(b) and (d) of
the Code in effect under section 415(c)(1)(A) of the Code or
thirty-five percent (35%) of the Participant's Compensation for
that 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 one
(1.0) under the terms of this Plan. Under the adjustment, an
amount equal to the product of (i) the excess of the sum of the
fractions over one (1.0) times (ii) 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 Article, Employer shall mean the
Employer that adopts this Plan, and all members of a controlled
group of corporations (as defined in section 414(b) of the Code
as modified by section 415(h)), all commonly controlled trades
or businesses (as defined in section 414(c) as modified by
section 415(h)) or affiliated service groups (as defined in
section 414(m)) of which the adopting Employer is a part and any
other entity required to be aggregated with the Employer
pursuant to regulations under section 414(o) of the Code.
(7) EXCESS AMOUNT: The excess of the Participant's Annual Additions
for the Limitation Year over the maximum permissible amount.
(8) HIGHEST AVERAGE COMPENSATION: The average Compensation for the
three (3) consecutive Years of Service with the Employer that
produces the highest average. A Year of Service with the
Employer is the Plan Year as elected in the Adoption Agreement.
(9) LIMITATION YEAR: - The twelve (12) consecutive month period
defined in Section 2.23 of this Plan. All qualified plans
maintained by the Employer must use the same Limitation Year.
If the Limitation Year is amended to a different twelve (12)
consecutive month period, the new Limitation Year must begin on
a date within the Limitation Year in which the amendment is
made.
(10) MASTER OR PROTOTYPE PLAN: A plan the form of which is the
subject of a favorable opinion letter from the Intel Revenue
Service.
(11) MAXIMUM PERMISSIBLE AMOUNT: The maximum Annual Addition that
may be contributed or allocated to a Participant's account under
the Plan for any Limitation Year shall not exceed the lesser of:
(a) The defined contribution dollar limitation, or
(b) Twenty-five percent (25%) of the Participant's Compensation
for the Limitation Year.
The Compensation limitation referred to in (b) shall not apply
to any contribution for medical benefits (within the meaning of
sections 401(h) or 419A(f)(2) of the Code) which is otherwise
treated as an Annual Addition under sections 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 twelve (12)
consecutive month period, the maximum permissible amount will
not exceed the defined contribution dollar limitation multiplied
by the following fraction:
NUMBER OF MONTHS IN THE SHORT LIMITATION YEAR
12
(11) PROJECTED ANNUAL BENEFIT: The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if
the benefit is expressed in a form other than a straight life
annuity or Qualified Joint and Survivor Annuity) to which the
Participant would be entitled under the terms of the Plan
assuming:
(i) the Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later),
and
(ii) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine
benefits under the Plan will remain constant for all future
Limitation Years.
5.4 - VOLUNTARY EMPLOYEE CONTRIBUTIONS:
(a) This Plan will not accept Voluntary Employee Contributions or
matching contributions for Plan Years beginning after
December 31, 1986.
(b) INVESTMENT OF VOLUNTARY CONTRIBUTIONS: For Voluntary Employee
Contributions made prior to Plan Years beginning before
December 31, 1986, the Trustee shall credit these contributions to
the Participant's Individual Account and maintain a separate
accounting for them. Voluntary contributions shall be invested in
the same type of assets as the Employer contributions unless
otherwise directed by the Plan Administrator.
(c) Withdrawal of Voluntary Contributions:
(1) The Plan Administrator, or if applicable, the Administrative
Committee, may prescribe rules under which the Trustee shall pay
withdrawals of Voluntary Contributions to Participants. All
rules regarding withdrawals shall be administered on a uniform
and nondiscriminatory basis.
(2) Subject to the Joint and Survivor Annuity requirements of
Article VIII, a Participant may withdraw part or all of the
values attributable to Voluntary Contributions, without
earnings, on any anniversary date upon giving the Trustee thirty
(30) days notice.
(3) If the Participant requests withdrawal on account of undue
hardship, the Plan Administrator or Administrative Committee may
permit the withdrawal of earnings on the Participant's Voluntary
Contributions. Undue hardship includes medical expenditures for
the Participant or Participant's dependents, acquisition of or
major improvements in the Participant's home, education of the
Participant's dependents or financial emergency. Withdrawal of
earnings is subject to the Joint and Survivor Annuity
requirements of Article VIII.
5.5 - TRANSFER OF ROLLOVERS: With the permission of the Plan Administrator
and without regard to any limit, the Plan may receive any amounts received
by a Participant from a plan qualified under section 401(a) of the Code
either directly within sixty (60) days after receipt or from an individual
retirement arrangement under section 408(d) of the Code provided that the
individual retirement arrangement contains no assets other than those
described in section 408(d)(3)(A)(ii) of the Code.
Rollover amounts shall be held by the Plan and a separate accounting shall
be made for them. These amounts shall be fully vested and their value shall
be paid to the Participant at Normal Retirement Date, upon termination of
employment, death or disability, in accordance with the provisions of the
Plan relating to other distributions.
5.6 - TRANSFERS FROM OTHER QUALIFIED PLANS: If at the time the Employer
adopts this Plan, it specifies in the Adoption Agreement that the Plan is to
be a continuation of a prior Plan, qualified under Section 401(a) of the
Code, as amended, the Trustee, Plan Administrator or Administrative
Committee, may, in its discretion, accept funds transferred from the prior
Plan to this amended Plan. Upon acceptance of the Adoption Agreement by the
Trustees and Plan Administrator, the prior Plan shall be deemed to have been
amended and continue as this Plan.
The Trustee is also authorized to receive and invest the assets of any other
Predecessor Plan subject to the applicable conditions contained in this
Section.
In making the transfer, an accounting for Employer contributions and
Employee contributions must be provided to the Trustee of the amended Plan
along with any additional information as may be required. All transfers
from any Employee at the time of the original contribution shall be treated
after the transfer as though they were contributed under the amended and
restated Plan.
The right of the Trustee to receive and invest the assets from any
Predecessor Plan is subject to the overriding requirement that each
Participant must (if this Plan terminated) receive a benefit equal to or
greater than the benefits he or she would have been entitled to receive
before the receipt of the assets of the Predecessor Plan (subject to
customary charges and valuation charges).
5.7 - MULTIPLE EMPLOYERS: In the event that affiliated, subsidiary or other
related Employers join in the adoption of this Plan, completely independent
records, allocations, contributions and accounting (including Individual
Accounts) shall be maintained for each Employer. However, the Trustee may
invest funds from this Plan without segregating assets between or among
Employers participating in this Plan.
ARTICLE VI
DEATH BENEFITS
6.1 - BENEFICIARY DESIGNATION: Unless the Participant's Spouse has elected
otherwise in writing pursuant to a Qualified Election under Section 8.4(d),
the Beneficiary of the death benefit shall be the Participant's Spouse. If
the Participant is unmarried at the time of his or her death, or if the
surviving Spouse has consented to a designated Beneficiary in the manner
prescribed in Section 8.4(d), then the Participant may designate a
Beneficiary other than the Spouse.
The Participant may at any time change the Beneficiary designation by filing
a written notice of the change in a form satisfactory to the Plan
Administrator. The Participant's Spouse must consent in writing to any
change in Beneficiary unless the Spouse has expressly permitted the
designation of a Beneficiary by the Participant without the requirement of
any further consent by the Spouse.
The term designated Beneficiary means 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.
6.2 - AMOUNT OF DEATH BENEFITS:
(a) DEATH PRIOR TO NORMAL RETIREMENT: The amount of the death benefit
payable at any time on behalf of a Participant who dies prior to
Normal Retirement Date shall be the amount payable under the
Contracts held for his or her benefit and the total of all other
amounts in the Plan credited to the Participant's Individual
Account.
(b) DEATH AFTER NORMAL RETIREMENT DATE BUT PRIOR TO ACTUAL RETIREMENT: A
survivor annuity shall be payable at the death of a Participant who
continues active employment beyond Normal Retirement Date but who
dies before actual retirement, unless the Participant has otherwise
elected in writing with the consent of the Spouse. The entire value
of the Participant's Individual Account balance as of the date of
death shall be used to purchase the survivor annuity.
(c) DEATH AFTER ACTUAL RETIREMENT: The amount of the death benefit, if
any, payable on behalf of a Participant who dies after actual
retirement will be that amount available under the particular
benefit form selected at the time of actual retirement and which is
in effect on the Participant's date of death.
6.3 - TIME FOR PAYMENT OF DEATH BENEFITS:
(a) DISTRIBUTION BEGINNING BEFORE DEATH: If the Participant dies after
distribution of his or her interest has begun, the remaining portion
of this interest will continue to be distributed at least as rapidly
as under the method of distribution being used prior to the
Participant's death.
(b) DISTRIBUTION BEGINNING AFTER DEATH: If the Participant dies before
distribution of his or her interest begins, distribution of the
Participant's entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is made to
receive distributions in accordance with (1) or (2) below:
(1) 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;
(2) If the designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the later of
(a) December 31 of the calendar year immediately following the
calendar year in which the Participant died and (b)
December 31 of the calendar year in which the Participant would
have attained age seventy and one-half (70 1/2).
If the participant has not made an election pursuant to this
Section 6.3(b) by the time of his or her death, the Participant's
designated Beneficiary must elect the method of distribution no
later than the earlier of (1) December 31 of the calendar year in
which distributions would be required to begin under this section,
or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the
Participant has no designated Beneficiary, or if the designated
Beneficiary does not elect a method of distribution, distribution of
the Participant's entire interest must be completed by December 31
of the calendar year containing the fifth anniversary of the
Participant's death.
(c) For purposes of Section 6.3(b) above, if the Surviving Spouse dies
after the Participant, but before payments to the Spouse begin, the
provisions of Section 6.3(b), with the exception of paragraph (2)
therein, shall be applied as if the Surviving Spouse were the
Participant.
(d) PAYMENTS TO CHILD OF PARTICIPANT: For the purposes of this
Section 6.3, 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.
(e) COMMENCEMENT OF DISTRIBUTION: For the purposes of this Section 6.3,
distribution of a Participant's interest is considered to begin on
the Participant's required beginning date (or, if Section 6.3(c)
above is applicable, the date distribution is required to begin to
the Surviving Spouse pursuant to Section 6.3(b) above). If
distribution in the form of an annuity described in
Section 7.10(b)(1) irrevocably commences to the Participant before
the required beginning date, the date distribution is considered to
begin is the date distribution actually commences. Required
beginning date is defined in Section 7.1(f).
6.4 - PAYMENT TO MINORS, ETC.: In making any distribution to or for the
benefit of any minor or any person who is judged incompetent the Trustee
shall make the distribution to a legal guardian, conservator or other person
legally charged with the care of the estate or person of the minor or
incompetent person. The recipient shall have full authority and discretion
to expend the distribution for the use and benefit of the minor or
incompetent person. Any payment made pursuant to this Section shall fully
discharge the Trustee, the Plan Administrator, the Employer and the Insurer
from further liability on account thereof. Any actions taken by the Plan
Administrator and Trustee under this Section shall be completed in
accordance with applicable state law.
6.5 - FAILURE OF BENEFICIARY: If the Participant fails to designate a
Beneficiary or if the Participant is predeceased by all designated primary
and contingent Beneficiaries, any death benefit shall be payable to the
Participant's Surviving Spouse or, if the Participant is not survived by a
Spouse, to any living issue in equal shares, per stirpes, or, in default of
issue, to the estate.
6.6 - PROOF OF DEATH: The Plan Administrator may require proof of death and
evidence of the right of any person to receive all or part of the death
benefits of a deceased Participant. Except with respect to payments due
from an Insurer, the Plan Administrator's determination of the Participant's
death and the right of any person to receive payment as a result thereof
shall be binding upon the legal representative of the Participant and all
persons having or claiming any right in the Trust on account of the deceased
Participant. The right to payments due directly or indirectly from an
Insurer shall be governed by the terms of the Contract under which payable.
ARTICLE VII
DISTRIBUTION OF RETIREMENT BENEFITS
7.1 - DEFINITIONS APPLICABLE TO ARTICLE VII:
(a) APPLICABLE LIFE EXPECTANCY: The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the
Participant (or designated Beneficiary) as of the Participant's (or
designated Beneficiary's) birthday in the applicable calendar year
reduced by one 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 recalculated. The applicable calendar year shall be
the first distribution calendar year, and if life expectancy is
being recalculated then each succeeding calendar year.
(b) 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 proposed regulations thereunder.
(c) DISTRIBUTION CALENDAR YEAR: A calendar year for which a minimum
distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which contains
the Participant's required beginning date. For distributions
beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are
required to begin pursuant to Section 6.3.
(d) 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 6.3(b)(2) above) by the time
distributions are required to begin, life expectancies shall be
recalculated annually. This election shall be irrevocable as to the
Participant (or Spouse) and shall apply to all subsequent years.
The life expectancy of a nonspouse Beneficiary may not be
recalculated.
(e) PARTICIPANT'S BENEFIT:
(1) The Account Balance as of the last Valuation Date in the
calendar year immediately preceding the distribution calendar
year (valuation calendar year) increased by the amount of any
contributions or Forfeitures allocated to the Account Balance as
of the dates in the valuation calendar year after the valuation
date and decreased by distributions made in the valuation
calendar year after the valuation date.
(2) Exception for second distribution calendar year: For purposes of
paragraph (1) 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.
(f) REQUIRED BEGINNING DATE:
(1) GENERAL RULE: The required beginning date of a Participant is
the first day of April of the calendar year following the
calendar year in which the Participant attains age seventy and
one-half (70 1/2).
(2) TRANSITIONAL RULES: The required beginning date of a Participant
who attains age seventy and one-half (70 1/2) before
January 1, 1988, shall be determined in accordance with (i)
or (ii) below:
(i) NON-5-PERCENT OWNERS: The required beginning date of a
Participant who is not a 5-percent owner is the first day of
April of the calendar year following the calendar year in
which the later of retirement or attainment of age seventy
and one-half (70 1/2) occurs.
(ii) 5-PERCENT OWNERS: The required beginning date of a
Participant who is a 5-percent owner during any year
beginning after December 31, 1979, is the first day of
April following the later of:
(A) the calendar year in which the Participant attains age
seventy and one-half (70 1/2), or
(B) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes
a 5-percent owner, or the calendar year in which the
Participant retires.
The required beginning date of a Participant who is not
a 5-percent owner who attains age seventy and one-half (70 1/2)
during 1988 and who has not retired as of January 1, 1989, is
April 1, 1990.
(3) 5-PERCENT OWNER: A Participant is treated as a 5-percent owner
for purposes of this Section if the Participant is a 5-percent
owner as defined in section 416(i) of the Code (determined in
accordance with section 416 but without regard to whether the
Plan is top-heavy) at any time during the Plan Year ending with
or within the calendar year in which the owner attains age
sixty six and one-half (66 1/2) or any subsequent Plan Year.
(4) Once distributions have begun to a 5-percent owner under this
Section, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
7.2 - GENERAL DISTRIBUTION RULES
(a) Except as provided in the Joint and Survivor Annuity requirements of
Article VIII, the requirements of this Article shall apply to any
distribution of a Participant's interest and will take precedence
over any inconsistent provisions of this Plan. Unless otherwise
specified, the provisions of this Article apply to calendar years
beginning after December 31, 1984.
(b) All distributions required under this Article shall be determined
and made in accordance with the proposed Income Tax Regulations
under section 401(a)(9) of the Code, including the minimum
distribution incidental benefit requirement of section 1.401(a)(9)-2
of the proposed regulations.
(c) REQUIRED BEGINNING DATE: The entire interest of a Participant must
be distributed or begin to be distributed no later than the
Participant's required beginning date.
(d) LIMITS ON DISTRIBUTION PERIODS: As of the first distribution
calendar year, distributions, if not made in a single-sum, may only
be made over one of the following periods (or a combination
thereof):
(1) the life of the Participant,
(2) the life of the Participant and a designated Beneficiary,
(3) a period certain not extending beyond the life expectancy of the
Participant, or
(4) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
7.3 - COMMENCEMENT OF RETIREMENT BENEFITS: Monthly retirement benefits will
normally commence at Normal Retirement Date as defined in Section 2.27. If
a Participant continues employment after that date, the provisions of
Section 7.7 will apply. Unless the Participant elects otherwise, in
writing, distribution of benefits will begin no later than the sixtieth
(60th) day after the latest of the close of the Plan Year in which:
(a) the Participant attains the earlier of age 65 or the Normal
Retirement Age;
(b) occurs the tenth (10th) anniversary of the year in which the
Participant commenced participation in the Plan; or
(c) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse to
consent to a distribution while a benefit is immediately distributable,
within the meaning of Section 9.5 of the Plan, shall be deemed to be an
election to defer commencement of payment of any benefit sufficient to
satisfy this Section.
7.4 - AMOUNT OF NORMAL MONTHLY RETIREMENT INCOME: Each Participant shall be
entitled to the full value of his or her Individual Account, including any
Contract values, commencing at Normal Retirement Date, as defined in the
Plan. The monthly retirement income amount shall be that which can be
purchased by application of the full value of the Individual Account,
including any Contract values attributable to the account, to the purchase
of a monthly annuity under the normal annuity form as described in
Section 7.5.
7.5 - NORMAL ANNUITY FORM: The amount of the normal monthly retirement
income shall be paid to the Participant in accordance with the normal
annuity form of settlement unless an optional form is selected as provided
in Section 7.6. The normal form of settlement is a Qualified Joint and
Survivor Annuity for a married Participant and a life annuity for an
unmarried Participant with one hundred and twenty (120) month period
certain.
7.6 - OPTIONAL FORM OF BENEFITS: Subject to the Joint and Survivor Annuity
requirements of Article VIII, the selection of an optional method of payment
of benefits with respect to any amounts which become payable under this Plan
during the lifetime of the Participant shall be subject to and in accordance
with the following:
(a) METHOD OF ELECTING OPTIONAL ELEMENTS - If a Participant elects not
to take his or her monthly retirement benefit in the form of a
Qualified Joint and Survivor Annuity, pursuant to a Qualified
Election, the Participant shall have the right at any time prior to
commencement of the distribution of benefits to request, in writing,
the Plan Administrator to direct the Trustee to arrange to make the
distribution in an optional form permitted in Subsection (c) below.
(b) VALUE OF OPTIONAL FORMS - All optional forms of payment, including
any Qualified Joint and Survivor Annuity and any Qualified
Preretirement Survivor Annuity shall be the actuarial equivalent of
each other and the actuarial equivalent of the normal annuity form.
The optional form may provide more or may provide less monthly
retirement amounts than the normal annuity form of retirement
benefit, depending on the option selected. In no event may the
amount payable to a Beneficiary exceed that payable to the
Participant.
(c) OPTIONAL FORMS PERMITTED - Whenever an optional form of payment is
requested, whether under the Contract(s) or the election is made
outside of the Contract(s), the optional form of payment shall be
limited to one of the following (or any combination thereof):
(1) Lump sum,
(2) Life Annuity for the Participant,
(3) Life Annuity for the Participant and a designated Beneficiary,
(4) Installments not extending beyond the life expectancy of the
Participant, or
(5) Installments not extending beyond the joint life expectancy of
the Participant and a designated Beneficiary.
(d) INTEREST ONLY OPTION NOT AVAILABLE - The "Interest Only" option
contained in the Contract(s) on the life of the Participant or any
similar option outside the Contract(s) shall not be available as an
optional form of payment.
7.7- DEFERRED RETIREMENT:, A Participant may consent to remain in employment
after his or her Normal Retirement Date. If the Participant defers
retirement, the Participant may elect that the payment of any benefits under
the Plan commence at a date later than the dates specified in Section
7.3(a), (b), and (c) but not beyond the earlier of actual retirement or the
required beginning date as defined in Section 7.1(f). The election must be
made by submitting to the Plan Administrator a written statement, signed by
the Participant, which describes the benefit and the date on which the
benefit shall commence. However, the failure of the Participant to consent
to a distribution of a benefit which is immediately distributable is deemed
to be an election to defer commencement of payment of any benefit sufficient
to satisfy section 401(a)(14) of the Code and Reg. section 1.401(a)-14.
This election shall not cause benefits payable under the Plan with respect
to the Participant in the event of his or her death to be more than
"incidental" pursuant to Reg. 1.401-1(b)(1)(i).
At actual retirement, the Contract values and the other values of the
Participant's Individual Account as of the Valuation Date coincident with or
immediately preceding his or her actual date of retirement, shall be applied
under the normal annuity form or if applicable under an optional form of
settlement, as provided for in the Plan.
7.8 - EARLY RETIREMENT: If the Plan provides for early retirement as set
forth in Section VI of the Adoption Agreement and a Participant satisfies
the eligibility requirements for early retirement and terminates employment,
contributions on behalf of the Participant shall cease and he or she shall
be entitled to the full value of his or her Individual Account, including
any Contract values. The Participant may elect to begin distribution on the
effective date of his or her separation from service or it may be postponed,
but in no event postponed beyond the later of the Participant's Normal
Retirement Date or age 62.
When distribution is to commence, the full value of the Participant's
Individual Account, including Contract values, as of the Valuation Date
coincident with or immediately preceding the distribution date shall be
applied under the normal annuity form, or, if applicable under one of the
optional forms of settlement, as provided in this Plan. If distribution is
to be postponed, the Trustee shall arrange with the Insurer to place any
Contracts relating to the Participant on a paid-up status or otherwise
preserve the Participant's equities therein until actual distribution
commences.
If a Participant separates from service before satisfying the age
requirement for early retirement, but has satisfied the service requirement,
the Participant will be entitled to elect an early retirement benefit upon
satisfaction of the age requirement.
7.9 - DISABILITY RETIREMENT: Disability retirement benefits under this
Section are subject to the election in Section VI of the Adoption Agreement.
If a Participant is disabled within the meaning of Section 2.11 and
terminates employment, contributions on behalf of the Participant shall
cease and he or she shall be entitled to the full value of his or her
Individual Account, including any Contract values. The Plan Administrator
shall certify fact of the disability to the Trustee and the Participant may
elect to begin distribution on the effective date of separation from service
or it may be postponed, but in no event postponed beyond the Participant's
Normal Retirement Date.
When distribution is to commence, the full value of the Participant's
Individual Account, including Contract Values, as of the Valuation Date
coincident with or immediately preceding the distribution date shall be
applied under the normal annuity form, or, if applicable, under one of the
optional forms of settlement, as provided in this Plan. If distribution is
to be postponed, the Trustee shall arrange with the Insurer to place any
Contracts relating to the Participant on a paid-up status or otherwise
preserve the Participant's equities therein until actual distribution
commences.
7.10 - MINIMUM ANNUAL DISTRIBUTIONS: If the Participant's interest is to be
distributed in other than a single sum, the following minimum distribution
rules shall apply on or after the required beginning date:
(a) DISTRIBUTION FROM PARTICIPANT'S INDIVIDUAL ACCOUNT:
(1) If a Participant's benefit is to be distributed over (i) a
period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy of
the Participant and the Participant's designated Beneficiary or
(ii) a period not extending beyond the life expectancy of the
designated Beneficiary, the amount required to be distributed
for each calendar year, beginning with distributions for the
first distribution calendar year, must at least equal the
quotient obtained by dividing the Participant's benefit by the
applicable life expectancy.
(2) For calendar years beginning before January 1, 1989, if the
Participant's Spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least fifty
percent (50%) of the present value of the amount available for
distribution is paid within the life expectancy of the
Participant.
(3) For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for
the first distribution calendar year shall not be less than the
quotient obtained by dividing the Participant's benefit by the
lesser of (i) the applicable life expectancy or (ii) if the
Participant's Spouse is not the designated Beneficiary, the
applicable divisor determined from the table set forth
in Q&A-4 of section 1.401(a)(9)-2 of the proposed regulations.
Distributions after the death of the Participant shall be
distributed using the applicable life expectancy in
Section 7.10(a)(1) above as the relevant divisor without regard
to proposed regulations section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution
for other calendar years, including the minimum distribution for
the distribution calendar year in which the Employee's required
beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
(b) PURCHASE OF ANNUITY:
(1) 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.
(2) Any annuity Contract distributed herefrom must be
nontransferable.
(3) The terms of any annuity Contract purchased and distributed by
the Plan to a Participant or Spouse shall comply with the
requirements of this Plan.
7.11 - TRANSITIONAL RULE:
(a) Notwithstanding the other requirements of this Article and subject
to the requirements of Article VIII, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee, including a
five percent (5%) owner, may be made in accordance with all of the
following requirements (regardless of when the distribution
commences):
(1) The distribution by the trust is one which would not have
disqualified the trust under section 401(a)(9) of the Code as in
effect prior to amendment by the Deficit Reduction Act of 1984.
(2) The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the trust is being
distributed or, if the Employee is deceased, by a Beneficiary of
the Employee.
(3) The designation was in writing, was signed by the Employee or
the Beneficiary, and was made before January 1, 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and
in the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the Beneficiary,
to whom the distribution is being made, will be presumed to have
designated the method of distribution under which the distribution
is being made if the method of distribution was specified in writing
and the distribution satisfies the requirements in Subsections
(a)(1) and (5) above.
(d) If a designation is revoked any subsequent distribution must satisfy
the requirements of section 401(a)(9) of the Code and the proposed
regulations thereunder. If a designation is revoked subsequent to
the date distributions are required to begin, the trust must
distribute by the end of the calendar year following the calendar
year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed
to satisfy section 401(a)(9) of the Code and the proposed
regulations thereunder, but for the section 242(b)(2) election. For
calendar years beginning after December 31, 1988, distributions must
meet the minimum distribution incidental benefit requirements in
section 1.401(a)(9)-2 of the proposed regulations. Any changes in
the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
Beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so
long as the 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.
ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 - APPLICATION OF THIS ARTICLE: The provisions of this Article shall
apply to any Participant who is credited with at least one (1) Hour of
Service with the Employer on or after August 23, 1984, and other
Participants as provided in Section 8.9.
8.2 - QUALIFIED JOINT AND SURVIVOR ANNUITY: Unless an alternative form of
benefit is selected pursuant to a qualified election within the ninety (90)
day period ending on the annuity starting date, a married Participant's
vested Account Balance will be paid in the form of a Qualified Joint and
Survivor Annuity and an unmarried Participant's vested Account Balance will
be paid in the form of a life annuity. The Participant may elect to have
the annuity distributed upon attainment of the earliest retirement age under
the Plan.
8.3 - QUALIFIED PRERETIREMENT SURVIVOR ANNUITY: Unless an alternative 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 the annuity distributed within a reasonable period
after the Participant's death.
8.4 - DEFINITIONS
(a) ANNUITY STARTING DATE: The first day of the first period for which
an amount is paid as an annuity or in any other form.
(b) EARLIEST RETIREMENT AGE: The earliest date on which, under the Plan,
the Participant could elect to receive retirement benefits.
(c) ELECTION PERIOD: The period which begins on the first day of the
Plan Year in which the Participant attains age thirty-five (35) and
ends on the date of the Participant's death. If a Participant
separates from service prior to the first day of the Plan Year in
which age thirty-five (35) is attained, with respect to the Account
Balance as of the date of separation, the Election Period shall
begin on the date of separation.
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 the election and ending on the
first day of the Plan Year in which the Participant will attain
age 35. This election shall not be valid unless the Participant
receives a written explanation of the qualified preretirement
survivor annuity in terms that are comparable to the explanation
required under Section 8.7. 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 that date shall be subject to the full
requirements of this Article.
(d) 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 (1) the
Participant's Spouse consents in writing to the election; (2) the
election designates a specific Beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal
consent); (3) the Spouse's consent acknowledges the effect of the
election; and (4) the spouse's consent is witnessed by a plan
representative or notary public. Additionally, a Participant's
waiver of the Qualified Joint and Survivor Annuity shall not be
effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the spouse
expressly permits designations by the Participant without any
further spousal consent). If it is established to the satisfaction
of a plan representative that there is no Spouse or that the Spouse
cannot be located, a waiver will be deemed a qualified election.
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 the Spouse. A consent that
permits designations by the Participant without any requirement of
further consent by the 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 those 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 8.7 below.
(e) QUALIFIED JOINT AND SURVIVOR ANNUITY: Qualified Joint and Survivor
Annuity is defined in Section 2.34.
(f) SPOUSE (SURVIVING SPOUSE): Spouse is defined in Section 2.36.
(g) 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 Article shall apply to a
Participant who is vested in amounts attributable to Employer
contributions, Employee contributions, or both at the time of death
or distribution.
8.5 - ELECTION REVOCABLE - Any election to waive benefits under this Section
is revocable in writing and/or a new election may be made in the same manner
provided in Section 8.4(d) prior to the commencement of annuity payments to
the Participant. Breaks in Service will neither invalidate a previous
election or revocation nor prevent a future election or revocation.
8.6 - AUTOMATIC REVOCATION - The death of a Participant's Spouse or the
divorce of the Participant from his or her Spouse (except as provided under
a Qualified Domestic Relations Order as described in section 414(p) of the
Code) prior to the commencement of benefits shall terminate the automatic
option under this Article and the normal annuity form or optional form of
settlement, if selected, shall control the distribution of the Participant's
benefits.
8.7 - NOTICE REQUIREMENTS:
(a) QUALIFIED JOINT AND SURVIVOR ANNUITY: In the case of a Qualified
Joint and Survivor Annuity, the Plan Administrator shall no less
than thirty (30) days and no more than ninety (90) days prior to the
annuity starting date, provide each Participant a written
explanation of: (1) the terms and conditions of a Qualified Joint
and Survivor Annuity; (2) the Participant's right to make and effect
an election to waive the Qualified Joint and Survivor Annuity form
of benefit; (3) the rights of a Participant's spouse; and (4) the
right to make, and the effect of, a revocation of a previous
election to waive the Qualified Joint and Survivor Annuity.
(b) QUALIFIED PRERETIREMENT SURVIVOR ANNUITY: In the case of a Qualified
Preretirement Survivor Annuity as described in Section 8.3 of this
Article, the Plan Administrator shall provide each Participant
within the applicable period for the Participant a written
explanation of the Qualified Preretirement Survivor Annuity in terms
and in a manner as would be comparable to the explanation provided
for meeting the requirements of Subsection (a) above applicable to a
Qualified Joint and Survivor Annuity.
The applicable period for a Participant is whichever of the
following periods ends last: (1) the period beginning with the first
day of the Plan Year in which the Participant attains age thirty two
(32) and ending with the close of the Plan Year preceding the Plan
Year in which the Participant attains age thirty five (35); (2) a
reasonable period ending after the individual becomes a Participant;
(3) a reasonable period ending after Section 8.7(c) ceases to apply
to the Participant; (4) a reasonable period ending after this
Article first applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a reasonable period ending
after separation from service in the case of a Participant who
separates from service before attaining age thirty five (35).
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (2), (3) and
(4) is the end of the two-year period beginning one (1) year prior
to the date the applicable event occurs, and ending one (1) year
after that date. In the case of a Participant who separates from
service before the Plan Year in which age thirty five (35) is
attained, notice shall be provided within the two-year period
beginning one (1) year prior to separation and ending one (1) year
after separation. If a Participant thereafter returns to employment
with the Employer, the applicable period for that Participant shall
be redetermined.
(c) Notwithstanding the other requirements of this Section 8.7 the
respective notices prescribed by this Section need not be given to a
Participant if (1) the Plan "fully subsidizes" the cost of a
Qualified Joint and Survivor Annuity or Qualified Preretirement
Survivor Annuity, and (2) 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 8.7, a plan fully subsidizes the cost 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.
8.8 - SAFE HARBOR RULES
(a) This Section shall apply to a Participant in a profit-sharing plan,
and to any distribution, made on or after the first day of the first
Plan Year beginning after December 31, 1988, from or under a
separate account attributable solely to accumulated deductible
Employee contributions, as defined in section 72(o)(5)(B) of the
Code, and maintained on behalf of a Participant in a money purchase
pension plan (including a target benefit plan) if the following
conditions are satisfied: (1) the Participant cannot or does not
elect payments in the form of a life annuity, and (2) on the death
of the 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 already 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 ninety (90)-day period following the date of the
Participant's death. The Account Balance shall be adjusted for
gains or losses occurring after the Participant's death in
accordance with the provisions of the Plan governing the adjustment
of Account Balances for other types of distributions. However, this
Section 8.8 shall not be operative with respect to the Participant
if it is determined that this profit-sharing plan is a direct or
indirect transferee of a defined benefit plan, money purchase
pension plan, a target benefit plan, stock bonus, or profit-sharing
plan which is subject to the survivor annuity requirements of
section 401(a)(11) and section 417 of the Code. If this Section
8.8 is operative, then the provisions of this Article, other than
Section 8.9, shall be inoperative. In addition, this Section shall
not apply unless the Participant's Spouse is the Beneficiary of any
insurance on the Participant's life purchased by Employer
contributions or Forfeitures allocated to the Participant's account.
(b) The Participant may waive the spousal death benefit described in
this Section at any time provided that no waiver shall be effective
unless it satisfies the conditions of Section 8.4(d) (other than the
notification requirement referred to therein) that would apply to
the Participant's waiver of the Qualified Preretirement Survivor
Annuity.
(c) For purposes of this Section 8.8, 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 8.4(g).
8.9 - TRANSITIONAL RULES:
(a) Any Living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the
previous Sections of this Article must be given the opportunity to
elect to have the prior Sections of this Article apply if the
Participant is credited with at least one (1) Hour of Service under
this Plan or a predecessor plan in a Plan Year beginning on or after
January 1, 1976, and the Participant had at least ten (10) years of
vesting service when he or she separated from service.
(b) Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one (1) Hour of Service under this
Plan or a predecessor plan on or after September 2, 1974, and who is
not otherwise credited with any service in a Plan Year beginning on
or after January 1, 1976, must be given the opportunity to have his
or her benefits paid in accordance with Section 8.9(d).
(c) The respective opportunities to elect (as described in
Subsections (a) and (b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to the
Participants.
(d) Any Participant who has elected pursuant to Subsection (b) above and
any Participant who does not elect under Subsection (a) above or who
meets the requirements of Subsection (a) except that the Participant
does not have at least ten (10) years of vesting service when he or
she separates from service, shall have his or her benefits
distributed in accordance with the following requirements if
benefits would have been payable in the form of a life annuity:
(1) AUTOMATIC JOINT AND SURVIVOR ANNUITY: If benefits in the form of
a life annuity become payable to a married Participant who:
(i) begins to receive payments under the Plan on or after Normal
Retirement Age, or
(ii) dies on or after Normal Retirement Age while still working
for the Employer, or
(iii) begins to receive payments on or after the qualified early
retirement age, or
(iv) separates from service on or after attaining Normal
Retirement age (or the qualified early retirement age) and
after satisfying the eligibility requirements for the
payment of benefits under the plan and thereafter dies
before beginning to receive those benefits;
then those benefits will be received under this Plan in the form
of a Qualified Joint and Survivor Annuity, unless the
Participant has elected otherwise during the election period.
The election period must begin at least six (6) months before
the Participant attains qualified early retirement age and end
not more than ninety (90) days before the commencement of
benefits. Any election hereunder will be in writing and may be
changed by the Participant at any time.
(2) 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 the 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 (i) the ninetieth (90th) day before the
participant attains the qualified early retirement age, or (ii)
the date on which participation begins, and ends on the date the
Participant terminates employment.
(3) For purposes of this Subsection (d):
(i) 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.
(ii) QUALIFIED JOINT AND SURVIVOR ANNUITY is an annuity for the
life of the Participant with a survivor annuity for the life
of the spouse as described in Section 8.2 of this Article.
ARTICLE IX
BENEFITS UPON TERMINATION - VESTING
9.1 - TERMINATION OF PARTICIPATION: If a Participant ceases to be an
Employee by resignation, discharge, or other reason, participation in the
plan shall terminate, and his or her interest and rights under the Plan
shall be limited to those contained in this Article. The Employer shall
promptly notify the Plan Administrator of the termination. No further
contributions shall be made or be due on behalf of the Participant after the
date he or she ceases to be a Participant except as provided in the Adoption
Agreement.
9.2 - VESTING: The Vested Interest of the Participant shall be determined in
accordance with the schedule elected in the Adoption Agreement. The total
value of the Individual Account, attributable to Employer contributions,
including the values of any Contract(s), as of the last Valuation Date,
shall be multiplied by the percentage obtained from the vesting schedule to
determine the amount due the Participant. On attainment of Normal
Retirement Date, early retirement if elected in the Adoption Agreement,
disability retirement, or termination of the Plan, the value of the
Participant's Individual account, including any Contract values, shall be
nonforfeitable.
Any portion of a Participant's Individual Account that is not vested shall
be treated as a Forfeiture and applied as provided in Section 5.1(d).
No part of a Participant's Account Balance attributable to the Employer's
contributions shall be forfeited solely by reason of the Participant's
withdrawal of his or her own contributions.
Any portion of a Participant's Individual Account, including Contract
values, which are attributable to the Employee's contributions, whether
Voluntary Employee Contributions or rollover assets, shall at all times be
nonforfeitable and one hundred percent (100%) vested in the Participant.
9.3 - TIME AND MANNER OF PAYMENT OF VESTED BENEFITS: Benefits will be paid
only on death, disability, termination of employment, plan termination, or
at Normal Retirement Age.
Benefits from the Plan are payable to the Participant pursuant to the
provisions of Article VII, Distribution of Retirement Benefits and Article
VIII, Joint and Survivor Annuity Requirements.
9.4 - CASH-OUT AND PLAN REPAYMENT PROVISIONS: If an Employee terminates
service, and the value of the Employee's vested Account Balance derived from
Employer and Employee contributions is not greater than three thousand five
hundred dollars ($3,500), the Employee will receive a distribution of the
value of the entire vested portion of the Account Balance and the nonvested
portion will be treated as a Forfeiture. For purposes of this Section, if
the value of an Employee's vested Account Balance is zero, the Employee
shall be deemed to have received a distribution of the vested Account
Balance. A Participant's vested Account Balance shall not include
accumulated deductible Employee contributions within the meaning of
section 72(o)(5)(B) of the Code for the Plan Years beginning prior to
January 1, 1989.
If an Employee terminates service, and elects, in accordance with the
requirements of Section 9.5, to receive the value of the Employee's vested
Account Balance, the nonvested portion will be treated as a Forfeiture. If
the Employee elects to have distributed less than the entire vested portion
of the Account Balance derived from Employer contributions, the part of the
nonvested portion that will be treated as a Forfeiture is the total
nonvested portion multiplied by a fraction, the numerator of which is the
amount of distribution attributable to Employer contributions and the
denominator of which is the total value of the vested Employer derived
Account Balance.
If an Employee receives a distribution pursuant to this Section and the
Employee resumes employment covered under this Plan, the Employee's
Employer-derived Account Balance will be restored to the amount on the date
of distribution if the Employee repays to the Plan the full amount of the
distribution attributable to Employer contributions before the earlier of
five (5) years after the first date on which the Participant is subsequently
re-employed by the Employer, or the date the Participant incurs five (5)
consecutive one (1)-year Breaks in Service following the date of the
distribution. If an Employee is deemed to receive a distribution pursuant
to this Section, and the Employee resumes employment covered under this Plan
before the date the Participant incurs five (5) consecutive one (l)-year
Breaks in Service, upon the reemployment of the Employee, the
Employer-derived Account Balance of the Employee will be restored to the
amount on the date of the deemed distribution.
9.5 - RESTRICTIONS ON IMMEDIATE DISTRIBUTION; CONSENT:
(a) If the value of a Participant's vested Account Balance derived from
Employer and Employee contributions exceeds (or at the time of any
prior distribution exceeded) $3,500, and the Account Balance is
immediately distributable, the Participant and the Participant's
Spouse (or where either the Participant or the Spouse has died, the
survivor) must consent to any distribution of the Account Balance.
The consent of the Participant and the Participant's Spouse shall be
obtained in writing within the ninety (90)-day period ending on the
annuity starting date. The annuity starting date is the first day
of the first period for which an amount is paid as an annuity or any
other form. The Plan Administrator shall notify the Participant and
the Participant's Spouse of the right to defer any distribution
until the Participant's Account Balance is no longer immediately
distributable. 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 thirty (30) days and no
more than ninety (90) days prior to the annuity starting date.
Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a Qualified Joint
and Survivor Annuity while the Account Balance is immediately
distributable. (Furthermore, if payment in the form of a Qualified
Joint and Survivor Annuity is not required with respect to the
Participant pursuant to Section 8.8 of the Plan, only the
Participant need consent to the distribution of an Account Balance
that is immediately distributable.) Neither the consent of the
Participant nor the Participant's Spouse shall be required to the
extent that a distribution is required to satisfy section 401(a)(9)
or section 415 of the Code. In addition, upon termination of this
Plan, if the Plan does not offer an annuity option (purchased from a
commercial provider), and if the Employer or any entity within the
same controlled group as the Employer does not maintain another
defined contribution plan (other than an employee stock ownership
plan as defined in section 4975(e)(7) of the Code), the
Participant's Account Balance will, without the Participant's
consent, be distributed to the Participant. However, if any entity
within the same controlled group as the Employer maintains another
defined contribution plan (other than an employee stock ownership
plan as defined in section 4975(e)(7) of the Code) then the
Participant's Account Balance will be transferred, without the
Participant's consent, to the other plan if the Participant does not
consent to an immediate distribution.
An Account Balance is immediately distributable if any part of the
Account Balance could be distributed to the Participant (or
Surviving Spouse) before the Participant attains (or would have
attained if the Participant had not died prior to) the later of
Normal Retirement Age or age sixty-two (62).
(b) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of
the first Plan Year beginning after December 31, 1988, the
Participant's vested Account Balance shall not include amounts
attributable to accumulated deductible Employee contributions within
the meaning of section 72(o)(5)(B) of the Code.
9.6 - AMENDMENTS AFFECTING VESTED AND/OR ACCRUED BENEFITS: No amendment to
the Plan shall be effective to the extent that it has the effect of
decreasing a Participant's accrued benefit. Notwithstanding the preceding
sentence, a Participant's Account Balance may be reduced to the extent
permitted under section 412(c)(8) of the Code. For purposes of this
paragraph, a Plan amendment which has the effect of decreasing a
Participant's Account Balance or eliminating an optional form of benefit,
with respect to benefits attributable to service before the amendment, shall
be treated as reducing an accrued benefit.
Furthermore, if the vesting schedule of a Plan is amended, in the case of an
Employee who is a Participant as of the later of the date the amendment is
adopted or the date it becomes effective, the nonforfeitable percentage
(determined as of that date) of the Employee's Employer-derived accrued
benefit will not be less than the percentage computed under the Plan without
regard to the amendment.
9.7 - 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 nonforfeitable percentage or if
the Plan is deemed amended by an automatic change to or from a top-heavy
vesting schedule, each Participant with at least three (3) years of service
with the Employer may elect, within a reasonable period after the adoption
of the amendment or change, to have the nonforfeitable percentage computed
under the Plan without regard to the amendment or change. For Participants
who do not have at least one (1) Hour of Service in any Plan Year beginning
after December 31, 1988, the preceding sentence shall be applied by
substituting "five (5) Years of Service" for "three (3) Years of Service"
where that language appears.
The period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end on the
later of:
(1) Sixty (60) days after the date the amendment is adopted;
(2) Sixty (60) days after the date the Plan amendment became
effective; or
(3) Sixty (60) days after the date the Participant is issued written
notice of the amendment by the Employer or Plan Administrator.
9.8 - BENEFITS PROTECTED ON MERGER, CONSOLIDATION OR TRANSFER: In the event
of a merger or consolidation with, or transfer of assets to any other plan,
each Participant will receive a benefit immediately after the merger, etc.
(if the Plan then terminated) which is at least equal to the benefit the
Participant was entitled to immediately before the merger, etc. (if the Plan
had terminated). A certification to this effect may be required by the
Insurer from the successor, sponsor or administrator prior to any merger,
consolidation or transfer of assets.
9.9 - EFFECT OF A BREAK IN SERVICE ON VESTING: in the case of a Participant
who has incurred a one (1) year Break in Service, Years of Service before
the break will not be taken into account until the Participant has completed
a Year of Service after the Break in Service.
In the case of a Participant who has five (5) or more consecutive one (1)
year Breaks in Service all service after these Breaks in Service will be
disregarded for the purpose of vesting the Employer-derived Account Balance
that accrued before these Breaks in Service. The Participant's pre-break
service will count in vesting the post-break Employer-derived Account
Balance only if either:
(1) The Participant has any nonforfeitable interest in the Account
Balance attributable to Employer contributions at the time of
separation from service; or
(2) Upon returning to service the number of consecutive one (1) year
Breaks in Service is less than the number of Years in Service.
Separate accounts will be maintained for the Participant's pre-break and
post-break Employer-derived Account Balance. Both accounts will share in
the earnings and losses of the fund.
9.10 - VESTING UPON TERMINATION OF PLAN: Upon the termination of this Plan
or upon partial termination of the Plan as determined under ERISA, the
Account Balance of each Participant as of the termination date will be
nonforfeitable. Upon a complete and final discontinuance of contributions
in a Profit Sharing plan, the Account Balance of each Participant will be
nonforfeitable.
ARTICLE X
PLAN LOANS TO PARTICIPANTS
10.1 - GENERAL RULES: The Trustee may in the Trustee's sole discretion, make
loans to Participants and Beneficiaries in a uniform and nondiscriminatory
manner under the following circumstances:
(a) Loans shall be made available to all Participants and Beneficiaries
on a reasonably equivalent basis.
(b) Loans shall not be made available to highly compensated Employees
(as defined in section 414(g) of the Code) in an amount greater than
the amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable interest
rate.
(d) No Participant loan shall exceed the present value of the
Participant's vested Account Balance.
10.2 - SPOUSAL CONSENT: A Participant must obtain the consent of his or her
Spouse, if any, to the use of the Account Balance as security for the loan.
Spousal consent shall be obtained no earlier than the beginning of the
ninety (90)-day period that ends on the date on which the loan is to be so
secured. The consent must be in writing, must acknowledge the effect of the
loan, and must be witnessed by a plan representative or notary public. The
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.
10.3 - COLLATERAL: Each loan shall be secured by collateral. Collateral
shall consist of (1) the Participant's entire right, title, and interest in
and to an amount not exceeding fifty percent (50%) of the nonforfeitable
Account Balance of the Participant under the Plan, and (2) if necessary,
other property acceptable to the Trustee, of sufficient value to adequately
secure the repayment of the loan.
10.4 - Interest Rate: Every loan applicant shall receive a clear statement
of the charges involved in each loan transaction including the dollar amount
and the annual interest rate of the finance charge. The rate of interest on
a promissory note must be reasonable and shall be comparable to the
prevailing rate which is then being charged by institutional lenders.
10.5 - LIMITATIONS ON LOANS:
(a) AMOUNT OF LOAN: Loans made pursuant to this Article (when added to
the outstanding balance of all other loans to the Participant or
Beneficiary) may not exceed the lesser of
(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans during the one (1) year period
ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made, or
(2) the greater of
(i) one-half (1/2) the present value of the nonforfeitable
accrued benefit of the participant, or
(ii) the total accrued benefit 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.
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.
(b) LOANS TO SHAREHOLDER - EMPLOYEES OR OWNER-EMPLOYEES: 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 the
corporation, more than five percent (5%) of the outstanding stock of
the corporation.
10.6 - REPAYMENT OF LOAN: Any loan shall by its terms require that repayment
(principal and interest) be amortized in level payments, not less frequently
than quarterly, over a period not extending beyond five (5) years from the
date of the loan, unless the 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.
10.7 - DEFAULT IN REPAYMENT: In the event of default, foreclosure on the
note and attachment of security will not occur until a distributable event
occurs in the Plan.
10.8 - EFFECT OF LOAN ON DEATH BENEFIT: If a valid spousal consent has been
obtained in accordance with Section 10.2, then notwithstanding any other
provision of this Plan, the portion of the Participant's vested Account
Balance used as a security interest held by the plan by reason of a loan
outstanding to the Participant shall be taken into account for purposes of
determining the amount of the Account Balance payable at the time of death
or distribution, but only if the reduction is used as repayment of the loan.
If less than 100% of the Participant's vested Account Balance (determined
without regard to the preceding sentence) is payable to the Surviving
Spouse, then the Account Balance shall be adjusted by first reducing the
vested Account Balance by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the Surviving Spouse.
ARTICLE XI
TOP-HEAVY PLAN
11.1 - APPLICATION OF PROVISIONS: If the Plan is or becomes Top-Heavy in any
Plan Year beginning after December 31, 1983, the provisions of this Article
will supercede any conflicting provisions in the Plan or Adoption Agreement.
11.2 - DEFINITIONS APPLICABLE TO TOP-HEAVY PLANS:
(a) KEY EMPLOYEE: Any Employee or former Employee (and the Beneficiaries
of that Employee) who at any time during the determination period
was
(1) an officer of the Employer, if that individual's annual
Compensation exceeds fifty percent (50%) of the dollar
limitation under section 415(b)(1)(A) of the Code,
(2) an owner (or considered an owner under section 318 of the Code)
of one of the ten (10) largest interests in the Employer if that
individual's Compensation exceeds one hundred percent (100%) of
the dollar limitation under section 415(c)(1)(A) of the Code,
(3) a five percent (5%) owner of the Employer, or
(4) a one percent (1%) owner of the Employer who has annual
Compensation of more than one hundred fifty thousand
dollars ($150,000).
Annual compensation means compensation as defined in section
415(c)(3) of the Code, but including amounts contributed by the
Employer pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under section 125,
section 402(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 four (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
hereunder.
(b) TOP-HEAVY PLAN: For any Plan Year beginning after December 31, 1983,
this Plan is top heavy if any of the following conditions exist:
(1) If the top-heavy ratio for this Plan exceeds sixty percent (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 sixty
percent (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 sixty
percent (60%).
(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 five (5) year period ending on the determination
date(s) has or has had accrued benefits, the top-heavy ratio for
this Plan alone or for the required or permissive aggregation
group as appropriate is a fraction, the numerator of which is
the sum of the Account Balances of all key Employees as of the
determination date(s) (including any part of any Account Balance
distributed in the five (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 five (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 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 five (5) year period ending on
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
five (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 twelve (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
a least one (1) Hour of Service with any Employer maintaining
the Plan at any time during the five (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 the benefit accrued less rapidly than the slowest accrual
rate permitted under the fractional rule of section 411(b)(1)(C)
of the Code.
(d) 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.
(e) REQUIRED AGGREGATION GROUP: (1) Each qualified plan of the Employer
in which at least one key Employee participates, or participated at
any time during the determination period (regardless of whether the
plan has terminated), and (2) any other qualified plan of the
Employer which enables a plan described in (1) to meet the
requirements of sections 401(a)(4) and 410 of the Code.
(f) 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.
(g) VALUATION DATE: Plan Valuation Date.
(h) PRESENT VALUE: Present value shall be based only on the interest and
mortality rates specified in the Adoption Agreement.
11.3 - MINIMUM ALLOCATION:
(a) Except as otherwise provided in Subsections (c) and (d) below, the
Employer contributions and Forfeitures allocated on behalf of any
Participant who is not a key Employee shall not be less than the
lesser of three percent (3%) of the Participant's Compensation or in
the case where the Employer has no defined benefit plan which
designates this Plan to satisfy section 401 of the Code, the largest
percentage of Employer contributions and Forfeitures, as a
percentage of the first two hundred thousand dollars ($200,000) of
the key Employee's Compensation, allocated on behalf of any key
Employee for that year. The minimum allocation is determined
without regard to any Social Security contribution. This minimum
allocation shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation of the year
because of (1) the Participant's failure to complete one thousand
(1,000) Hours of Service (or any equivalent provided in the Plan),
or (2) the Participant's failure to make mandatory Employee
contributions to the Plan, or (3) Compensation less than a stated
amount.
(b) For purposes of computing the minimum allocation, Compensation will
mean Compensation as defined in Section 2.9 of the Plan.
(c) Subsection (a) above shall not apply to any Participant who was not
employed by the Employer on the last day of the Plan Year.
(d) Subsection (a) above shall not apply to any Participant to the
extent the Participant is covered under any other Plan or Plans of
the Employer and the Employer has provided in the Adoption Agreement
that the minimum allocation or benefit requirement applicable to
top-heavy plans will be met in the other Plan or Plans.
11.4 - NONFORFEITABILITY: The minimum allocation required (to the extent
required to be nonforfeitable under section 416(b) of the Code) may not be
forfeited under section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
11.5 - MINIMUM VESTING SCHEDULES: For any Plan Year in which this Plan is
top-heavy and one hundred percent (100%) immediate vesting has not been
selected, the minimum vesting schedule in this Section will automatically
apply to the Plan. The minimum vesting schedule applies to all benefits
within the meaning of section 411(a)(7) of the Code except those
attributable to Employee contributions, including benefits accrued before
the effective date of section 416 and benefits accrued before the Plan
became top-heavy. Further, no reduction in vested benefits may occur in the
event the Plan's status as top-heavy changes for any Plan Year. However,
this Section does not apply to the Account Balances of any Employee who does
not have an Hour of Service after the Plan has initially become top-heavy
and that Employee's Account Balance attributable to Employer contributions
and Forfeitures will be determined without regard to this Section.
The nonforfeitable interest of each Employee in his or her Account Balance
attributable to Employer contributions shall be determined on the basis of
the following minimum vesting schedule:
Twenty percent (20%) vesting after two (2) Years of Service.
Forty percent (40%) vesting after three (3) Years of Service.
Sixty percent (60%) vesting after four (4) Years of Service.
Eighty percent (80%) vesting after five (5) Years of Service.
One hundred percent (100%) vesting after six (6) Years of Service.
If the vesting schedule under the Plan shifts in or out of the above
schedule for any Plan Year because of the Plan's top-heavy status, that
shift is an amendment to the vesting schedule and the election in Section
9.7 of the Plan applies.
ARTICLE XII
CLAIMS PROCEDURE
12.1 - FILING A CLAIM FOR BENEFITS: A Participant, or Beneficiary or
Employer acting on his or her behalf, shall make a claim for Plan benefits
by filing a written request with the Plan Administrator upon a form
furnished for that purpose. The request shall set forth the basis of the
claim and shall authorize the Plan Administrator to conduct any examinations
necessary to determine the validity of the claim and to take any necessary
steps to facilitate the payment of any benefits to which the Participant or
Beneficiary may be entitled under the terms of the Plan.
12.2 - DENIAL OF CLAIM: Whenever a claim for benefits by any Participant or
Beneficiary has been wholly or partially denied, the Plan Administrator must
furnish the Participant or Beneficiary a written notice of the denial within
sixty (60) days of the date the original claim was filed. This notice shall
set forth the specific reason for the denial, specific reference to
pertinent Plan provisions on which the denial is based, a description of any
additional information needed to perfect the claim and an explanation of why
it is necessary, and an explanation of the procedure for appeal.
12.3 - REMEDIES AVAILABLE: The Participant or Beneficiary shall have sixty
(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 the review within sixty
(60) days after receipt of an application, for review as provided for in
this Section. Upon a decision unfavorable to the Participant or
Beneficiary, the Participant or Beneficiary shall be entitled to bring any
necessary or appropriate action in law or equity to protect or clarify his
or her right to benefits under this Plan.
ARTICLE XIII
THE PLAN ADMINISTRATOR
13.1 - DESIGNATION AND ACCEPTANCE: The Employer shall designate the person
to serve as Plan Administrator. The person so designated shall signify in
writing his or her acceptance of this responsibility. If more than one (1)
person is designated, these persons shall be known as the Administrative
Committee and, where applicable, references in the Plan to the Plan
Administrator shall be deemed to refer to the Administrative Committee. The
original Plan Administrator shall be as designated in the Adoption Agreement
and shall continue to serve until resignation or discharge.
13.2 - RESIGNATION AND REMOVAL - APPOINTMENT OF SUCCESSOR: The Plan
Administrator or members of the Administrative Committee may resign at any
time by delivering to the Employer a written notice of resignation, to take
effect at a specified date, which shall not be less than thirty (30) days
after delivery, unless the notice is waived.
The Plan Administrator or members of the Administrative Committee may be
removed with or without cause by the Employer. Removal shall be by delivery
of a written notice of removal to take effect at a specified date which
shall not be less than thirty (30) days after delivery thereof, unless the
notice is waived.
The Employer, upon receipt of notice of resignation or upon giving notice of
removal of the Plan Administrator or member(s) of the Administrative
Committee, shall promptly designate a successor Plan Administrator or
Administrative Committee member(s) who shall signify acceptance of this
position in writing. In the event no successor is appointed, the Employer
will function in that capacity until a new Plan Administrator or Committee
has been appointed and has accepted the appointment.
13.3 - ALLOCATION AND DELEGATION OF RESPONSIBILITIES: In the absence of an
appointment of specific individuals by the Employer, the Plan Administrator
may engage or consult with specialists such as legal counsel, actuaries,
accountants and other persons to assist in the performance of the duties of
this position.
The Plan Administrator or Administrative Committee may allocate fiduciary
responsibilities, other than Trustee responsibilities, to named persons or
parties provided the allocation or delegation is in writing.
In the absence of an appointment of a specific individual by the Employer,
the Plan Administrator or Administrative Committee may appoint, in writing,
an Investment Manager, to whom may be delegated the authority to manage,
acquire, invest or dispose of all or any part of the Trust Fund. With
regard to the Fund entrusted to his or her care, the Investment Manager
shall provide written instructions and directions to the Trustee who, in
turn, shall be entitled to rely upon these written directions.
13.4 - DUTY AND RESPONSIBILITY OF PLAN ADMINISTRATOR: The primary
responsibility of the Plan Administrator is to administer the Plan for the
exclusive benefit of the Participants and their Beneficiaries in accordance
with the specific terms of the Plan. The Plan Administrator may correct any
defect, supply any omission or reconcile any inconsistency deemed necessary
or advisable to carry out the purpose of this Plan. Any interpretation or
construction shall be done in a manner that is nondiscriminatory, consistent
with the intent that the Plan continue to be a qualified plan under section
401(a) of the Code and in compliance with the terms of ERISA. Any
construction or determination in good faith shall be conclusive and binding
on all persons except as otherwise provided herein or by law. The Plan
Administrator shall have all powers necessary or appropriate to accomplish
his or her duties under this Plan.
The Plan Administrator shall be charged with the duties of the general
administration of the Plan, including but not limited to, the following:
(a) To determine all question of interpretation or policy in a manner
not inconsistent with this agreement;
(b) To establish, subject to the limitations in the Plan, rules for the
administration of the Plan and the transaction of its business;
(c) To accept as conclusive, the records of the Employer as certified to
the Plan Administrator with respect to any and all factual matters
about the employment of an Employee and/or Participant and all other
information required to be furnished by the Employer;
(d) To determine all questions relating to an Employee's eligibility to
participate in or remain a Participant in the Plan;
(e) To compute, certify and direct the Trustee with respect to the
amount and kind of benefits to which a Participant is entitled;
(f) To authorize and direct the Trustee with respect to all
disbursements under the Plan and, when requested by the Trustee, to
furnish the Trustee with written instructions on matters pertaining
to the Plan and Trust upon which the Trustee may rely and act;
(g) To maintain all necessary records needed for the administration of
the Plan;
(h) To make and publish rules and regulations for Plan administration
that are not inconsistent with the provisions of the Plan;
(i) To advise the Trustee regarding the short and long term liquidity
needs of the Plan in order that the Trustee might direct investments
accordingly and to advise, counsel and direct the Trustee with
regard to investments and other matters involving the trust assets;
(j) To be responsible for preparing and filing disclosure and tax forms
required by the Secretary of Labor or the Secretary of the Treasury;
(k) To furnish each Employee, Participant, or Beneficiary information
and reports as required by law;
(l) To request variances, deferrals, extensions or exemptions or to make
elections for the Plan as permitted under the law when determined to
be in the best interests of the Plan and its Participants or
Beneficiaries; and
(m) To secure the exact figures representing that portion of each
insurance premium payment which is the value of the annual term
insurance (term cost) for the preceding year for each insured
Participant and to see that the term cost is properly reported to
the individual Participant for personal income tax purposes.
13.5 - EXPENSES AND COMPENSATION: All expenses of administration, including
but not limited to those involved in retaining necessary professional
assistance, shall be borne by the Employer who shall reimburse the Plan for
these expenditures. The Employer shall furnish the Plan Administrator with
clerical and other assistance necessary for the performance of
administrative duties. The Plan Administrator shall receive reasonable
compensation for services rendered in administration of this Plan, unless
the Plan Administrator is a full-time Employee of any Employer establishing
this Plan.
13.6 - INFORMATION FROM EMPLOYER: To enable the Plan Administrator to
perform his or her functions, the Employer shall supply full and timely
information to the Plan Administrator (or designated agents) on all matters
relating to the Compensation of all Participants, their regular employment,
retirement, death, disability or termination of employment, and other
pertinent facts as required by the Plan Administrator (or agents). The Plan
Administrator (or agents) is entitled to rely on information supplied by the
Employer and shall have no duty or responsibility to verify that
information. The Plan Administrator shall advise the Trustees of facts
pertinent to the Trustee's duties under the Plan.
13.7 - ADMINISTRATIVE COMMITTEE: If an Administrative Committee is
established and its members have signified in writing their acceptance, the
signature of any one Committee member may be accepted by any interested
party as conclusive evidence that the Administrative Committee has duly
authorized the action and that it represents the will of and is binding upon
the whole Committee. The Committee shall act by a majority of its members
and the action may be taken either by a vote at a meeting or in writing
without a meeting.
13.8 - NOTICE OF CHANGE IN PLAN ADMINISTRATOR: If a new Plan Administrator
is appointed in accordance with Section 13.2, any Insurer or any other party
which has previously had dealings with the Plan Administrator shall be fully
protected in relying on any action taken or signature presented which would
have been proper in accordance with that information previously received
until notice of the appointment is received. Notice shall be given at the
home office of the Insurer or the principal office of any other party.
13.9 - INVESTMENT MANAGER: An Investment Manager appointed by either the
Plan Administrator or Employer is required to acknowledge in writing that he
or she has undertaken a fiduciary responsibility with respect to the Plan.
If an Investment Manager is appointed to manage the Plan assets, the Trustee
will not be liable for any act or omission of the Investment Manager within
the Investment Manager's delegated authority because the Trustee will not
have exclusive discretion to manage and control the Plan assets. In order
to serve as an Investment Manager, a person must qualify under one (1) of
the following categories:
(a) A registered investment advisor under the Investment Advisory Act
of 1940, or
(b) A bank, as defined under the Investment Advisers Act of 1940, or
(c) An insurance company duly authorized to perform these services under
the laws of more than one (1) state, or
(d) In any other manner determined by any regulation or ruling issued
pursuant to authority granted by ERISA.
ARTICLE XIV
TRUST FUND AND ITS ADMINISTRATION
--TRUSTEE'S POWER AND RESPONSIBILITIES--
14.1 - TRUST FUND: All contributions of money or property made by the
Employer under the provisions of this Plan and all investments and
reinvestments made with those contributions, and all income and profits less
any losses thereon, shall constitute the Trust Fund. The Trustee shall not
be responsible for the collection of any contributions to the Plan. The
Trustee shall, however, hold all contributions and investments thereof
pursuant to the terms of the Plan and Trust for the exclusive benefit of
Participants and their Beneficiaries.
14.2 - VALUATION OF TRUST FUND: At least once each year on the Valuation
Date specified in Section 2.42, and at any other times required by the Plan,
the Trustee shall determine the value of the Trust Fund. Assets of the
Trust Fund shall be valued at their fair market value at the close of
business on the Valuation Date. If the Valuation Date falls on a Saturday,
Sunday or legal holiday, the assets shall be valued on the first business
day immediately preceding that date, or, in the absence of readily
ascertainable market values, at the values that the Trustee shall determine,
in accordance with methods consistently followed and uniformally applied.
Any interest of the Plan Trust Fund invested in common trust fund, combined
investment trust, collective or commingled trust fund shall be valued on the
basis of the valuation of the assets of that common, combined, collective or
commingled trust fund that either coincides with or most recently precedes
the Valuation Date of this Trust.
On the basis of the valuation, each Participant's Individual Account shall
be adjusted in the ratio that that Participant's Account Balance bears to
all Account Balances to reflect the effect of income, realized and
unrealized profits and losses, expenses and all other transactions of the
preceding valuation period where applicable. These valuations and
adjustments to the Participants' Individual Accounts shall be made so as to
preserve for each Participant's Individual Account its beneficial interest
in the Trust Fund determined on the basis of the contributions made by and
on behalf of each Participant.
14.3 - INVESTMENT FUNCTIONS: Subject to any conditions or limitations
contained in the Plan, the Trustee is authorized and empowered to invest and
reinvest the Trust Fund. The Trustee shall have full power and authority to
perform this function, in any manner he or she deems advisable and which is
clearly not inconsistent with the funding Contract(s) and method of the
Plan. The Trustee shall not be bound as to the character of any investment
by a statute or rule of law or custom governing the investment of Trust
Funds except as provided in this Plan and the requirements of ERISA. The
power and authorities of the Trustee include but are not limited to the
following:
(a) To hold, manage, invest and reinvest contributions to the Plan and
resulting income without distinction between principal and income as
a single Trust Fund, unless otherwise provided in the Plan;
(b) To invest and reinvest all or part of the Trust Fund in common trust
funds, combined investment trusts, collective or commingled funds of
a corporate trustee maintained exclusively for qualified plans under
section 401(a) of the Code; savings accounts in the savings
department (including certificates of deposit and time certificates)
of a corporate trustee; any type of security, including but not
necessarily limited to common stocks or preferred stocks; open end
or closed end mutual funds, corporate bonds, debentures, convertible
debentures; commercial paper, U.S. Treasury bills, notes and bonds;
improved or unimproved real estate located in the United States,
loans to others (except as prohibited by ERISA or the provisions of
the Plan), at a reasonable rate of interest and upon receipt of
adequate security, including chattel mortgages, first and second
loan deeds or mortgages; individual or group annuities, fixed or
variable, including deposit administration or investment type
contracts, individual or group life insurance Contracts, or in other
appropriate investments;
(c) To hold in the form of cash for distribution or investment a portion
of the Trust Fund that the Trustee deems prudent without liability
to account for interest thereon;
(d) To retain as the Trustee deems prudent any and all securities and
other property, real or personal, which become a part of the Trust
Fund, as well as any property into which those securities or other
property may be converted by reason of any reorganization,
recapitalization, consolidation, merger, liquidation, exchange, or
other transaction;
(e) To sell, convert, assign, convey, exchange, transfer or otherwise
dispose of, or grant options with respect to, any and all securities
or other property, real or personal, constituting part of the Trust
Fund, at public or private sale, for that consideration and upon
those terms and conditions as the Trustee deems advisable, but
without liability on the part of the purchaser to see to the
application of the purchase money or to inquire into the validity or
propriety of the sale; and to execute and deliver good and
sufficient deeds for any real estate, conveying title free and clear
of all defects;
(f) To manage and operate all real estate held in the Trust; to lease
all or any part of the real estate for the terms and rentals and
upon the conditions that the Trustee deems advisable even though the
terms of the lease may extend beyond the life of the Trust; to
release, mortgage, partition, vacate or abandon real estate; to
grant and acquire licenses and easements with respect to the real
estate; to make improvements to or upon the real estate; to
construct, demolish, alter, repair, maintain and rebuild buildings
and other improvements; and to use other assets of the Trust Fund
for any of these purposes;
(g) To carry the securities and other property held by the Trust either
in the name of the Trust, or in the name of the nominee, or in
bearer form;
(h) To vote, in person or by proxy, all securities held by the Trust; to
consent to or oppose the reorganization, recapitalization,
consolidation, merger, liquidation or sale of corporations or
properties; to exchange securities for other securities issued in
connection with or resulting from any of these transactions; to pay
any assessment or expense which the Trustee deems advisable for the
protection of the Trust Fund as holder of any securities; to deposit
securities in any voting trust or with any protective or like
committee or with a Trustee or depository; to exercise any options
appurtenant to any securities for conversion into other securities;
and to exercise or sell any rights issued upon terms that the
Trustee deems prudent;
(i) To prosecute, defend, compromise, arbitrate or otherwise adjust or
settle claims in favor of or against the Trustee of the Trust Fund;
(j) To foreclose any obligation by judicial proceedings or otherwise;
(k) To borrow money, with or without giving security;
(l) To exchange any Trust property for other property and to grant
options to purchase or acquire any Trust property;
(m) To engage in any litigation, either for the collection of monies or
other properties due the Trust Fund, or in defense of any claim
against the Trust Fund, provided, however, that the Trustee is not
required to engage in or participate in any litigation unless the
Trustee has been indemnified to his or her satisfaction against all
expenses and liabilities to which the Trustee may become subject;
(n) To purchase and pay premiums on Contracts as required by the
Adoption Agreement and as directed by the Plan Administrator,
provided funds for these payments are available from the Trust;
(o) To invest in and pay premiums on Contracts on the lives of key
Employees of the Employer, payable on death to the Trustee as
Beneficiary. These Contracts shall be vested exclusively in the
Trustee for the benefit of the Trust as a whole and shall not be
distributed in kind to a Participant in satisfaction of any interest
he or she may have in the Trust Fund.
14.4 - RECORDS AND REPORTS: The Trustee shall maintain accurate records and
detailed accounts of all investments, receipts, disbursements, and other
transactions hereunder. These records shall be available at all reasonable
times for inspection by the Plan Administrator, the Employer or any
Fiduciary, Participant or Beneficiary or authorized representative of these
persons. The Trustee shall submit or cause to be submitted in a timely
manner to the Plan Administrator any information reasonably required by the
Plan Administrator in connection with the preparation of the reports
required to be made to various regulatory agencies and to Plan Participants
and Beneficiaries.
14.5 - ANNUAL ACCOUNTING: Within sixty (60) days (or any other time mutually
agreed upon) following the close of each Plan Year, the Trustee shall file
with the Plan Administrator a written account setting forth a description of
all property purchased and sold and all receipts, disbursements and other
transactions effected by the Trustee during the Plan Year. The Trustee
shall list property held by the Trustee at the end of the period and the
list shall include a valuation of each asset at its fair market value as
determined at the end of the Plan Year. The Plan Administrator may approve
the accounting by written notice of approval delivered to the Trustee or by
failure to object in writing to the Trustee within sixty (60) days from the
date upon which the account was delivered to the Plan Administrator. If the
Plan Administrator approves the accounting either by written notice or by
failure to object in writing within sixty (60) days, the accounting by the
Trustee shall be deemed approved. If the accounting is deemed approved,
then to the extent permitted by law, the Trustee shall be released and
discharged as to all items and matters set forth in the accounting as if the
accounting had been settled and allowed by a decree of a court of competent
jurisdiction. Nothing contained in this Section will be construed or
interpreted to deny the Trustee the right to have his or her account
judicially determined.
14.6 - COMPENSATION AND EXPENSES: The Trustee shall receive reasonable
compensation as agreed upon by the Trustee and the Employer. However, any
Trustee who is a full-time Employee of the Employer shall receive no
compensation for services as Trustee under this Plan, but the Employer shall
supply the Trustee with clerical help and assistance as deemed necessary for
the performance of duties under the plan. The Trustee shall be entitled to
reimbursement by the Employer for all proper expenses incurred in carrying
out duties under this Plan, including reasonable legal, accounting and
actuarial expenses. The Trustee may charge the Trust Fund for these
expenses until paid by the Employer. All taxes of any and all kinds that
may be levied or assessed under existing or future laws upon, or in respect
of, the Trust Fund or the income thereof shall be paid from the Trust Fund.
14.7 - ELIGIBILITY OF TRUSTEE TO PARTICIPATE IN THE PLAN: No Trustee shall
be precluded from becoming a Participant under this Plan provided the
Trustee has satisfied the conditions for eligibility.
14.8 - MEETINGS - MAJORITY TO GOVERN - DELEGATION: If more than one Trustee
is appointed, the acts and decisions of the Trustees shall be by majority
vote. Any one of the Trustees may sign on behalf of all Trustees any
applications for Contracts or any papers which may be required by the
Insurer, stock exchange, mutual fund, banking institution, investment
advisory service or any other papers or documents which may be required for
the Trustees to carry out their duties under this Plan. The Trustees need
not call or hold meetings to make any decision or to take any action, but
any decision and any action may be taken by written documents signed by a
majority of the Trustees.
When two or more persons are appointed as Trustees, they are specifically
authorized, by written agreement among themselves, to allocate specific
responsibilities, obligations or duties among themselves. An original
written copy of the agreement is to be delivered to the Plan Administrator
and retained with the other Plan documents.
14.9 - NOT OBLIGATED TO QUESTION DATA: Each Employer shall furnish the
Trustee, Plan Administrator or Insurer with information necessary for the
administration of the Plan, including but not limited to changes in a
Participant's status, eligibility, mailing address and other data as
required. The Trustee, Plan Administrator and Insurer shall be entitled to
act on the information supplied them and shall have no duty or
responsibility to further verify or question this information.
14.10 - LIABILITY FOR APPLICATION OF FUNDS: All persons dealing with the
Trustee are released from inquiring into the decision or authority of the
Trustee and from seeing to the application of any monies, securities or
other property paid or delivered to the Trustee.
14.11 - MANNER OF PAYMENT: The Trustee may make any payment that he or she
is required to make under the Plan, by mailing to the person or entity a
check or delivering the annuity or other property directed to be distributed
by the Plan Administrator, at the last known address furnished to the
Trustee.
14.12 - UNCLAIMED BENEFITS: Any benefits payable to, or on behalf of, a
Participant or former Participant which are not claimed shall not bear
interest, but shall be deemed abandoned and relinquished only if the
Beneficiary or Participant cannot be located after reasonable efforts at the
time of termination of the Plan or an earlier time designated by the Plan
Administrator as permitted under any applicable law, ruling or regulation.
If a benefit is forfeited because the Participant or Beneficiary cannot be
found, the benefit will be reinstated if a claim is made by the Participant
or Beneficiary.
14.13 - CERTIFICATION AS TO TRUSTEES: A certificate signed by an officer of
the Employer or the Plan Administrator certifying the name and signature of
the Trustee on the date thereof shall be conclusive evidence for all
purposes that the designated entity or person is the Trustee at the date of
the certification and on any date thereafter until a new certificate is
received.
14.14 - DENIAL OF LIABILITY BY INSURER: In the event of a denial by the
Insurer of liability under its Contracts the Trustee or Plan Administrator
shall be under no duty to bring action unless they have been first
indemnified to their satisfaction by the Participant or his or her
Beneficiaries, for all anticipated costs, expenses and attorney fees. Nor
shall the Employer, Trustee, or Plan Administrator be responsible for the
validity of any Contract, for the failure on the part of the Insurer to make
any payments or provide any benefit under any Contract, for the action of
any person or persons which may render any Contract, invalid or
unenforceable, for any delay or any act occasioned by any restriction or
provision of any Contract imposed by the Insurer.
14.15 - DEGREE OF CARE - LIMITATIONS ON LIABILITY: The Trustee shall
discharge his or her duties, obligations and responsibilities in conformance
with the care, skill, prudence and diligence under the circumstances then
prevailing, that a prudent person acting in a like capacity and familiar
with like matters would use in the conduct of an enterprise of a like
character with like aims.
If the Plan or any written rule or direction of the Plan Administrator or
Employer shall, by agreement, allocate responsibilities among Co-Trustees,
only the Trustee to whom the responsibilities are delegated will be
responsible for any breach unless the other Trustee or Trustees knowingly
participate therein.
In the event that an Investment Manager is appointed pursuant to Section
13.9, no Trustee shall be liable for the acts or omissions of the Investment
Manager or be under any obligation to invest or manage the assets of the
Plan which are subject to management by an Investment Manager.
The Trustee shall not be liable for any losses incurred by the Trust by any
lawful direction to invest communicated by the Plan Administrator. The
Trustee shall be under no liability for distributions made or other actions
taken or not taken at the written direction of the Plan Administrator, other
than to the extent required of a prudent Co-Fiduciary under ERISA. It is
specifically understood that the Trustee 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 the Participant or
Beneficiary shall be entitled to receive hereunder or the size and type of
any Contract to be purchased from any Insurer for any Participant hereunder
or similar matters; it being understood that all these responsibilities
under the Plan are vested in the Plan Administrator. Nor shall the Trustee
be responsible for the adequacy of the Trust to meet and discharge any and
all payments and liabilities under the Plan.
Nothing contained in this Plan shall be deemed to enlarge the
responsibilities or liabilities of any Trustee or Co-Trustee or any other
Fiduciary with respect to the Plan beyond those imposed by ERISA and all
rulings and regulations promulgated thereunder. However, nothing herein
shall exculpate or relieve the Trustee from liability for any losses to the
Plan incurred by negligence, bad faith or knowing participation in a breach
of trust nor shall the Trustee be relieved from the duty to conduct a
periodic review to assure that delegated duties and responsibilities are
being properly carried out by all persons acting as Fiduciaries with respect
to the Plan and by all persons to whom these duties and responsibilities
have been delegated.
14.16 - PROHIBITED TRANSACTIONS: Notwithstanding any other provisions of
this Plan to the contrary, neither the Trustee nor any other Fiduciary shall
engage in a transaction known to be a "Prohibited Transaction" under ERISA
at the time of the proposed transaction. If there is any uncertainty or
dispute respecting the proposed transaction, neither the Trustee nor any
other Fiduciary shall be required to act or be liable for failure to act,
unless and until a final administrative or judicial determination shall be
obtained by any person interested in the transaction or an exemption
obtained from the proper regulatory authorities and the information
transmitted to the Trustee or other Fiduciary together with an opinion of
counsel that it is lawful under the Plan and ERISA. Subject to any future
changes in the law, rulings or regulations, the following constitute
prohibited transactions:
(a) Sale or exchange or leasing of any property between the Plan and a
party-in-interest;
(b) Lending of money or extension of credit between the Plan and a
party-in-interest;
(c) Furnishing of goods, services or facilities between the Plan and a
party-in-interest; or
(d) Transfer to or use by or for the benefit of a party-in-interest of
any assets of the Plan.
14.17 - RESIGNATION OR REMOVAL OF TRUSTEE: The Trustee may resign at any
time by giving thirty (30) days advance written notice to the Employer. The
resignation shall become effective thirty (30) days after receipt of the
notice unless a shorter period is agreed upon.
The Employer may remove any Trustee at any time by giving written notice to
the Trustee and the removal shall be effective thirty (30) days after
receipt of this notice unless a shorter period is agreed upon.
Upon the resignation or removal, if the resigning or removed Trustee is the
sole Trustee, he or she shall transfer all of the assets of the Trust then
held by the Trustee as expeditiously as possible to the successor Trustee or
Trustees after paying or reserving a reasonable amount as deemed necessary
to provide for the expense in the settlement of the accounts and the amount
of any compensation due him or her and any sums chargeable against the Trust
for which he or she may be liable. If the reserved funds are not
sufficient, then the Trustee shall be entitled to reimbursement from the
successor Trustee out of the assets in the successor Trustee's hands under
this Plan. If the amount reserved is in excess of the amount actually
needed, the former Trustee shall return the excess to the successor Trustee.
Upon receipt of these assets, the successor Trustee shall thereupon succeed
to all of the powers and duties given to the Trustee by this Plan.
The resigning or removed Trustee shall render an accounting to the Employer
and unless objected to by the Employer, the accounting shall be deemed
approved and the resigning or released Trustee shall be released and
discharged as to all matters set forth in the accounting.
In the alternative, there may be a judicial settlement of the account
instituted by either the Trustee or Employer in a Court of competent
jurisdiction.
14.18 - APPOINTMENT OF SUCCESSOR TRUSTEE: The Employer shall have the power
to appoint a successor or Co-Trustee to replace or join the named Trustee of
the Plan. The appointment of a successor Trustee or Co-Trustee shall become
effective upon acceptance in writing of the appointment. Successor or
Co-Trustees may be individual or corporate and shall have no liability for
acts or omissions of the former Trustee.
ARTICLE XV
AMENDMENT OF PLAN AND ADOPTION AGREEMENT
15.1 - RIGHT OF EMPLOYER TO AMEND THE PLAN: The Employer reserves the right
to amend this Plan in any and all respects without the consent of any
Participant or Beneficiary as follows:
(a) OPTIONAL PROVISIONS - The Employer may amend the Plan by
(1) Changing the choice of options in the Adoption Agreement;
(2) Adding overriding plan language to the Adoption Agreement where
such language is necessary to satisfy section 415 of the Code or
to avoid duplication of minimums under section 416 of the Code
because of the required aggregation of multiple plans; and
(3) Adding certain model amendments published by the Internal
Revenue Service which specifically provide that their adoption
will not cause the Plan to be treated as individually designed.
(b) NONOPTIONAL PROVISIONS - The Employer may amend any nonoptional
portions of the text of both the Adoption Agreement and the Plan
document. However, an Employer who amends any nonoptional portion
of the Plan for any reason including a waiver of the minimum funding
requirement under section 412(d) of the Code, will no longer
participate in this Prototype Plan. If changes of this nature are
made and the Plan is adopted as changed, it shall become an
individually designed Plan and shall be administered as an
individually designed Plan.
In all situations described under this Subsection (b), the Plan
shall be submitted to the Internal Revenue Service as an
individually designed Plan for qualification under Section 401(a)
of the Code.
15.2 - RIGHT OF LUTHERAN BROTHERHOOD (LB) TO AMEND THE PLAN: Each Employer,
by adopting this Plan, expressly delegates to Lutheran Brotherhood (LB) the
authority, but not the duty, to amend this plan to comply with changes in
the Internal Revenue Code and the regulations thereunder, as well as revenue
rulings, other statements published by the Service, including rules and
guidelines affecting qualifications, and to make corrections of the Plan
once it is approved. Any amendment made by LB under this paragraph shall be
limited as provided in Section 15.3 below. If LB amends the Plan, the
Employer is deemed to have consented to any amendments made by LB. Copies
of any amendments shall be forwarded to any Employer who had adopted and
maintained this Plan as a Prototype Plan.
If the Employer does not adopt the amendments made by LB, the Employer's
plan will no longer be identical to the LB Prototype Plan and will be
considered an individually designed plan as indicated in Section 15.1(b).
15.3 - LIMITATIONS ON POWER TO AMEND: No amendment by either the Employer
nor LB shall reduce or otherwise affect any rights or benefits of a
Participant or Beneficiary acquired prior to an amendment, including the
protection of any Vested Interests as set forth in Article IX, except as
required to qualify the Plan under the Code; nor shall any amendment
increase the duties or responsibilities of the Trustee or Plan Administrator
without their consent, attempt to deprive the Insurer of any exemptions or
immunities with respect to Contracts it has issued, provide for the use of
Contracts or assets held under this Plan other than for the exclusive
benefit of the Participants or their Beneficiaries, or permit any Contracts
or assets of this Plan to revert to or be used by the Employer prior to the
satisfaction of all liabilities under the Plan to the Participants or their
Beneficiaries.
ARTICLE XVI
TERMINATION AND DISCONTINUANCE
16.1 - PERMANENCY: The Employer adopting this Plan hopes and expects to
continue this Plan and make necessary contributions indefinitely, but
continuance and payment are not assumed contractual obligations. Neither
the Adoption Agreement nor this Plan and Trust nor any amendment or
modification thereof nor the making of contributions hereunder nor the
purchase of any Contract, nor the creation of any fund or account, nor the
payment of any benefit shall be construed as giving any Participant or any
person whomsoever any legal or equitable right against the Employer, the
Trustee, the Plan Administrator or the Trust Fund except as specifically
provided herein, or as provided by law, nor as giving any Participant the
right to be continued in the service of the Employer. All Participants
shall remain subject to discharge to the same extent as if this Plan had
never been adopted.
16.2 - METHOD AND PROCEDURE FOR TERMINATION: The Plan may be terminated by
the Employer at any time. Plan termination shall be effective on the date
specified by the Employer. Upon termination the liability of the Employer
to make contributions shall cease.
Notice of the termination and the effective date shall be given to the
Trustee, Plan Administrator, Insurer, Participants and their Beneficiaries,
and the required filings must be made with the Internal Revenue Service and
any other regulatory body as required by current rules and regulations.
16.3 - INVOLUNTARY TERMINATION: This Plan shall terminate if the Employer is
dissolved, deemed bankrupt, insolvent or merged with another company, except
that in the event of dissolution, merger or consolidation of the Employer,
provisions may be made, subject to the condition set forth in Section 9.8,
by a successor for the continuance of the Plan. The successor shall in that
event be substituted for the present Employer by an instrument authorizing
the substitution by amendment of the name of the Employer in the Adoption
Agreement.
16.4 - DISTRIBUTION OF ACCOUNTS: If the Plan is terminated, all Contracts
and other assets shall be distributed to the active, retired or terminated
Participants or their Beneficiaries, in accordance with the amounts credited
to their Individual Accounts as of the date of termination, together with
any earnings subsequently accrued, but after any unallocated funds are first
allocated to the accounts. Distributions shall be made to the Participant
or Beneficiary in accordance with the provisions of Section 7.5, Section
7.6, and Section 9.5(a), and the Joint and Survivor Annuity requirements of
Article VIII. No option can be made available to any Participant or
Beneficiary unless it is made available to all Participants and
Beneficiaries on a uniform and nondiscriminatory basis. Upon completion of
the distribution, the Plan Administrator and Trustee are relieved from all
further liability with respect to all amounts paid and with respect to the
mode of distribution.
ARTICLE XVII
MISCELLANEOUS
17.1 - STANDARD OF CONDUCT - FIDUCIARIES: For purposes of ERISA, all
Fiduciaries, including the Employer, the Plan Administrator or
Administrative Committee, the Trustee, and any others shall each discharge
their respective duties under the Plan with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with like matters would use in the
conduct of an enterprise of like character and with like aims. These duties
include the appointment and retention of Fiduciaries and agents by those
having appointive authority under the Plan.
All Fiduciaries by accepting appointment are responsible for carrying out
their own duties in accordance with the standards required by ERISA and all
regulations and rulings promulgated thereunder. All Fiduciaries shall be
responsible for the actions or failure to act of all other Fiduciaries
(except an Investment Manager as provided in Section 13.9) with respect to
the Plan if he or she participates, approves, acquiesces in or conceals a
breach committed by another Fiduciary, or if the Fiduciary's failure to
exercise reasonable care in the administration of his or her own duties
enables the breach to be committed. Each Fiduciary is required to act
prudently in the delegation or allocation of the responsibilities to other
persons and to use reasonable care to prevent others from committing a
breach.
If duties are properly delegated or allocated among Fiduciaries, only the
Fiduciary to whom they are delegated shall be responsible for a breach
unless other Fiduciaries knowingly participate in the breach or the other
Fiduciaries fail to conduct a periodic review to assure that delegated
duties and responsibilities are being carried out by all persons acting as
Fiduciaries with respect to the Plan and by all persons to whom any of these
duties and responsibilities have been delegated.
17.2 - PROHIBITION AGAINST DIVERSION - CORRECTION OF ERRORS: There shall be
no diversion of any portion of the assets of the Plan other than for the
exclusive benefit of Participants or their Beneficiaries.
Any contribution made by the Employer as a result of error, miscalculation
or a mistake of fact must be returned to the Employer within one (1) year of
the contribution.
In the event the deduction of a contribution made by the Employer is
disallowed under section 404 of the Code, that contribution (to the extent
disallowed) must be returned to the Employer within one (1) year of the
disallowance of the deduction.
In the event that the Commissioner of Internal Revenue determines that the
Plan is not initially qualified under the Code, any contribution made prior
to that initial qualification by the Employer must be returned to the
Employer within one (1) year after the date the initial qualification is
denied, but only if the application for the qualification is made by the
time prescribed by law for filing the Employer's return for the taxable year
in which the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
17.3 - INALIENABILITY OF BENEFITS: No benefit or interest available
hereunder will be subject to assignment or alienation, either voluntarily or
involuntarily. The prohibition against assignment and alienation of
benefits 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 the order is determined to be a qualified
domestic relations order, as defined in section 414(p) of the Code, or any
domestic relations order entered before January 1, 1985.
17.4 - INVALIDITY OF CERTAIN PROVISIONS: If any provision of this Plan is
held invalid or unenforceable, the invalidity or unenforceability shall not
affect any other provision of the Plan and this Plan and Trust shall be
construed and enforced as if the provision had not been included.
17.5 - GENERAL UNDERTAKING OF ALL PARTIES: All parties to this Plan and all
persons claiming any interest under the Plan agree to perform any and all
acts and execute any and all documents under the Plan which may be necessary
or desirable for the carrying out of this Plan and Trust and any of its
provisions.
17.6 - AGREEMENT BINDS HEIRS, ETC.: This Plan shall be binding upon all
parties to this Plan, present and future and upon their heirs, executors,
administrators, successors and assigns.
17.7 - DURATION OF TRUST - RULE AGAINST PERPETUITIES: If the indefinite
continuance of this Plan would be in violation of any law, then this Plan
shall continue for the maximum period permitted by law and shall then
terminate, whereupon distribution of its assets shall be made as provided in
Article XVI.
17.8 - 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 of this Plan.
17.9 - GENDER, CONSTRUCTION: Whenever the context shall require, the
masculine shall be read in the feminine, the singular shall be read in the
plural and the plural shall be read in the singular, and these terms shall
be used interchangeably.
17.10 - DISQUALIFICATION FROM USE OF PROTOTYPE PLAN: If the Employer's plan
fails to attain or retain qualification, that plan will no longer
participate in this prototype Plan and will be considered an individually
designed plan.
17.11 - RESPONSIBILITY OF INSURER UNDER THIS PLAN:
(a) The Insurer shall not be considered a party to this Plan or have any
responsibility for the validity of this Plan and Trust or for any
action taken by the Trustee. The Insurer shall be fully protected
in dealing with the Trustee as sole owner of the Contracts held
under this Plan and Trust and of the Trust Fund, if any. The
Insurer shall be fully protected in accepting premium payments from
the Trustee or the Employer and in making payment of any amounts to
the Trustee or in accordance with the Trustee's directions, or the
directions of the Plan Administrator, without liability as to the
application of these payments.
(b) The Insurer shall be fully protected from any liability in dealing
with the person who is the Trustee according to the latest
notification received by the Insurer at its home office or in
assuming that this document has not been amended or terminated until
notice of any amendment or termination has been received at its home
office.
(c) The Insurer shall be entitled to assume that any person on whose
life an application is made for a Contract is eligible under the
terms of this Plan to have such a Contract issued, and in the form,
benefits and amounts requested.
17.12 - INDEMNIFICATION: The Employer may agree to indemnify the Plan
Administrator, or any other Employee, Fiduciary or agent, fully or
partially, for any expenses, penalties, damages or other pecuniary loss the
Employee, Fiduciary or agent may suffer as a result of his or her
responsibilities, obligations or duties in connection with the Plan or
Fiduciary activities actually performed in connection with the Plan.
Indemnification may be paid in whole or in part by Fiduciary liability
insurance paid for by the Employer, but in no event shall the items be paid
out of the Plan assets.
17.13 - SAVINGS CLAUSE: If, upon the initial submission of the Plan as
adopted by an Employer for approval under the Code, the Employer receives
notice in writing from the Internal Revenue Service that its participation
in the Plan does not qualify under the Code, its participation shall
terminate. The assets allocable to the Employer's account, less any amounts
required to pay taxes or administrative fees or other charges shall be
returned to the Employer and by the Employer to Participants to the extent
those assets are attributable to the Employees' contribution. The Plan as
to that Employer shall be considered to be void and of no force and effect
and the Trustee shall be discharged from all obligations. Until the
Internal Revenue Service determines that the Plan qualifies under section
401(a) of the Code, no Participant or Beneficiary shall have any right or
claim to any asset of the Trust, except for proceeds payable under any
Contracts on the life of any Participant as a result of death.
Under no circumstances shall any values applicable to a prior Plan of an
Employer revert to that Employer if the Internal Revenue Service fails to
rule favorably upon this Plan.
17.14 - NOTIFICATION OF INTERESTED PARTIES: No person or entity shall bring
an action under Section 7476 of the Code until the Petitioner has given
notice of the request for determination to the Secretary or his delegate and
to interested parties, as defined by Internal Revenue Regulations, in the
manner prescribed by regulations.
17.15 - OVERPAYMENTS, RECOUPMENT: If a Participant or Beneficiary receives
an erroneous payment or payments to which the Participant or Beneficiary is
not entitled under the terms and provisions of the Plan, repayment of the
amount of the erroneous payment shall be made by the person receiving the
payment. In the event the Participant or Beneficiary fails to return the
overpayment, the Plan Administrator and/or Trustees shall exercise the care,
skill and diligence that a prudent person acting in a like capacity in a
similar enterprise would exercise in an attempt to collect money owed the
Plan. If other efforts fail to recover the excess payments and if prudent
under the circumstances, legal action may be instituted or payments to the
Participant or Beneficiary may be offset against the money owed the Plan.
<PAGE>
STANDARDIZED TARGET BENEFIT PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Target Benefit
Plan and Trust, to be effective as of the date specified below, for the
exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
-------------------------------------
Employees' Target Benefit Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-----------------------------------------------------------------
Name
-----------------------------------------------------------------
Address
-----------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
----------------------------------------------------------------
Name
----------------------------------------------------------------
Address
----------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ---------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
----------------
Date predecessor business commenced:
--------------------------
5. Employer's Federal income tax year: to
---------- --------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----------
b. An amendment and restatement.
-----------
This amendment, restatement or substitution shall
not reduce the nonforfeitable interest of any
Participant determined as of the day preceding the
effective date of this Adoption Agreement; but
Participants who retired or who terminated their
employment with the Employer prior to the
effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of
this amendment for their benefits, if any,
provided under the Plan (except as provided in the
Joint and Survivor Annuity requirements of
Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an
-----
existing plan under this prototype to
conform Plan to changes in the law.
ii. A substitution for or conversion of an
-----
existing plan.
Information about an existing plan:
Name of Plan
------------------------------
------------------------------
Effective date of plan
--------------------
Letter Serial No. of
IRS determination letter
------------------
Date of IRS determination
letter
------------------------------------
iii. An amendment of this Adoption Agreement
----
which was previously adopted by the
Employer to make changes in optional
provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
--------------------------------------------------------
(The general effective date for an amendment and restatement
after the Tax Reform Act of 1986 will be the first day of the
Plan Year beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve
(12) month period corresponding to the Employer's business year
for income tax purposes) ending on and
---------------------
each anniversary thereof.
The first Plan Year shall begin on , 19 .
--------------------- ---
9. The Limitation Year as defined in Section 2.23 of the Plan shall
be the same as the Plan Year.
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
---------------------------------------------------------------
Name and Address
---------------------------------------------------------------
Name and Address
---------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-------
b. Administrator designated by Employer
-------
i. Individual Administrator
-----
Identification No.:
---------------------------
----------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------
----------------------------------------------
Name and Address
----------------------------------------------
Name and Address
----------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
----
iv. Other
---- -----------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
----------------------------------------------
street address
----------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
415 Safe-Harbor Compensation:
Contributions to this Plan are based on a Participant's
Compensation. Compensation shall mean wages, salaries, fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includible
in gross income (including but not limited to, commissions,
compensation for services paid as a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits
and reimbursements or other expense allowances under a
nonaccountable plan (as described in 1.62-2(c)) paid for the taxable
year ending with or within the Plan Year.
Compensation excludes the following:
(a) Employer contributions to a plan of deferred compensation which
are not includible in the Employee's gross income for the
taxable year in which contributed, or Employer contributions
under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(b) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
contract described in section 403(b) of the Code (whether or not
the contributions are actually excludable from the gross income
of the employee).
For any self-employed individual compensation will mean earned
income.
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the
age and service requirement of Section III except (select none, one
or both):
1. Union Employees who are included in a unit of employees
--------
covered by a collective bargaining agreement between the
Employer and the employee representatives, if retirement
benefits were the subject of good faith bargaining and if
two percent or less of the employees of the employer who
are covered pursuant to that agreement are professionals
as defined in section 4.410(b)-9(g) of the proposed
regulations. For this purpose, the term "employee
representatives" does not include any organization more
than half of whose members are employees who are owners,
officers, or executives of the Employer.
2. Nonresident aliens who receive no earned income from the
--------
Employer which constitutes income from sources within the
United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the Plan
--------
Year (select one):
a. Nearest to the date an Employee first meets
------
the age and service requirements.
b. In which an Employee first meets age and
------
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
--------
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year
--------
and the first day of each month after an Employee first
meets age and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service will be credited on the basis of actual hours for
which an Employee is paid or entitled to be paid.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the
-----
Years of Service requirements. (Check this option if
predecessor employer maintained a plan.)
Name of predecessor employer:
-------------------------------
2. Shall not be taken into account for purposes of meeting the
-----
Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age
----- ----
(not less than 55 nor greater than 65) or (b) the
completion of the (5th or less) anniversary of the
-----
date upon which the Participant commenced participation
in the Plan.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service
----- ----- -----
cannot exceed one (1) year and zero (0) months if graded
vesting is selected or two (2) years and zero (0) months
if full and immediate vesting is selected.)
IV. CONTRIBUTIONS
A. STATED BENEFIT
Each participant's stated benefit under the Plan will be equal to
the sum of:
(1) the Participant's current stated benefit, and
(2) the Participant's frozen accrued stated benefit, if any.
1. Current Stated Benefit:
Each Participant's current stated benefit is equal to % of
-----
average annual Compensation (reduced pro rata for the
Participant's total years of projected participation less
than 25) payable annually as a straight life annuity beginning
Normal Retirement Age.
For purposes of this Section, average annual Compensation means
the average of a Participant's Compensation over the three (3)
consecutive Plan Year period ending in the current year or in any
prior year which produces the highest average. If the
Participant has less than three (3) years of participation,
Compensation is averaged over the Participant's total period of
participation.
Each Participant's current stated benefit will be the product of:
(a) the amount derived from the formula selected above, and (b) a
fraction, the numerator of which is the Participant's number of
years of participation from the latest fresh-start date (if any)
through and including the later of the year in which the
Participant attains Normal Retirement Age or the current Plan
Year, and the denominator of which is the Participant's total
years of projected participation. If this Plan has not had a
fresh-start date, such fraction will equal 1.0 for all
Participants. In any event, for those Participants who first
participated in the Plan after the latest fresh-start date, such
fraction will equal 1.0. For purposes of determining the
numerator in the fraction above, only those current and prior
years during which a Participant was eligible to receive a
contribution under the Plan will be taken into account.
For purposes of determining a Participant's current stated
benefit, a Participant's total years of projected participation
under the Plan is the sum of the Participant's total number of
years of participation under this Plan for the years this Plan
consecutively satisfies the safe harbor for target benefit plans
in Regulations section 1.401(a)(4)-8(b)(3), or was a prior safe
harbor plan, if applicable, projected through the later of the
end of the Plan Year in which the Participant attains Normal
Retirement Age or the end of the current Plan Year.
For purposes of determining a Participant's total years of
projected participation, only those current and prior years
during which a Participant was eligible to receive a contribution
under the Plan will be taken into account.
2. Frozen Accrued Stated Benefit:
A Participant's frozen accrued stated benefit is determined as of
the Plan's latest fresh-start date as if the Participant
terminated employment with the Employer as of that date, without
regard to any amendment made to the Plan after that date.
A Participant's frozen accrued stated benefit is equal to the
amount of the current stated benefit in effect on the latest
fresh-start date that a Participant has accrued as of that date,
assuming that such current stated benefit accrues ratably from
the year in which the Participant first participated in this Plan
(or, if later, the preceding fresh-start date under this Plan)
through and not including the Plan Year in which the Participant
attains Normal Retirement Age.
The amount of the current stated benefit in effect on the latest
fresh-start date that a Participant is assumed to have ratably
accrued is determined by multiplying the Plan's current stated
benefit formula in effect on that date by a fraction, the
numerator of which is the number of years of participation from
the later of the Participant's first year of participation in
this Plan or the preceding fresh-start date (if any) through and
including the year that contains the latest fresh-start date, and
the denominator of which is the number of years of participation
from the later of the Participant's first year of participation
in this Plan or the preceding fresh-start date (if any) through
and including the later of the year in which the Participant
attains Normal Retirement Age or the current Plan Year. For
purposes of this paragraph, only those years of participation
during which a Participant was eligible to receive a contribution
under the Plan will be taken into account.
If this Plan has had a preceding fresh-start date, each
Participant's frozen accrued stated benefit as of the latest
fresh-start date will equal the sum of the amount of the current
stated benefit in effect on the latest fresh-start date that a
Participant is assumed to have ratably accrued as of that date
under the preceding paragraph, and the frozen accrued stated
benefit determined as of the preceding fresh-start date.
If: (a) the current stated benefit formula in effect on the
latest fresh-start date was not expressed as a straight life
annuity for all Participants, and/or (b) the Normal Retirement
Age for any Participant on the latest fresh-start date was
greater than the Normal Retirement Age for that Participant under
the current stated benefit formula in effect after the latest
fresh-start date, the frozen accrued stated benefit will be
converted to an actuarially equivalent straight life annuity
commencing at the Participant's Normal Retirement Age under the
current stated benefit formula in effect after the latest
fresh-start date, using the actuarial assumptions in effect under
the current stated benefit formula in effect on the latest
fresh-start date.
Notwithstanding the above, if in the immediately preceding Plan
Year this Plan did not satisfy the safe harbor for target benefit
plans in Regulations section 1.401(a)(4)-8(b)(3) or was not a
prior safe harbor plan, the frozen accrued stated benefit for any
Participant in the Plan, determined for the next Plan Year during
which section 1.401(a)(4)-8(b)(3) is satisfied until the year
following the next fresh-start date, if any, will be zero.
Prior safe harbor plan means a plan adopted and in effect on
September 19, 1991, that satisfied the applicable
nondiscrimination requirements for target benefit plans on that
date and in all prior periods (taking into account no amendments
to the plan after September 19, 1991, other than amendments
necessary to satisfy section 401(1)).
Fresh Start Date: Fresh-start date means the last day of a Plan
Year preceding a Plan Year for which provisions that would affect
the amount of the current stated benefit are amended. If
applicable, the latest fresh-start date of the Plan is .
----------
B. INTEREST RATE ASSUMPTION
For purposes of determining the annual Employer contribution
necessary to fund the stated benefit, the interest rate
shall be (select one):
1. 7.50%
---------
2. 8.00%
---------
3. 8.50%
---------
C. CALCULATION OF ANNUAL EMPLOYER CONTRIBUTION
For each Plan Year the Employer will contribute for each Participant
who either completes more than 500 Hours of Service during the Plan
Year or is employed on the last day of the Plan Year the annual
Employer contribution calculated below.
The annual Employer contribution necessary to fund the stated
benefit with respect to a Participant shall be determined each year
as follows:
Step 1: If the Participant has not yet reached the Plan's Normal
Retirement Age, calculate the present value of the stated benefit
contained in Section IV.A. above by multiplying the stated benefit
by the factor which is the product of: (1) the applicable factor in
Table I (if attained (current) age is less than 65) or Table IA (if
attained age is greater than or equal to 65), multiplied by (2) the
applicable factor in Table III. If the Participant is at or beyond
the Plan's Normal Retirement Age, calculate the present value of the
stated benefit by multiplying the stated benefit by the factor in
Table IV corresponding to that Normal Retirement Age. See Appendix
for Tables.
Step 2: Calculate the theoretical reserve of the stated benefit
according to (a) and (b) below:
a. Initial theoretical reserve. A Participant's theoretical
reserve as of the last day of the first Plan Year the
Participant participates in the Plan, and as of the last day
of the first Plan Year after any Plan Year in which the Plan
either did not satisfy the safe harbor in Regulations section
1.401(a)(4)-8(b)(3) or was not a prior safe harbor plan, is
zero. In all other cases, in the first Plan Year in which
this theoretical reserve provision is adopted or made
effective, if later (year 1) the initial theoretical reserve
is determined as follows:
1. Calculate as of the last day of the Plan Year immediately
preceding year 1 the present value of the stated benefit,
using the actuarial assumptions, the provisions of the
Plan, and the Participant's Compensation as of that date.
For a Participant who is beyond Normal Retirement Age
during year 1, the stated benefit will be determined using
the actuarial assumptions, the provisions of the Plan, and
the Participant's Compensation as of such date, except that
the straight life annuity factor used in that determination
will be the factor applicable for the Participant's Normal
Retirement Age.
2. Calculate as of the last day of the Plan Year immediately
preceding year 1 the present value of future Employer
contributions, i.e., the level contributions due each Plan
Year using the actuarial assumptions, the provisions of the
Plan (disregarding those provisions of the Plan providing
for the limitations of section 415 of the Code or the
minimum contributions under section 416 of the Code), and
the Participant's Compensation as of that date, beginning
with year 1 through the end of the Plan Year in which the
Participant attains Normal Retirement Age.
3. Subtract the amount determined in 2. from the amount
determined in 1.
4. In the case of an Employee who first becomes a Participant
during or after year 1, the result in 3 is zero.
b. Accumulate the initial theoretical reserve determined in (a)
and the Employer contribution (as limited by section 415 of
the Code, but without regard to any required minimum
contributions under section 416 of the Code) for each Plan
Year beginning in year 1 up through the last day of the
current Plan Year (excluding contributions made for the
current Plan Year) using the plan's interest assumption in
effect for each such year. In any Plan Year following the
Plan Year in which the Participant attains Normal Retirement
Age, the accumulation is calculated assuming an interest rate
of 0%.
For purposes of determining the level of annual Employer
contribution necessary to fund the stated benefit, the
calculations in (a) and (b) above shall be made as the last
day of each Plan Year, on the basis of the Participant's age
on the Participant's last birthday, using the interest rate in
effect on the last day of the prior Plan Year.
Step 3: Calculate the excess, if any, of the amount determined in
Step 1 over the theoretical reserve determined in Step 2.
Step 4: To determine the annual Employer contributions necessary to
fund the result in Step 3, amortize the result in Step 3 by
multiplying it by the applicable factor from Table II in the
Appendix. For the Plan Year in which the Participant attains Normal
Retirement Age and for any subsequent Plan Year, the applicable
factor is 1.0.
D. MAXIMUM CONTRIBUTION
The maximum contribution for each eligible Participant is the lesser
of the amount calculated under Section IV.C. above or the limit
under section 415(c)(1) of the Code. (The lesser of 25% of
Participant's Compensation or $30,000.)
E. ALLOCATION OF CONTRIBUTIONS AND FORFEITURES
1. Employer contributions will be allocated to each Participant who
either completes more than 500 Hours of Service during the Plan
Year or who is employed on the last day of the Plan Year.
Employer contributions shall be allocated to each eligible
Participant's Individual Account by the formula set forth in this
Section IV.
2. Forfeitures, if any, shall be used to reduce the Employer's
contribution.
F. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be provided under (select
one):
a. this Plan
------
b. another qualified Plan maintained by the Employer in
------
which the Participants in this Plan also participate.
2. For purposes of minimum top-heavy allocations as explained in
Section 11.3 of the Plan, contributions and Forfeitures equal
to % of each non-key Employee's Compensation will be
------
allocated to the Employee's Individual Account when the Plan is
top-heavy. (The minimum top-heavy allocation must be not less
than 3% if the Employer maintains only a target benefit plan.)
The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
------------
Mortality table
-----------
V. VESTING
Subject to the provisions of Article IX of the Plan, the nonforfeitable
percentage of a Participant's Account Balance derived from Employer
contributions prior to attainment of Normal Retirement Age
shall be (select one):
1. 100% immediate vesting (must be selected if service of more
-----
than one (1) year is required for entry.)
2. 100% vesting after three (3) Years of Service (if entry date is
-----
before one (1) year and zero (0) months)
3. Six-Year Graded Vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
(not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less
----- -----
than 55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will be
-----
100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor (select one):
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant loan
program
-----------------------------------------------------------
--------------------------------------------------------------------
2. Procedure for applying for loans
------------------------------------
--------------------------------------------------------------------
3. Basis on which loans will be approved or denied
---------------------
--------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
------
--------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
-------------
--------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
-------------
--------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
------------------------
--------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-------
Yes (if yes, please complete the following):
-------
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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.
------------------------------------------------
------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer,
provide the method under which the plan involved will
satisfy the 1.0 limitation of section 415(e) of the code
in a manner that precludes Employer discretion.
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. However, an Employer who amends the Plan for a waiver of the
minimum funding requirement will no longer participate in this master or
prototype plan and will be considered to have an individually designed
plan.
XI. RELIANCE ON OPINION LETTER
The Internal Revenue Service has approved this Plan as a prototype. 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 may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under section 401 of the Internal Revenue Code. If the
Employer who adopts or maintains multiple plans wishes to obtain reliance
that his or her plan(s) are qualified, application for a determination
letter should be made to the appropriate Key District Director of
Internal Revenue.
The Employer may not rely on the opinion letter issued by the National
Office of the Internal Revenue Service as evidence that this Plan is
qualified under section 401 of the Code unless the terms of the Plan, as
herein adopted or amended, that pertain to the requirements of sections
401(a)(4), 401(a)(17), 401(l), 401(a)(5), 410(b) and 414(s) of the Code,
as amended by the Tax Reform Act of 1986, or later laws, (a) are made
effective retroactively to the first day of the first Plan Year beginning
after December 31, 1988 (or such later date on which these requirements
first become effective with respect to this plan); or (b) are made
effective no later than the first day on which the Employer is not longer
entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the
Plan constitute such an interpretation.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
APPENDIX
The following is an amendment to the definition of Compensation found in
Section 2.9 of the Plan.
2.9 COMPENSATION. The amount defined in Section II.A in the Adoption
Agreement. 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
determination period. Except as provided elsewhere in this Plan, the
determination period shall be the period elected by the Employer in the
Adoption Agreement. If the Employer makes no election, the determination
period shall be the Plan Year.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by
the Employer pursuant to a salary reduction agreement and which is not
includible in the gross income of the Employee under sections 125,
402(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 for determining all benefits provided
under the Plan for any determination period shall not exceed $200,000.
This limitation shall be adjusted by the Secretary at the same time and
in the same manner as under section 415(d) of the Code, except that the
dollar increase in effect on January 1 of any calendar year is effective
for years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1, 1990. If the period for
determining Compensation used in calculating an Employee's allocation for
a determination period is a short Plan year (i.e. shorter than 12
months), the annual Compensation limit is an amount equal to the
otherwise applicable annual Compensation limit multiplied by the
fraction, the numerator of which is the number of months in the short
Plan Year, and the denominator of which is 12.
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 limitations shall be prorated among the
affected individuals in proportion to each such individual's Compensation
as determined under this section prior to the application of this
limitation.
If Compensation for any prior determination period is taken into account
in determining an Employee's allocations or benefits for the current
determination period, the Compensation for such prior 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.
<PAGE>
APPENDIX
The following is an amendment to the definition of Compensation found in
Section 5.3(m)(2) of the Plan.
(2) COMPENSATION: One of the following as elected by the Employer in the
Adoption Agreement:
(a) Information required to be reported under sections 6041 and 6051.
(Wages, Tips and Other Compensation Box on Form W-2.) Compensation
is defined as wages as defined in section 3401(a) and all other
payments of Compensation to an Employee by the Employer (in the
course of the Employer's trade or business) for which the Employer
is required to furnish the Employee a written statement under
sections 6041(d) and 6051(a)(3) of the Code. Compensation must be
determined without regard to any rules under section 3401(a) that
limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the
exception for agricultural labor in section 3401(a)(2)).
(b) Section 3401(a) wages. Compensation is defined as wages within the
meaning of section 3401(a) 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. Compensation is defined as wages,
salaries and fees for professional services and other amounts
received (without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the course of
employment with the Employer maintaining the Plan to the extent that
the amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for services on
the basis of a percentage of profits, commission on insurance
premiums, tips, bonuses, fringe benefits, and reimbursements or
other expense allowances under a nonaccountable plan (as described
in 1.62-2(c)), and excluding the following:
(i) Employer contributions to a plan of deferred compensation which
are not includable in the Employee's gross income for the
taxable year in which contributed, or Employer contributions
under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Employer (whether of not under a
salary reduction agreement) towards the purchase of an annuity
contract described in section 403(b) of the Code (whether or not
the contributions are actually excludable from the gross income
of the Employee).
For any Self-Employed Individual Compensation will mean Earned Income.
For Limitation Years beginning after December 31, 1991, for purposes of
applying the limitations of this Article, Compensation for a Limitation
Year is the Compensation actually paid or made available during the
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 Internal Revenue Code) is the
Compensation that 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 the Participant are nonforfeitable when made.
<PAGE>
APPENDIX
TABLE I: Present value factors (SEE * BELOW)
NUMBER OF YEARS INTEREST RATE
FROM ATTAINED AGE
TO AGE 65* 7.50% 8.00% 8.50%
------------------- ----- ----- -----
1 7.868 7.589 7.326
2 7.319 7.027 6.752
3 6.808 6.506 6.223
4 6.333 6.024 5.736
5 5.891 5.578 5.286
6 5.480 5.165 4.872
7 5.098 4.782 4.491
8 4.742 4.428 4.139
9 4.412 4.100 3.815
10 4.104 3.796 3.516
11 3.817 3.515 3.240
12 3.551 3.255 2.986
13 3.303 3.014 2.752
14 3.073 2.790 2.537
15 2.859 2.584 2.338
16 2.659 2.392 2.155
17 2.474 2.215 1.986
18 2.301 2.051 1.831
19 2.140 1.899 1.687
20 1.991 1.758 1.555
21 1.852 1.628 1.433
22 1.723 1.508 1.321
23 1.603 1.396 1.217
24 1.491 1.293 1.122
25 1.387 1.197 1.034
26 1.290 1.108 0.953
27 1.200 1.026 0.878
28 1.116 0.950 0.810
29 1.039 0.880 0.746
30 0.966 0.814 0.688
31 0.899 0.754 0.634
32 0.836 0.698 0.584
33 0.778 0.647 0.538
34 0.723 0.599 0.496
35 0.673 0.554 0.457
36 0.626 0.513 0.422
37 0.582 0.475 0.389
38 0.542 0.440 0.358
39 0.504 0.407 0.330
40 0.469 0.377 0.304
41 0.436 0.349 0.280
42 0.406 0.323 0.258
43 0.377 0.299 0.238
44 0.351 0.277 0.219
45 0.327 0.257 0.202
* IF A PARTICIPANT'S ATTAINED AGE IS AT OR ABOVE 65 BUT
STILL BELOW THE PARTICIPANT'S NRA, USE TABLE IA.
Note: These factors are based on the UP-1984 Mortality Table.
<PAGE>
TABLE IA: Present value factors for participants below normal retirement
age (to be used only when attained age is GREATER THAN, OR EQUAL TO, 65.)
NUMBER OF YEARS INTEREST RATE
FROM AGE 65
TO ATTAINED AGE 7.50% 8.00% 8.50%
----------------- ----- ----- -----
0 8.458 8.196 7.949
1 9.092 8.852 8.625
2 9.774 9.560 9.358
3 10.507 10.325 10.153
4 11.295 11.151 11.016
5 12.143 12.043 11.953
6 13.053 13.006 12.969
7 14.032 14.047 14.071
8 15.085 15.170 15.267
9 16.216 16.384 16.565
10 17.432 17.695 17.973
11 18.740 19.110 19.500
12 20.145 20.639 21.158
13 21.656 22.290 22.956
14 23.280 24.073 24.907
15 25.026 25.999 27.025
Note: These factors are based on the UP-1984 Mortality Table.
<PAGE>
TABLE II: Amortization factors
NUMBER OF YEARS INTEREST RATE
FROM ATTAINED AGE
TO NORMAL
RETIREMENT AGE 7.50% 8.00% 8.50%
------------------ ------ ------ ------
1 0.5181 0.5192 0.5204
2 0.3577 0.3593 0.3609
3 0.2777 0.2796 0.2814
4 0.2299 0.2319 0.2339
5 0.1982 0.2003 0.2024
6 0.1756 0.1778 0.1801
7 0.1588 0.1611 0.1634
8 0.1458 0.1482 0.1506
9 0.1355 0.1380 0.1405
10 0.1272 0.1297 0.1323
11 0.1203 0.1229 0.1255
12 0.1145 0.1171 0.1198
13 0.1096 0.1123 0.1151
14 0.1054 0.1082 0.1110
15 0.1018 0.1046 0.1075
16 0.0986 0.1015 0.1044
17 0.0958 0.0988 0.1018
18 0.0934 0.0964 0.0994
19 0.0912 0.0943 0.0974
20 0.0893 0.0924 0.0956
21 0.0876 0.0908 0.0940
22 0.0861 0.0893 0.0925
23 0.0847 0.0879 0.0912
24 0.0835 0.0867 0.0901
25 0.0823 0.0857 0.0890
26 0.0813 0.0847 0.0881
27 0.0804 0.0838 0.0872
28 0.0795 0.0830 0.0865
29 0.0788 0.0822 0.0858
30 0.0781 0.0816 0.0851
31 0.0774 0.0810 0.0846
32 0.0768 0.0804 0.0840
33 0.0763 0.0799 0.0836
34 0.0758 0.0794 0.0831
35 0.0753 0.0790 0.0827
36 0.0749 0.0786 0.0824
37 0.0745 0.0783 0.0820
38 0.0742 0.0779 0.0817
39 0.0739 0.0776 0.0815
40 0.0736 0.0774 0.0812
41 0.0733 0.0771 0.0810
42 0.0730 0.0769 0.0808
43 0.0728 0.0767 0.0806
44 0.0726 0.0765 0.0804
45 0.0724 0.0763 0.0802
<PAGE>
TABLE III: Factors to be multiplied by those in Table I.
NORMAL INTEREST RATE
RETIREMENT
AGE 7.50% 8.00% 8.50%
--------------- ----- ----- -----
80 0.206 0.194 0.184
79 0.231 0.219 0.207
78 0.258 0.246 0.234
77 0.289 0.276 0.263
76 0.322 0.309 0.296
75 0.359 0.346 0.333
74 0.400 0.387 0.374
73 0.446 0.432 0.419
72 0.495 0.482 0.469
71 0.549 0.537 0.525
70 0.609 0.597 0.586
69 0.674 0.664 0.653
68 0.745 0.736 0.728
67 0.822 0.816 0.810
66 0.907 0.904 0.900
65 1.000 1.000 1.000
64 1.101 1.106 1.110
63 1.212 1.221 1.231
62 1.332 1.348 1.363
61 1.464 1.486 1.509
60 1.606 1.637 1.669
59 1.761 1.802 1.844
58 1.929 1.982 2.036
57 2.111 2.177 2.246
56 2.309 2.390 2.475
55 2.523 2.622 2.726
NOTE: These factors are based on the UP-1984 Mortality Table.
<PAGE>
TABLE IV: FACTORS for participants who are at or beyond
normal retirement age.
NORMAL INTEREST RATE
RETIREMENT
AGE 7.50% 8.00% 8.50%
--------------- ----- ----- -----
80 5.151 5.053 4.959
79 5.370 5.264 5.162
78 5.591 5.476 5.366
77 5.814 5.690 5.572
76 6.039 5.905 5.777
75 6.266 6.122 5.985
74 6.494 6.339 6.192
73 6.721 6.556 6.398
72 6.947 6.771 6.603
71 7.171 6.983 6.804
70 7.392 7.192 7.003
69 7.610 7.399 7.198
68 7.825 7.601 7.389
67 8.037 7.801 7.577
66 8.248 7.999 7.764
65 8.458 8.196 7.949
64 8.666 8.390 8.131
63 8.870 8.581 8.311
62 9.072 8.770 8.485
61 9.270 8.954 8.657
60 9.463 9.133 8.825
59 9.651 9.307 8.986
58 9.834 9.477 9.143
57 10.012 9.641 9.295
56 10.186 9.801 9.442
55 10.354 9.955 9.585
NOTE: These factors are based on the UP-1984 Mortality Table.
<PAGE>
TARGET BENEFIT PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Target Benefit
Plan and Trust, to be effective as of the date specified below, for the
exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Target Benefit Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and
--------------------
each anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
a. The same as the Plan Year
-----
b. The twelve (12) consecutive month period
-----
commencing on
--------------------------------------------
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
----
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
Contributions to this Plan are based on a Participant's Compensation.
For any Self-Employed Individual covered under the Plan, Compensation
means Earned Income. See Appendix for definition of Compensation.
1. Compensation as defined in Section 2.9 of the Plan will mean all of
each Participant's (select one):
a. Wages, Tips and Other Compensation Box on Form W-2
-----
b. Section 3401(a) wages (wages subject to income tax)
-----
c. Section 415 safe-harbor Compensation
-----
2. Which is actually paid to the Participant during (select one):
a. the Plan Year
-----
b. a consecutive 12-month period ending with or within the
-----
Plan Year
3. Employer contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code (select one):
a. shall be included in Compensation
-----
b. shall not be included in Compensation
-----
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none or those
applicable):
1. The following job classifications are not covered (select
-----
those applicable):
a. hourly pay
-----
b. commission pay
-----
c. salary pay
-----
d. piecework pay
-----
e. Employees under a comparable employer plan.
-----
Specify plan
-----------------------------------------
If any of these job classifications are not covered under this
Plan, the Plan must still satisfy on a continuing basis the
coverage tests of section 410(b), the antidiscrimination tests
of 401(a)(4) and the participation test of 401(a)(26).
2. Union Employees who are included in a unit of employees covered
-----
by a collective bargaining agreement between the Employer and
the employee representatives, if retirement benefits were
the subject of good faith bargaining. For this purpose, the
term "employee representatives" does not include any
organization more than half of whose members are employees who
are owners, officers, or executives of the Employer.
3. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within the
United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the
-----
Plan Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets
age and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service may be credited in a number of different ways.
Select one of the methods listed below. The method selected will be
applied to all Employees covered under the Plan.
1. On the basis of actual hours for which an Employee is paid or
-----
entitled to be paid.
2. On the basis of days worked:
-----
An Employee shall be credited with ten (10) Hours of Service if
under Section 2.18 of the Plan the Employee would be credited
with at least one (1) Hour of Service during the day.
3. On the basis of weeks worked:
-----
An Employee shall be credited with forty-five (45) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the week.
4. On the basis of semi-monthly payroll periods:
-----
An Employee shall be credited with ninety-five (95) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the
semi-monthly payroll period.
5. On the basis of months worked:
-----
An Employee shall be credited with one hundred ninety (190)
Hours of Service if under Section 2.18 of the Plan the Employee
would be credited with at least one (1) Hour of Service during
the month.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting the
-----
Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
less than 55 nor greater than 65) or (b) the completion of
the (5th or less) anniversary of the date upon which the
-----
Participant commenced participation in the Plan.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. STATED BENEFIT
Each participant's stated benefit under the Plan will be equal to the
sum of:
(1) the Participant's current stated benefit, and
(2) the Participant's frozen accrued stated benefit, if any.
1. Current Stated Benefit:
Each Participant's current stated benefit is equal to % of
------
average annual Compensation (reduced pro rata for the Participant's
total years of projected participation less than 25) payable
annually as a straight life annuity beginning Normal Retirement
Age.
For purposes of this Section, average annual Compensation means the
average of a Participant's Compensation over the three (3)
consecutive Plan Year period ending in the current year or in any
prior year which produces the highest average. If the Participant
has less than three (3) years of participation, Compensation is
averaged over the Participant's total period of participation.
Each Participant's current stated benefit will be the product of:
(a) the amount derived from the formula selected above, and (b) a
fraction, the numerator of which is the Participant's number of
years of participation from the latest fresh-start date (if any)
through and including the later of the year in which the
Participant attains Normal Retirement Age or the current Plan Year,
and the denominator of which is the Participant's total years of
projected participation. If this Plan has not had a fresh-start
date, such fraction will equal 1.0 for all Participants. In any
event, for those Participants who first participated in the Plan
after the latest fresh-start date, such fraction will equal 1.0.
For purposes of determining the numerator in the fraction above
only those current and prior years during which a Participant was
eligible to receive a contribution under the Plan will be taken
into account.
For purposes of determining a Participant's current stated benefit,
a Participant's total years of projected participation under the
Plan is the sum of the Participant's total number of years of
participation under this Plan for the years this Plan consecutively
satisfies the safe harbor for target benefit plans in Regulations
section 1.401(a)(4)-8(b)(3), or was a prior safe harbor plan, if
applicable, projected through the later of the end of the Plan Year
in which the Participant attains Normal Retirement Age or the end
of the current Plan Year.
For purposes of determining a Participant's total years of
projected participation, only those current and prior years during
which a Participant was eligible to receive a contribution under
the Plan will be taken into account.
2. Frozen Accrued Stated Benefit:
A Participant's frozen accrued stated benefit is determined as of
the Plan's latest fresh-start date as if the Participant terminated
employment with the Employer as of that date, without regard to any
amendment made to the Plan after that date.
A Participant's frozen accrued stated benefit is equal to the
amount of the current stated benefit in effect on the latest
fresh-start date that a Participant has accrued as of that date,
assuming that such current stated benefit accrues ratably from the
year in which the Participant first participated in this Plan (or,
if later, the preceding fresh-start date under this Plan) through
and not including the Plan Year in which the Participant attains
Normal Retirement Age.
The amount of the current stated benefit in effect on the latest
fresh-start date that a Participant is assumed to have ratably
accrued is determined by multiplying the Plan's current stated
benefit formula in effect on that date by a fraction, the numerator
of which is the number of years of participation from the later of
the Participant's first year of participation in this Plan or the
preceding fresh-start date (if any) through and including the year
that contains the latest fresh-start date, and the denominator of
which is the number of years of participation from the later of the
fresh-start date (if any) through and including the later of the
year in which the Participant attains Normal Retirement Age or the
current Plan Year. For purposes of this paragraph, only those
years of participation during which a Participant was eligible to
receive a contribution under the Plan will be taken into account.
If this Plan has had a preceding fresh-start date, each
Participant's frozen accrued stated benefit as of the latest
fresh-start date will equal the sum of the amount of the current
stated benefit in effect on the latest fresh-start date that a
Participant is assumed to have ratably accrued as of that date
under the preceding paragraph, and the frozen accrued stated
benefit determined as of the preceding fresh-start date.
If: (a) the current stated benefit formula in effect on the latest
fresh-start date was not expressed as a straight life annuity for
all Participants, and/or (b) the Normal Retirement Age for any
Participant on the latest fresh-start date was greater than the
Normal Retirement Age for that Participant under the current stated
benefit formula in effect after the latest fresh-start date, the
frozen accrued stated benefit will be converted to an actuarially
equivalent straight life annuity commencing at the Participant's
Normal Retirement Age under the current stated benefit formula in
effect after the latest fresh-start date, using the actuarial
assumptions in effect under the current stated benefit formula in
effect on the latest fresh-start date.
Notwithstanding the above, if in the immediately preceding Plan
Year this Plan did not satisfy the safe harbor for target benefit
plans in Regulations section 1.401(a)(4)-8(b)(3) or was not a prior
safe harbor plan, the frozen accrued stated benefit for any
Participant in the Plan, determined for the next Plan Year during
which section 1.401(a)(4)-8(b)(3) is satisfied until the year
following the next fresh-start date, if any, will be zero.
Prior safe harbor plan means a plan adopted and in effect on
September 19, 1991, that satisfied the applicable nondiscrimination
requirements for target benefit plans on that date and in all prior
periods (taking into account no amendments to the plan after
September 19, 1991, other than amendments necessary to satisfy
section 401(1)).
Fresh Start Date: Fresh-start date means the last day of a Plan
Year preceding a Plan Year for which provisions that would affect
the amount of the current stated benefit are amended. If
applicable, the latest fresh-start date of the Plan is .
------------
B. INTEREST RATE ASSUMPTION
For purposes of determining the annual Employer contribution necessary
to fund the stated benefit, the interest rate shall be (select one):
1. 7.50%
-----
2. 8.00%
-----
3. 8.50%
-----
C. CALCULATION OF ANNUAL EMPLOYER CONTRIBUTION
For each Plan Year the Employer will contribute for each Participant
who either completes more than 500 Hours of Service during the Plan
Year or is employed on the last day of the Plan Year the annual
Employer contribution calculated below.
The annual Employer contribution necessary to fund the stated benefit
with respect to a Participant shall be determined each year as
follows:
Step 1: If the Participant has not yet reached the Plan's Normal
Retirement Age, calculate the present value of the stated benefit
contained in Section IV.A. above by multiplying the stated benefit by
the factor which is the product of: (1) the applicable factor in
Table I (if attained (current) age is less than 65) or Table IA (if
attained age is greater than or equal to 65), multiplied by (2) the
applicable factor in Table III. If the Participant is at or beyond
the Plan's Normal Retirement Age, calculate the present value of the
stated benefit by multiplying the stated benefit by the factor in
Table IV corresponding to that Normal Retirement Age. See Appendix
for Tables.
Step 2: Calculate the theoretical reserve of the stated benefit
according to (a) and (b) below:
a. Initial theoretical reserve. A Participant's theoretical reserve
as of the last day of the first Plan Year the Participant
participates in the Plan, and as of the last day of the first Plan
Year after any Plan Year in which the Plan either did not satisfy
the safe harbor in Regulations section 1.401(a)(4)-8(b)(3) or was
not a prior safe harbor plan, is zero. In all other cases, in the
first Plan Year in which this theoretical reserve provision is
adopted or made effective, if later (year 1) the initial
theoretical reserve is determined as follows:
1. Calculate as of the last day of the Plan Year immediately
preceding year 1 the present value of the stated benefit using
the actuarial assumptions, the provisions of the Plan, and the
Participant's Compensation as of that date. For a Participant
who is beyond Normal Retirement Age during year 1, the stated
benefit will be determined using the actuarial assumptions, the
provisions of the Plan, and the Participant's Compensation as of
such date, except that the straight life annuity factor used in
that determination will be the factor applicable for the
Participant's Normal Retirement Age.
2. Calculate as of the last day of the Plan Year immediately
preceding year 1 the present value of future Employer
contributions, i.e., the level contributions due each Plan Year
using the actuarial assumptions, the provisions of the Plan
(disregarding those provisions of the Plan providing for the
limitations of section 415 of the Code or the minimum
contributions under section 416 of the Code), and the
Participant's Compensation as of that date, beginning with
year 1 through the end of the Plan Year in which the Participant
attains Normal Retirement Age.
3. Subtract the amount determined in 2. from the amount determined
in 1.
4. In the case of an Employee who first becomes a Participant
during or after year 1, the result in 3 is zero.
b. Accumulate the initial theoretical reserve determined in (a) and
the Employer contribution (as limited by section 415 of the Code,
but without regard to any required minimum contributions under
section 416 of the Code) for each Plan Year beginning in year 1 up
through the last day of the current Plan Year (excluding
contributions made for the current Plan Year) using the plan's
interest assumption in effect for each such year. In any Plan Year
following the Plan Year in which the Participant attains Normal
Retirement Age, the accumulation is calculated assuming an interest
rate of 0%.
For purposes of determining the level of annual Employer
contribution necessary to fund the stated benefit, the calculations
in a and b above shall be made as the last day of each Plan Year,
on the basis of the Participant's age on the Participant's last
birthday, using the interest rate in effect on the last day of the
prior Plan Year.
Step 3: Calculate the excess, if any, of the amount determined
in Step 1 over the theoretical reserve determined in Step 2.
Step 4: To determine the annual Employer contributions necessary to
fund the result in Step 3, amortize the result in Step 3 by
multiplying it by the applicable factor from Table II in the Appendix.
For the Plan Year in which the Participant attains Normal Retirement
Age and for any subsequent Plan Year, the applicable factor is 1.0.
D. MAXIMUM CONTRIBUTION
The maximum contribution for each eligible Participant is the lesser
of the amount calculated under Section IV.C. above or the limit under
section 415(c)(1) of the Code. (The lesser of 25% of
Participant's Compensation or $30,000.)
E. ALLOCATION OF CONTRIBUTIONS AND FORFEITURES
1. Employer contributions shall be allocated to each eligible
Participant's Individual Account by the formula set forth in
this Section IV.
2. Forfeitures, if any, shall be used to reduce the Employer's
contribution.
F. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be provided under (select one):
a. this Plan
-----
b. another qualified Plan maintained by the Employer in which
-----
the Participants in this Plan also participate.
2. For purposes of minimum top-heavy allocations as explained in
Section 11.3 of the Plan, contributions and Forfeitures equal
to % of each non-key Employee's Compensation will be allocated
-----
to the Employee's Individual Account when the Plan is top-heavy.
(The minimum top-heavy allocation must be not less than 3% if the
Employer maintains only a target benefit plan. If the Employer
also maintains a defined benefit plan, the minimum top-heavy
allocation must be 5%, however, if the Employer wants to save the
1.25 multiplier, the minimum top-heavy allocation must be at
least 7.5%.)
The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
--------
Mortality table
-------
V. VESTING
A. Subject to the provisions of Article IX of the Plan, the
nonforfeitable percentage of a Participant's Account Balance
derived from Employer contributions prior to attainment of Normal
Retirement Age shall be (select one):
1. 100% immediate vesting (satisfies top-heavy requirement: must
-----
be selected if service of more than one (1) year is required
for vesting)
2. 100% vesting after three (3) Years of Service (satisfies
-----
top-heavy requirement)
3. 100% vesting after five (5) Years of Service
-----
4. Six-Year Graded Vesting (satisfies top-heavy requirement)
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5. Two to Seven-Year Vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
6. Vesting shall be % after years, then yearly increase
----- ----- -----
of % for year(s) and % thereafter for each year
----- ----- -----
until 100% vested. Vesting selected under this option must be
at least as favorable as provided by the other above options.
B. In accordance with Section 2.44 of the Plan, services for vesting for
purposes of calculating the Participant's nonforfeitable percentage
shall include all Years of Service with the Employer except service
disregarded under Section 9.9 of the Plan and service (check if
applicable):
1. Prior to the effective date of this Plan or predecessor plan
-----
2. Prior to the Participant's attainment of age (not
----- -----
exceeding 18 years)
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
(not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for
100% vesting).
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled. vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor.
Select one of the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, complete the following):
-----
A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or
prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of the Plan will
-----
apply as if the other plan were a master or prototype plan.
2. 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.
---------------------------------------------------------------
---------------------------------------------------------------
B. If the participant is or ever has been a Participant in a defined
benefit plan maintained by the Employer, provide the method under
which the plan involved will satisfy the 1.0 limitation of
section 415(e) of the code in a manner that precludes Employer
discretion.
---------------------------------------------------------------
---------------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. However, an Employer who amends the Plan for a waiver of the
minimum funding requirement will no longer participate in this master or
prototype plan and will be considered to have an individually designed
plan.
XI. RELIANCE ON OPINION LETTER
The adopting Employer may not rely on an opinion letter issued by the
National Office of the Internal Revenue Service as evidence that the Plan
is qualified under section 401 of the Code. In order to obtain reliance
with respect to Plan qualification, the Employer must apply to the
appropriate key district office of the Internal Revenue Service for a
determination letter.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
- -------------------------------------------------------
<PAGE>
APPENDIX
The following is an amendment to the definition of Compensation found in
Section 2.9 of the Plan.
2.9 COMPENSATION. The amount defined in Section II.A in the Adoption
Agreement. 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
determination period. Except as provided elsewhere in this Plan, the
determination period shall be the period elected by the Employer in the
Adoption Agreement. If the Employer makes no election, the determination
period shall be the Plan Year.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by
the Employer pursuant to a salary reduction agreement and which is not
includible in the gross income of the Employee under sections 125,
402(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 for determining all benefits provided
under the Plan for any determination period shall not exceed $200,000.
This limitation shall be adjusted by the Secretary at the same time and
in the same manner as under section 415(d) of the Code, except that the
dollar increase in effect on January 1 of any calendar year is effective
for years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1, 1990. If the period for
determining Compensation used in calculating an Employee's allocation for
a determination period is a short Plan year (i.e. shorter than 12
months), the annual Compensation limit is an amount equal to the
otherwise applicable annual Compensation limit multiplied by the
fraction, the numerator of which is the number of months in the short
Plan Year, and the denominator of which is 12.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of section 414(q)(6) of the Code shally 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 limitations shall be prorated among the
affected individuals in proportion to each such individual's Compensation
as determined under this section prior to the application of this
limitation.
If Compensation for any prior determination period is taken into account
in determining an Employee's allocations or benefits for the current
determination period, the Compensation for such prior 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.
<PAGE>
APPENDIX
The following is an amendment to the definition of Compensation found in
Section 5.3(m)(2) of the Plan.
(2) COMPENSATION: One of the following as elected by the Employer in the
Adoption Agreement:
(a) Information required to be reported under sections 6041 and 6051.
(Wages, Tips and Other Compensation Box on Form W-2.) Compensation is
defined as wages as defined in section 3401(a) and all other payments
of Compensation to an Employee by the Employer (in the course of the
Employer's trade or business) for which the Employer is required to
furnish the Employee a written statement under sections 6041(d) and
6051(a)(3) of the Code. Compensation must be determined without
regard to any rules under section 3401(a) that limit the remuneration
included in wages based on the nature or location of the employment or
the services performed (such as the exception for agricultural labor
in section 3401(a)(2)).
(b) Section 3401(a) wages. Compensation is defined as wages within the
meaning of section 3401(a) 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. Compensation is defined as wages,
salaries and fees for professional services and other amounts received
(without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with
the Employer maintaining the Plan to the extent that the amounts are
includable in gross income (including, but not limited to, commissions
paid salesmen, compensation for services on the basis of a percentage
of profits, commission on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a
nonaccountable plan (as described in 1.62-2(c)), and excluding the
following:
(i) Employer contributions to a plan of deferred compensation which
are not includable in the Employee's gross income for the taxable
year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions
are deductible by the Employee, or any distributions from a plan of
deferred compensation;
(ii) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Employer (whether of not under a salary
reduction agreement) towards the purchase of an annuity contract
described in section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
For any Self-Employed Individual Compensation will mean Earned Income.
For Limitation Years beginning after December 31, 1991, for purposes
of applying the limitations of this Article, Compensation for a
Limitation Year is the Compensation actually paid or made available
during the 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 Internal Revenue Code) is the
Compensation that 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 the Participant are nonforfeitable when made.
<PAGE>
APPENDIX
TABLE I: Present value factors (SEE * BELOW)
NUMBER OF YEARS INTEREST RATE
FROM ATTAINED AGE
TO AGE 65* 7.50% 8.00% 8.50%
----------------- ----- ----- -----
1 7.868 7.589 7.326
2 7.319 7.027 6.752
3 6.808 6.506 6.223
4 6.333 6.024 5.736
5 5.891 5.578 5.286
6 5.480 5.165 4.872
7 5.098 4.782 4.491
8 4.742 4.428 4.139
9 4.412 4.100 3.815
10 4.104 3.796 3.516
11 3.817 3.515 3.240
12 3.551 3.255 2.986
13 3.303 3.014 2.752
14 3.073 2.790 2.537
15 2.859 2.584 2.338
16 2.659 2.392 2.155
17 2.474 2.215 1.986
18 2.301 2.051 1.831
19 2.140 1.899 1.687
20 1.991 1.758 1.555
21 1.852 1.628 1.433
22 1.723 1.508 1.321
23 1.603 1.396 1.217
24 1.491 1.293 1.122
25 1.387 1.197 1.034
26 1.290 1.108 0.953
27 1.200 1.026 0.878
28 1.116 0.950 0.810
29 1.039 0.880 0.746
30 0.966 0.814 0.688
31 0.899 0.754 0.634
32 0.836 0.698 0.584
33 0.778 0.647 0.538
34 0.723 0.599 0.496
35 0.673 0.554 0.457
36 0.626 0.513 0.422
37 0.582 0.475 0.389
38 0.542 0.440 0.358
39 0.504 0.407 0.330
40 0.469 0.377 0.304
41 0.436 0.349 0.280
42 0.406 0.323 0.258
43 0.377 0.299 0.238
44 0.351 0.277 0.219
45 0.327 0.257 0.202
* IF A PARTICIPANT'S ATTAINED AGE IS AT OR ABOVE 65 BUT
STILL BELOW THE PARTICIPANT'S NRA, USE TABLE IA.
Note: These factors are based on the UP-1984 Mortality Table.
<PAGE>
TABLE IA: Present value factors for participants below normal retirement
age (to be used only when attained age is GREATER THAN, OR EQUAL TO, 65.)
NUMBER OF YEARS INTEREST RATE
FROM AGE 65
TO ATTAINED AGE 7.50% 8.00% 8.50%
----------------- ----- ----- -----
0 8.458 8.196 7.949
1 9.092 8.852 8.625
2 9.774 9.560 9.358
3 10.507 10.325 10.153
4 11.295 11.151 11.016
5 12.143 12.043 11.953
6 13.053 13.006 12.969
7 14.032 14.047 14.071
8 15.085 15.170 15.267
9 16.216 16.384 16.565
10 17.432 17.695 17.973
11 18.740 19.110 19.500
12 20.145 20.639 21.158
13 21.656 22.290 22.956
14 23.280 24.073 24.907
15 25.026 25.999 27.025
Note: These factors are based on the UP-1984 Mortality Table.
<PAGE>
TABLE II: Amortization factors
NUMBER OF YEARS INTEREST RATE
FROM ATTAINED AGE
TO NORMAL
RETIREMENT AGE 7.50% 8.00% 8.50%
----------------- ------ ------ ------
1 0.5181 0.5192 0.5204
2 0.3577 0.3593 0.3609
3 0.2777 0.2796 0.2814
4 0.2299 0.2319 0.2339
5 0.1982 0.2003 0.2024
6 0.1756 0.1778 0.1801
7 0.1588 0.1611 0.1634
8 0.1458 0.1482 0.1506
9 0.1355 0.1380 0.1405
10 0.1272 0.1297 0.1323
11 0.1203 0.1229 0.1255
12 0.1145 0.1171 0.1198
13 0.1096 0.1123 0.1151
14 0.1054 0.1082 0.1110
15 0.1018 0.1046 0.1075
16 0.0986 0.1015 0.1044
17 0.0958 0.0988 0.1018
18 0.0934 0.0964 0.0994
19 0.0912 0.0943 0.0974
20 0.0893 0.0924 0.0956
21 0.0876 0.0908 0.0940
22 0.0861 0.0893 0.0925
23 0.0847 0.0879 0.0912
24 0.0835 0.0867 0.0901
25 0.0823 0.0857 0.0890
26 0.0813 0.0847 0.0881
27 0.0804 0.0838 0.0872
28 0.0795 0.0830 0.0865
29 0.0788 0.0822 0.0858
30 0.0781 0.0816 0.0851
31 0.0774 0.0810 0.0846
32 0.0768 0.0804 0.0840
33 0.0763 0.0799 0.0836
34 0.0758 0.0794 0.0831
35 0.0753 0.0790 0.0827
36 0.0749 0.0786 0.0824
37 0.0745 0.0783 0.0820
38 0.0742 0.0779 0.0817
39 0.0739 0.0776 0.0815
40 0.0736 0.0774 0.0812
41 0.0733 0.0771 0.0810
42 0.0730 0.0769 0.0808
43 0.0728 0.0767 0.0806
44 0.0726 0.0765 0.0804
45 0.0724 0.0763 0.0802
<PAGE>
TABLE III: Factors to be multiplied by those in Table I.
NORMAL INTEREST RATE
RETIREMENT
AGE 7.50% 8.00% 8.50%
--------------- ----- ----- -----
80 0.206 0.194 0.184
79 0.231 0.219 0.207
78 0.258 0.246 0.234
77 0.289 0.276 0.263
76 0.322 0.309 0.296
75 0.359 0.346 0.333
74 0.400 0.387 0.374
73 0.446 0.432 0.419
72 0.495 0.482 0.469
71 0.549 0.537 0.525
70 0.609 0.597 0.586
69 0.674 0.664 0.653
68 0.745 0.736 0.728
67 0.822 0.816 0.810
66 0.907 0.904 0.900
65 1.000 1.000 1.000
64 1.101 1.106 1.110
63 1.212 1.221 1.231
62 1.332 1.348 1.363
61 1.464 1.486 1.509
60 1.606 1.637 1.669
59 1.761 1.802 1.844
58 1.929 1.982 2.036
57 2.111 2.177 2.246
56 2.309 2.390 2.475
55 2.523 2.622 2.726
NOTE: These factors are based on the UP-1984 Mortality Table.
<PAGE>
TABLE IV: FACTORS for participants who are at or beyond
normal retirement age.
NORMAL INTEREST RATE
RETIREMENT
AGE 7.50% 8.00% 8.50%
----------------- ----- ----- -----
80 5.151 5.053 4.959
79 5.370 5.264 5.162
78 5.591 5.476 5.366
77 5.814 5.690 5.572
76 6.039 5.905 5.777
75 6.266 6.122 5.985
74 6.494 6.339 6.192
73 6.721 6.556 6.398
72 6.947 6.771 6.603
71 7.171 6.983 6.804
70 7.392 7.192 7.003
69 7.610 7.399 7.198
68 7.825 7.601 7.389
67 8.037 7.801 7.577
66 8.248 7.999 7.764
65 8.458 8.196 7.949
64 8.666 8.390 8.131
63 8.870 8.581 8.311
62 9.072 8.770 8.485
61 9.270 8.954 8.657
60 9.463 9.133 8.825
59 9.651 9.307 8.986
58 9.834 9.477 9.143
57 10.012 9.641 9.295
56 10.186 9.801 9.442
55 10.354 9.955 9.585
NOTE: These factors are based on the UP-1984 Mortality Table.
<PAGE>
STANDARDIZED NONINTEGRATED PROFIT SHARING PLAN AND
TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Profit Sharing
Trust named below and the Employer hereby adopts this Prototype Profit
Sharing Plan and Trust, to be effective as of the date specified below, for
the exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Profit Sharing Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
-----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
the same as the Plan Year
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
----
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
415 Safe-Harbor Compensation:
Contributions to this Plan are based on a Participant's Compensation.
Compensation shall mean wages, salaries, fees for professional
services and other amounts received for personal services actually
rendered with the Employer (including but not limited to, commissions,
compensation paid as a percentage of profits, tips, bonuses, fringe
benefits, reimbursements and expense allowances) paid for the taxable
year ending with or within the Plan Year. Compensation excludes
amounts defined in section 5.3(m)(2)(a)(i)-(iv) of the Plan. For a
Self-Employed Individual covered under the Plan, Compensation shall
mean a Participant's Earned Income.
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none, one or
both):
1. Union Employees who are included in a unit of employees covered
-----
by a collective bargaining agreement between the Employer and
the employee representatives, if retirement benefits were
the subject of good faith bargaining and if two percent or less
of the employees of the employer who are covered pursuant to
that agreement are professionals as defined in section
1.410(b)-9(g) of the proposed regulations. For this purpose,
the term "employee representatives" does not include any
organization more than half of whose members are employees who
are owners, officers, or executives of the Employer.
2. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within the
United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the
-----
Plan Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets
age and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service will be credited on the basis of actual hours for
which an Employee is paid or entitled to be paid.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting
-----
the Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
The Employer shall contribute to the Plan a percentage of annual
Compensation to be determined annually not to exceed 15% of the
Compensation of Plan Participants (select one):
1. Contributions shall be out of current or accumulated
-----
net profits.
2. Contributions shall not be limited to current or accumulated
-----
net profits.
B. ALLOCATION OF CONTRIBUTIONS
1. Employer contributions shall be allocated to each Participant who
either completes more than 500 Hours of Service during the Plan
contributions for the Plan Year will be allocated to Participant's
Individual Accounts in the same ratio that the Participant's
Compensation bears to the total Compensation of all Participants.
2. Forfeitures, if any, shall be (select one):
a. Used to reduce Employer contributions
-----
b. Allocated to each Participant's Individual Account in the
-----
same ratio as Employer contributions.
C. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be equal to the lesser of
either (a) three percent (3%) of the non-key Employee's
Compensation or (b) the highest percentage of Employer
contributions and Forfeitures as a percentage of the first $200,000
of the key Employee's Compensation allocated on behalf of any key
Employee during the year.
2. The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
--------
Mortality table
-------
V. VESTING
Service for vesting starts at date of employment. Subject to the
provisions of Article IX of the Plan, the nonforfeitable percentage of a
Participant's Account Balance derived from Employer contributions prior
to attainment of Normal Retirement Age shall be (select one):
1. 1OO% immediate vesting
-----
2. 100% vesting after three (3) Years of Service (if entry date is
-----
before one (1) year and zero (0) months)
3. Six-Year Graded Vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of such age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor. Select one of
the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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.
-------------------------------------------------
-------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer,
provide the method under which the plan involved will
satisfy the 1.0 limitation of section 415(e) of the code
in a manner that precludes Employer discretion.
--------------------------------------------------------
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The Internal Revenue Service has approved this Plan as a prototype. 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 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 Internal Revenue Code. If the
Employer who adopts or maintains multiple plans wishes to obtain reliance
that his or her plan(s) are qualified, application for a determination
letter should be made to the appropriate Key District Director of the
Internal Revenue.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
STANDARDIZED NONINTEGRATED MONEY PURCHASE PLAN AND
TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Money Purchase
Plan and Trust, to be effective as of the date specified below, for the
exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Money Purchase Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
-----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
the same as the Plan Year
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
---
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
Section 415 Safe-Harbor Compensation:
Contributions to this Plan are based on a Participant's Compensation.
Compensation shall mean wages, salaries, fees for professional
services and other amounts received for personal services actually
rendered with the Employer (including but not limited to, commissions,
compensation paid as a percentage of profits, tips, bonuses, fringe
benefits, reimbursements and expense allowances) paid for the taxable
year ending with or within the Plan Year. Compensation excludes
amounts defined in section 5.3(m)(2)(a)(i)-(iv) of the Plan. For any
Self-Employed Individual covered under the Plan, Compensation means
Earned Income.
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none, one or
both):
1. Union Employees who are included in a unit of employees covered
-----
by a collective bargaining agreement between the Employer and
the employee representatives, if retirement benefits were
the subject of good faith bargaining and if two percent or less
of the employees of the employer who are covered pursuant to
that agreement are professionals as defined in section
1.410(b)-9(g) of the proposed regulations. For this purpose,
the term "employee representatives" does not include any
organization more than half of whose members are employees who
are owners, officers, or executives of the Employer.
2. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within the
United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the Plan
-----
Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets
age and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service will be credited on the basis of actual hours for
which an Employee is paid or entitled to be paid.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting the
-----
Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
For each Plan Year, the Employer will contribute for each Participant
who either completes more than 500 Hours of Service during the Plan
Year or is employed on the last day of the Plan Year an amount equal
to % (not to exceed 25%) of each Participant's Compensation.
-----
B. ALLOCATION OF CONTRIBUTIONS
1. Employer contributions calculated in IV.A. above shall be allocated
to each Participant's Individual Account.
2. Forfeitures, if any, shall be (select one):
a. Used to reduce Employer contributions
-----
b. Allocated to each Participant's Individual Account by the
-----
formula in Section IV.A. above.
C. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be equal to the lesser of
either (a) three percent (3%) of the non-key Employee's
Compensation or (b) the highest percentage of Employer
contributions and Forfeitures as a percentage of the first $200,000
of the key Employee's Compensation allocated on behalf of any key
Employee during the year.
2. The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
--------
Mortality table
-------
V. VESTING
Service for vesting starts at date of employment. Subject to the
provisions of Article IX of the Plan, the nonforfeitable percentage of a
Participant's Account Balance derived from Employer contributions prior
to attainment of Normal Retirement Age shall be (select one):
1. 1OO% immediate vesting
-----
2. 100% vesting after three (3) Years of Service (if entry date is
-----
before one (1) year and zero (0) months)
3. Six-Year Graded Vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of such age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor. Select one of
the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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.
-------------------------------------------------
-------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer,
provide the method under which the plan involved will
satisfy the 1.0 limitation of section 415(e) of the code
in a manner that precludes Employer discretion.
--------------------------------------------------------
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the Code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The Internal Revenue Service has approved this Plan as a prototype. 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 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 Internal Revenue Code. If the
Employer who adopts or maintains multiple plans wishes to obtain reliance
that his or her plan(s) are qualified, application for a determination
letter should be made to the appropriate Key District Director of the
Internal Revenue.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
STANDARDIZED INTEGRATED PROFIT SHARING PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Profit Sharing
Trust named below and the Employer hereby adopts this Prototype Profit
Sharing Plan and Trust, to be effective as of the date specified below, for
the exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
-------------------------------------
Employees' Profit Sharing Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
------
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
-----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
the same as the Plan Year
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
---
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
415 Safe-Harbor Compensation:
Contributions to this Plan are based on a Participant's Compensation.
Compensation shall mean wages, salaries, fees for professional
services and other amounts received for personal services actually
rendered with the Employer (including but not limited to, commissions,
compensation paid as a percentage of profits, tips, bonuses, fringe
benefits, reimbursements and expense allowances) paid for the taxable
year ending with or within the Plan Year. Compensation excludes
amounts defined in section 5.3(m)(2)(a)(i)-(iv) of the Plan. For a
Self-Employed Individual covered under the Plan, Compensation shall
mean a Participant's Earned Income.
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none, one or
both):
1. Union Employees who are included in a unit of employees
-----
covered by a collective bargaining agreement between the
Employer and the employee representatives, if retirement
benefits were the subject of good faith bargaining and if two
percent or less of the employees of the employer who are
covered pursuant to that agreement are professionals as defined
in section 1.410(b)-9(g) of the proposed regulations. For this
purpose, the term "employee representatives" does not include
any organization more than half of whose members are employees
who are owners, officers, or executives of the Employer.
2. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within the
United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the
-----
Plan Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets
age and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service will be credited on the basis of actual hours for
which an Employee is paid or entitled to be paid.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting
-----
the Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
The Employer shall contribute to the Plan a percentage of annual
Compensation to be determined annually not to exceed 15% of the
Compensation of Plan Participants. Compensation shall mean
Compensation as defined in Section 5.3(m)(2) of the Plan (select one):
1. Contributions shall be out of current or accumulated
-----
net profits.
2. Contributions shall not be limited to current or accumulated
-----
net profits.
B. INTEGRATION LEVEL
The integration level shall be equal to the Taxable Wage Base or such
lesser amount elected by the employer below. The Taxable Wage Base is
the contribution and benefit base in effect under section 230 of the
Social Security Act at the beginning of the Plan Year. The
integration level is equal to (select one):
1. Taxable Wage Base
-----
2. $ (a dollar amount less than the Taxable Wage Base)
----- -----
3. % of Taxable Wage Base (not to exceed 100%)
----- -----
C. ALLOCATION OF CONTRIBUTIONS
Employer contributions will be allocated to each Participant who
either completes more than 500 Hours of Service during the Plan Year
or who is employed on the last day of the Plan Year. Employer
contributions for the Plan Year plus any forfeitures will be allocated
to Participants' Individual accounts as follows:
1. Contributions and Forfeitures will be allocated to each
Participant's account in the ratio that each Participant's total
Compensation bears to all Participants' total Compensation, but not
in excess of 3% of each Participant's Compensation.
2. Any contributions and Forfeitures remaining after the allocation in
Subparagraph 1 will be allocated to each Participant's account in
the ratio that each Participant's Compensation for the Plan Year in
excess of the integration level bears to the excess Compensation of
all participants, but not in excess of 3%.
3. Any contributions and Forfeitures remaining after the allocation in
Subparagraph 2 will be allocated to each Participant's account in
the ratio that the sum of each Participant's total Compensation and
Compensation in excess of the integration level bears to the sum of
all Participants' total Compensation and Compensation in excess of
the integration level, but not in excess of the profit-sharing
maximum disparity rate.
4. Any remaining Employer contributions or Forfeitures will be
allocated to each Participant's account in the ratio that each
Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that year.
D. MAXIMUM PROFIT SHARING DISPARITY RATE
The maximum profit-sharing disparity rate is equal to the lesser of:
1. 2.7%, or
2. the applicable percentage determined in accordance with the
table below:
If the Integration Level
THE APPLICABLE
IS MORE THAN BUT NOT MORE THAN PERCENTAGE IS:
$0 X* 2.7%
X* 80% of TWB 1.3%
80% of TWB Y** 2.4%
*X = the greater of $10,000 or 20 percent of the TWB
**Y = any amount more than 80% of the TWB but less than
100% of the TWB.
If the integration level used is equal to the Taxable Wage Base,
the applicable percentage is 2.7%.
E. MINIMUM TOP-HEAVY ALLOCATIONS
1. Employer contributions shall be allocated to each Participant who
either completes more than 500 Hours of Service during the Plan
contributions for the Plan Year will be allocated to Participant's
Individual Accounts in the same ratio that the Participant's
Compensation bears to the total Compensation of all Participants.
2. Forfeitures, if any, shall be (select one):
a. Used to reduce Employer contributions
-----
b. Allocated to each Participant's Individual Account in the
-----
same ratio as Employer contributions.
C. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be no less than three percent
(3%) of the non-key Employee's Compensation.
2. The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
----------
Mortality table
---------
V. VESTING
Service for vesting starts at date of employment. Subject to the
provisions of Article IX of the Plan, the nonforfeitable percentage of a
Participant's Account Balance derived from Employer contributions prior
to attainment of Normal Retirement Age shall be (select one):
1. 1OO% immediate vesting
-----
2. 100% vesting after three (3) Years of Service (if entry date is
-----
before one (1) year and zero (0) months)
3. Six-Year Graded Vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of such age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor.
Select one of the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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.
-------------------------------------------------
-------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer,
provide the method under which the plan involved will
satisfy the 1.0 limitation of section 415(e) of the code
in a manner that precludes Employer discretion.
--------------------------------------------------------
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The Internal Revenue Service has approved this Plan as a prototype. 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 may not rely on the opinion letter issued by
the National Office of the Internal Revenue Service as evidence that the
Plan is qualified under section 401 Internal Revenue Code. If this
Employer who adopts or maintains multiple plans wishes to obtain reliance
that his or her plan(s) are qualified, application for a determination
letter should be made to the appropriate Key District Director of the
Internal Revenue.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
STANDARDIZED INTEGRATED MONEY PURCHASE PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Money Purchase
Plan and Trust, to be effective as of the date specified below, for the
exclusive benefit of its Employees who qualify under the terms and
conditions thereof The Employer hereby selects the following specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Money Purchase Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an
-----
existing plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or
amendment shall be
-------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
the same as the Plan Year.
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
----
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
415 Safe-Harbor Compensation:
Contributions to this Plan are based on a Participant's Compensation.
Compensation shall mean wages, salaries, fees for professional
services and other amounts received for personal services actually
rendered with the Employer (including but not limited to, commissions,
compensation paid as a percentage of profits, tips, bonuses, fringe
benefits, reimbursements and expense allowances) paid for the taxable
year ending with or within the Plan Year. Compensation excludes
amounts defined in Section 5.3(m)(2)(a)(i)-(iv) of the Plan. For a
Self-Employed Individual covered under the Plan, Compensation shall
mean a Participant's Earned Income.
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none, one or
both):
1. Union Employees who are included in a unit of employees
-----
covered by a collective bargaining agreement between the
Employer and the employee representatives, if retirement
benefits were the subject of good faith bargaining and if two
percent or less of the employees of the employer who are
covered pursuant to that agreement are professionals as defined
in section 1.410(b)-9(g) of the proposed regulations. For this
purpose, the term "employee representatives" does not include
any organization more than half of whose members are employees
who are owners, officers, or executives of the Employer.
2. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within the
United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the
-----
Plan Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets
age and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service will be credited on the basis of actual hours for
which an Employee is paid or entitled to be paid.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting
-----
the Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
The Employer will contribute for each Participant who either completes
more than 500 Hours of Service during the Plan Year or is employed on
the last day of the Plan Year an amount equal to % (base
-----
contribution percentage, not less than 3%) of each Participant's
Compensation as defined in section 5.3(m)(2) of the Plan for the Plan
Year up to the integration level plus % (not less than 3% and
-----
not to exceed the base contribution percentage by more than the
lesser (1) the base contribution percentage, or (2) the money purchase
maximum disparity rate) of each Participant's Compensation in excess
of the integration level.
B. INTEGRATION LEVEL
The integration level shall be equal to the Taxable Wage Base or such
lesser amount elected by the employer below. The Taxable Wage Base is
the contribution and benefit base in effect under section 230 of the
Social Security Act at the beginning of the Plan Year. The
integration level is equal to (select one):
1. Taxable Wage Base
-----
2. $ (a dollar amount less than the Taxable Wage Base)
----- -----
3. % of Taxable Wage Base (not to exceed 100%)
----- -----
C. ALLOCATION OF CONTRIBUTIONS
1. Employer contributions calculated in IV.A. above shall be
allocated to each Participant's Individual Account.
2. Forfeitures, if any, shall be (select one):
a. Used to reduce Employer contributions
-----
b. Allocated to each Participant's Individual Account in the
-----
same ratio as Employer contributions.
D. MAXIMUM PROFIT SHARING DISPARITY RATE
The maximum money purchase disparity rate is equal to the lesser of:
1. 5.7%, or
2. the applicable percentage determined in accordance with the
table below:
If the integration level
THE APPLICABLE
IS MORE THAN BUT NOT MORE THAN PERCENTAGE IS:
$0 X* 5.7%
X* 80% of TWB 4.3%
80% of TWB Y** 5.4%
*X = the greater of $10,000 or 20 percent of the TWB
**Y = any amount more than 80% of the TWB but less than
100% of the TWB.
TWB = Taxable Wage Base
If the integration level used is equal to the Taxable Wage Base,
the applicable percentage is 5.7%.
E. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be no less than three percent
(3%) of the non-key Employee's Compensation.
2. The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
----------
Mortality table
---------
V. VESTING
Service for vesting starts at date of employment. Subject to the
provisions of Article IX of the Plan, the nonforfeitable percentage of a
Participant's Account Balance derived from Employer contributions prior
to attainment of Normal Retirement Age shall be (select one):
1. 1OO% immediate vesting
-----
2. 100% vesting after three (3) Years of Service (if entry date is
-----
before one (1) year and zero (0) months)
3. Six-Year Graded Vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of the age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor (select one):
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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.
-------------------------------------------------
-------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer,
provide the method under which the plan involved will
satisfy the 1.0 limitation of section 415(e) of the code
in a manner that precludes Employer discretion.
--------------------------------------------------------
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the Code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The Internal Revenue Service has approved this Plan as a prototype. 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 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 Internal Revenue Code. If the
Employer who adopts or maintains multiple plans wishes to obtain reliance
that his or her plan(s) are qualified, application for a determination
letter should be made to the appropriate Key District Director of the
Internal Revenue.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
INTEGRATED MONEY PURCHASE PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Money Purchase
Plan and Trust, to be effective as of the date specified below, for the
exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Money Purchase Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
-----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
a. The same as the Plan Year
-----
b. The twelve (12) consecutive month period
-----
commencing on
--------------------------------------------
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
---
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
Contributions to this Plan are based on a Participant's Compensation.
For any Self-Employed Individual covered under this Plan, Compensation
means Earned Income.
1. Compensation as defined in Section 2.9 of the Plan will mean all of
each Participant's (select one):
a. Section 415 safe-harbor Compensation
-----
b. Section 3121(a) wages (wages subject to Social Security tax)
-----
c. Section 3401(a) wages (wages subject to income tax)
-----
2. Which is actually paid to the Participant during (select one):
a. the Plan Year
-----
b. the taxable year ending with or within the Plan Year
-----
c. the Limitation Year ending with or within the Plan Year
-----
3. Employer contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code (select one):
a. shall be included in Compensation
-----
b. shall not be included in Compensation
-----
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none or those
applicable):
1. The following job classifications are not covered (select
-----
those applicable):
a. hourly pay
-----
b. commission pay
-----
c. salary pay
-----
d. piecework pay
-----
e. Employees under a comparable Employer plan.
-----
Specify plan
-----------------------------------
If any of these job classifications are not covered under this
Plan, the Plan must still satisfy on a continuing basis the
coverage tests of Code section 410(b), the anti-discrimination
tests of Code section 401(a)(4) and the participation test of
Code section 401(a)(26).
2. Union Employees who are included in a unit of employees covered
-----
by a collective bargaining agreement between the Employer and
the employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or less of
the employees of the employer who are covered pursuant to that
agreement are professionals as defined in section 1.410(b)-9(g)
of the proposed regulations. For this purpose, the term
"employee representatives does not include any organization
more than half of whose members are employees who are owners,
officers, or executives of the Employer.
3. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within
the United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the
-----
Plan Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets
age and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service may be credited in a number of different ways.
Select one of the methods listed below. The method selected will be
applied to all Employees covered under the Plan.
1. On the basis of actual hours for which an Employee is paid or
-----
entitled to be paid.
2. On the basis of days worked:
-----
An Employee shall be credited with ten (10) Hours of Service if
under Section 2.18 of the Plan the Employee would be credited
with at least one (1) Hour of Service during the day.
3. On the basis of weeks worked:
-----
An Employee shall be credited with forty-five (45) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the week.
4. On the basis of semi-monthly payroll periods:
-----
An Employee shall be credited with ninety-five (95) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the
semi-monthly payroll period.
5. On the basis of months worked:
-----
An Employee shall be credited with one hundred ninety (190)
Hours of Service if under Section 2.18 of the Plan the Employee
would be credited with at least one (1) Hour of Service during
the month.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting
-----
the Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
The Employer will contribute an amount equal to % (base
-----
contribution percentage, not less than 3%) of each Participant's
Compensation as defined in Section 5.3(m)(2) of the Plan for the Plan
Year up to the integration level plus % (not less than 3% and 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) of each Participant's Compensation in excess
of the integration level.
B. INTEGRATION LEVEL
The integration level shall be equal to the Taxable Wage Base or such
lesser amount elected by the Employer below. The Taxable Wage Base is
the contribution and benefit base in effect under section 230 of the
Social Security Act at the beginning of the Plan Year. The
integration level is equal to (select one):
1. Taxable Wage Base
-----
2. $ (a dollar amount less than the Taxable Wage Base)
----- -----
3. % of Taxable Wage Base (not to exceed 100%)
----- -----
C. ALLOCATION OF CONTRIBUTIONS AND FORFEITURES
1. Employer Contributions calculated by the formula in IV.A. above
shall be allocated to each Participant's Individual Account.
2. Forfeitures, if any, shall be (select one):
a. Used to reduce Employer contributions.
-----
b. Allocated to each Participant's Individual Account by the
-----
formula in Section IV.A. above.
D. MAXIMUM MONEY PURCHASE DISPARITY RATE
The maximum money purchase disparity rate is equal to the lesser of:
1. 5.7%, or
2. the applicable percentage determined in accordance with the
table below.
If the integration level:
THE APPLICABLE
IS MORE THAN BUT NOT MORE THAN PERCENTAGE IS:
$0 X* 5.7%
X* 80% of TWB 4.3%
80% of TWB Y** 5.4%
*X = the greater of $10,000 or 20 percent of the TWB.
**Y = any amount more than 80% of the TWB but less
than 100% of the TWB.
TWB = Taxable Wage Base
If the integration level used is equal to the Taxable Wage Base, the
applicable percentage is 5.7%.
E. TERMINATED PARTICIPANTS
Participants who terminate employment for other than death,
disability, or retirement before the end of the Plan Year but after
completion of 1000 Hours of Service (select one):
1. shall share in Employer contributions
-----
2. shall not share in Employer contributions for Plan Year in
-----
which termination occurred. (Selection of this option could be
considered discriminatory or lead to Plan disqualification in
some cases.)
F. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be provided under (select one):
a. this Plan
-----
b. another qualified Plan maintained by the Employer in which
-----
the Participants in this Plan also participate.
2. If more than one qualified plan is maintained by the Employer, for
purposes of minimum top-heavy allocations as explained in
Section 11.3 of the Plan, contributions and Forfeitures equal
to % of each non-key Employee's Compensation will be allocated
-----
to the Employee's individual Account when the Plan is top-heavy.
The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
--------
Mortality table
-------
V. VESTING
A. Subject to the provisions of Article IX of the Plan, the
nonforfeitable percentage of a Participant's Account Balance derived
from Employer contributions prior to attainment of Normal Retirement
Age ,shall be (select one):
1. 100% immediate vesting (satisfies top-heavy requirement; must
-----
be selected if service of more than one (1) year is required
for vesting)
2. 100% vesting after three (3) Years of Service (satisfies
-----
top-heavy requirement)
3. 100% vesting after five (5) Years of Service
-----
4. Six-Year Graded Vesting (satisfies top-heavy requirement)
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5. Two to Seven year graded vesting.
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
6. Vesting shall be % after years, then yearly increase
----- ----- -----
of % for year(s) and % thereafter for
----- ----- -----
each year until 100% vested. (Vesting selected under this
option must be at least as favorable as provided by the other
above options.
B. In accordance with Section 2.44 of the Plan, service for vesting for
purposes of calculating the Participant's nonforfeitable percentage
shall include all Years of Service except service disregarded under
Section 9.9 of the Plan and service (check if applicable):
1. Service prior to the effective date of this Plan or
-----
Predecessor Plan.
2. Service prior to the Participant's attainment of
-----
age (not exceeding 18 years).
-----
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of such age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor.
Select one of the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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 in the following
manner:
-------------------------------------------------
-------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer, the
plan involved will satisfy the 1.0 limitation of section
415(e) of the code in a manner that precludes Employer
discretion in the following manner:
--------------------------------------------------------
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the Code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The adopting Employer may not rely on an 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. In order to obtain
reliance with respect to Plan qualification, the Employer must apply to
the appropriate key district office of the Internal Revenue Service for a
determination letter.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
NONINTEGRATED MONEY PURCHASE PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Money Purchase
Plan and Trust, to be effective as of the date specified below, for the
exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Money Purchase Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
-----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
a. The same as the Plan Year
-----
b. The twelve (12) consecutive month period
-----
commencing on
--------------------------------------------
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
----
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
Contributions to this Plan are based on a Participant's Compensation.
For any Self-Employed Individual covered under this Plan, Compensation
means Earned Income.
1. Compensation as defined in Section 2.9 of the Plan will mean all of
each Participant's (select one):
a. Section 415 safe-harbor Compensation
-----
b. Section 3121(a) wages (wages subject to Social Security tax)
-----
c. Section 3401(a) wages (wages subject to income tax)
-----
2. Which is actually paid to the Participant during the following
period (select one):
a. the Plan Year
-----
b. the taxable year ending with or within the Plan Year
-----
c. the Limitation Year ending with or within the Plan Year
-----
3. Employer contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code (select one):
a. shall be included in Compensation
-----
b. shall not be included in Compensation
-----
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none or those
applicable):
1. The following job classifications are not covered (select
-----
those applicable):
a. hourly pay
-----
b. commission pay
-----
c. salary pay
-----
d. piecework pay
-----
e. Employees under a comparable Employer plan.
-----
Specify plan
-----------------------------------
If any of these job classifications are not covered under this
Plan, the Plan must still satisfy on a continuing basis the
coverage tests of Code section 410(b), the antidiscrimination
tests of 401(a)(4) and the participation test of 401(a)(26).
2. Union Employees who are included in a unit of employees covered
-----
by a collective bargaining agreement between the Employer and
the employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or less of
the employees of the employer who are covered pursuant to that
agreement are professionals as defined in section 1.410(b)-9(g)
of the proposed regulations. For this purpose, the term
"employee representatives" does not include any organization
more than half of whose members are employees who are owners,
officers, or executives of the Employer.
3. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within
the United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the
-----
Plan Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets age
and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service may be credited in a number of different ways.
Select one of the methods listed below. The method selected will be
applied to all Employees covered under the Plan.
1. On the basis of actual hours for which an Employee is paid or
-----
entitled to be paid.
2. On the basis of days worked:
-----
An Employee shall be credited with ten (10) Hours of Service if
under Section 2.18 of the Plan the Employee would be credited
with at least one (1) Hour of Service during the day.
3. On the basis of weeks worked:
-----
An Employee shall be credited with forty-five (45) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the week.
4. On the basis of semi-monthly payroll periods:
-----
An Employee shall be credited with ninety-five (95) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the
semi-monthly payroll period.
5. On the basis of months worked:
-----
An Employee shall be credited with one hundred ninety (190)
Hours of Service if under Section 2.18 of the Plan the Employee
would be credited with at least one (1) Hour of Service during
the month.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting the
-----
Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
The Employer will contribute an amount equal to % (not to
-----
exceed 25%) of each Participant's Compensation.
B. ALLOCATION OF CONTRIBUTIONS AND FORFEITURES
1. Employer Contributions calculated by the formula set forth
in IV.A. above shall be allocated to each Participant's Individual
Account.
2. Forfeitures, if any, shall be (select one):
a. Used to reduce Employer contributions.
-----
b. Allocated to each Participant's Individual Account by the
-----
formula in Section IV.A. above.
C. TERMINATED PARTICIPANTS
Participants who terminate employment for other than death,
disability, or retirement before the end of the Plan Year but after
completion of 1000 Hours of Service (select one):
1. shall share in Employer contributions for the Plan Year in
-----
which termination occurred.
2. shall not share in Employer contributions for Plan Year in
-----
which termination occurred. (Selection of this option could be
considered discriminatory or lead to Plan disqualification in
some cases.)
C. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be provided under (select one):
a. this Plan
-----
b. another qualified Plan maintained by the Employer in which
-----
the Participants in this Plan also participate.
2. If more than one qualified plan is maintained by the Employer, for
purposes of minimum top-heavy allocations as explained in
Section 11.3 of the Plan, contributions and Forfeitures equal
to % of each non-key Employee's Compensation will be allocated
-----
to the Employee's individual Account when the Plan is top-heavy.
The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
--------
Mortality table
-------
V. VESTING
A. Subject to the provisions of Article IX of the Plan, the
nonforfeitable percentage of a Participant's Account Balance derived
from Employer contributions prior to attainment of Normal Retirement
Age ,shall be (select one):
1. 100% immediate vesting (satisfies top-heavy requirement; must
-----
be selected if service of more than one (1) year is required
for vesting)
2. 100% vesting after three (3) Years of Service (satisfies
-----
top-heavy requirement)
3. 100% vesting after five (5) Years of Service
-----
4. Six-Year Graded Vesting (satisfies top-heavy requirement)
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5. Two to Seven-Year Vesting.
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
6. Vesting shall be % after years, then yearly increase
----- ----- -----
of % for year(s) and % thereafter for
----- ----- -----
each year until 100% vested. Vesting selected under this
option must be at least as favorable as provided by the other
above options.
B. In accordance with Section 2.44 of the Plan, service for vesting for
purposes of calculating the Participant's nonforfeitable percentage
shall include all Years of Service except service disregarded under
Section 9.9 of the Plan and service (check if applicable):
1. Service prior to the effective date of this Plan or
-----
Predecessor Plan.
2. Service prior to the Participant's attainment of
-----
age (not exceeding 18 years).
-----
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of such age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to self-employed individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor.
Select one of the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
The provisions of Section 5.3(e) through (j) of the
-----
Plan will apply as if the other plan were a master
or prototype plan.
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 in the following
manner:
---------------------------------------------------
---------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer, the
plan involved will satisfy the 1.0 limitation of section
415(e) of the code in a manner that precludes Employer
discretion in the following manner:
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the Code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The adopting Employer may not rely on an opinion letter issued by
the National Office of the Internal Revenue Service as evidence that the
Plan is qualified under section 401 of the Code. In order to obtain
reliance with respect to Plan qualification, the Employer must apply to
the appropriate key district office of the Internal Revenue Service for a
determination letter.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
NONINTEGRATED PROFIT SHARING PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Profit Sharing
Trust named below and the Employer hereby adopts this Prototype Profit
Sharing Plan and Trust, to be effective as of the date specified below, for
the exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Profit Sharing Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
-----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
a. The same as the Plan Year
-----
b. The twelve (12) consecutive month period
-----
commencing on
--------------------------------------------
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
----
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
Contributions to this Plan are based on a Participant's Compensation.
For any Self-Employed Individual covered under this Plan, Compensation
means Earned Income.
1. Compensation as defined in Section 2.9 of the Plan will mean all of
each Participant's (select one):
a. Section 415 safe-harbor Compensation
-----
b. Section 3121(a) wages (wages subject to Social Security tax)
-----
c. Section 3401(a) wages (wages subject to income tax)
-----
2. Which is actually paid to the Participant during the following
period (select one):
a. the Plan Year
-----
b. the taxable year ending with or within the Plan Year
-----
c. the Limitation Year ending with or within the Plan Year
-----
3. Employer contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code (select one):
a. shall be included in Compensation
-----
b. shall not be included in Compensation
-----
4. Compensation shall not include (select those applicable):
a. overtime pay
-----
b. bonuses
-----
c. commissions
-----
d. other special pay (specify)
-----
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none or those
applicable):
1. The following job classifications are not covered (select
-----
those applicable):
a. hourly pay
-----
b. commission pay
-----
c. salary pay
-----
d. piecework pay
-----
e. Employees under a comparable Employer plan.
-----
Specify plan
-----------------------------------
If any of these job classifications are not covered under this
Plan, the Plan must still satisfy on a continuing basis the
coverage tests of Code section 410(b), the antidiscrimination
tests of Code section 401(a)(4) and the participation test of
Code section 401(a)(26).
2. Union Employees who are included in a unit of employees covered
-----
by a collective bargaining agreement between the Employer and
the employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or less of
the employees of the employer who are covered pursuant to that
agreement are professionals as defined in section 1.410(b)-9(g)
of the proposed regulations. For this purpose, the term
"employee representatives" does not include any organization
more than half of whose members are employees who are owners,
officers, or executives of the Employer.
3. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within
the United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the Plan
-----
Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets age
and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service may be credited in a number of different ways.
Select one of the methods listed below. The method selected will be
applied to all Employees covered under the Plan.
1. On the basis of actual hours for which an Employee is paid or
-----
entitled to be paid.
2. On the basis of days worked:
-----
An Employee shall be credited with ten (10) Hours of Service if
under Section 2.18 of the Plan the Employee would be credited
with at least one (1) Hour of Service during the day.
3. On the basis of weeks worked:
-----
An Employee shall be credited with forty-five (45) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the week.
4. On the basis of semi-monthly payroll periods:
-----
An Employee shall be credited with ninety-five (95) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the
semi-monthly payroll period.
5. On the basis of months worked:
-----
An Employee shall be credited with one hundred ninety (190)
Hours of Service if under Section 2.18 of the Plan the Employee
would be credited with at least one (1) Hour of Service during
the month.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting the
-----
Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
The Employer shall contribute to the Plan a percentage of annual
Compensation to be determined annually not to exceed 15% of the
Compensation of Plan Participants (select one):
1. Contributions shall be out of current or accumulated
-----
net profits.
2. Contributions shall not be limited to current or
-----
accumulated net profits.
B. ALLOCATION OF CONTRIBUTIONS AND FORFEITURES
1. Employer Contributions for the Plan Year will be allocated to
Participant's Individual Accounts in the same ratio that the
Participant's Compensation bears to the total Compensation of
all Participants.
2. Forfeitures, if any, shall be (select one):
a. Used to reduce Employer contributions.
-----
b. Allocated to each Participant's Individual Account in the
-----
same ratio as Employer contributions.
C. TERMINATED PARTICIPANTS
Participants who terminate employment for other than death,
disability, or retirement before the end of the Plan Year but after
completion of 1000 Hours of Service (select one):
1. shall share in Employer contributions for the Plan Year in
-----
which termination occurred.
2. shall not share in Employer contributions for Plan Year in
-----
which termination occurred. (Selection of this option could be
considered discriminatory or lead to Plan disqualification in
some cases.)
C. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be provided under (select one):
a. this Plan
-----
b. another qualified Plan maintained by the Employer in which
-----
the Participants in this Plan also participate.
2. If more than one qualified plan is maintained by the Employer, for
purposes of minimum top-heavy allocations as explained in
Section 11.3 of the Plan, contributions and Forfeitures equal
to % of each non-key Employee's Compensation will be allocated
-----
to the Employee's individual Account when the Plan is top-heavy.
The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
--------
Mortality table
-------
V. VESTING
A. Subject to the provisions of Article IX of the Plan, the
nonforfeitable percentage of a Participant's Account Balance derived
from Employer contributions prior to attainment of Normal Retirement
Age ,shall be (select one):
1. 100% immediate vesting (satisfies top-heavy requirement; must
-----
be selected if service of more than one (1) year is required
for vesting)
2. 100% vesting after three (3) Years of Service (satisfies
-----
top-heavy requirement)
3. 100% vesting after five (5) Years of Service
-----
4. Six-Year Graded Vesting (satisfies top-heavy requirement)
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5. Two to Seven-Year Graded Vesting.
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
6. Vesting shall be % after years, then yearly increase
----- ----- -----
of % for year(s) and % thereafter for
----- ----- -----
each year until 100% vested. (Vesting selected under this
option must be at least as favorable as provided by the other
above options.)
B. In accordance with Section 2.44 of the Plan, service for vesting for
purposes of calculating the Participant's nonforfeitable percentage
shall include all Years of Service except service disregarded under
Section 9.9 of the Plan, and service (check if applicable):
1. Service prior to the effective date of this Plan or
-----
Predecessor Plan
2. Service prior to the Participant's attainment of
-----
age (not exceeding 18 years).
-----
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of such age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to self-employed individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor. Select one of
the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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 in the following
manner:
--------------------------------------------------
--------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer, the
plan involved will satisfy the 1.0 limitation of section
415(e) of the code in a manner that precludes Employer
discretion in the following manner:
---------------------------------------------------------
---------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the Code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The adopting Employer may not rely on an opinion letter issued by
the National Office of the Internal Revenue Service as evidence that the
Plan is qualified under section 401 of the Code. In order to obtain
reliance with respect to Plan qualification, the Employer must apply to
the appropriate key district office of the Internal Revenue Service for a
determination letter.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
<PAGE>
INTEGRATED PROFIT SHARING PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Profit Sharing
Trust named below and the Employer hereby adopts this Prototype Profit
Sharing Plan and Trust, to be effective as of the date specified below, for
the exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Profit Sharing Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Employer:
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
Controlled Business (also adopting this Plan):
-------------------------------------------------------------------
Name
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
Phone
2. Form of Business (check one):
a. Regular Corporation b. S Corporation
----- -----
c. Professional Corp. or Assoc. d. Partnership
----- -----
e. Sole Proprietor f. Non-Profit Corporation
----- -----
g. Other
----- ----------------------------------
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
--------------------
Date predecessor business commenced:
------------------------------
5. Employer's Federal income tax year: to
------------- ----------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement.
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefits, if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
Select one of the following:
i. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
ii. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
-------------------------------------
Effective date of plan
---------------------------
Letter Serial No. of IRS determination
letter
-------------------------------------------
Date of IRS determination letter
-----------------
iii. An amendment of this Adoption Agreement which was
----
previously adopted by the Employer to make
changes in optional provisions.
7. The effective date of this Adoption Agreement or amendment
shall be
-----------------------------------------------------------
(The general effective date for an amendment and restatement after
the Tax Reform Act of 1986 will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof.
The first Plan Year shall begin on , 19 .
----------------------- ----
9. The Limitation Year as defined in Section 2.23 of the Plan shall be
a. The same as the Plan Year
-----
b. The twelve (12) consecutive month period
-----
commencing on
--------------------------------------------
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
-------------------------------------------------------------------
Name and Address
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual Administrator
-----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
ii. Administrative Committee
----
Identification No.:
---------------------------------
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
-----------------------------------------------------
Name and Address
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
----
iv. Other
---- ------------------------------------------------
Name
b. Address:
i. Use Employer's address
-----
ii. Use Address below:
----
-----------------------------------------------------
street address
-----------------------------------------------------
city, state, zip
II. DEFINITIONS
A. COMPENSATION:
Contributions to this Plan are based on a Participant's Compensation.
For any Self-Employed Individual covered under the Plan, Compensation
means Earned Income.
1. Compensation as defined in Section 2.9 of the Plan will mean all of
each Participant's (select one):
a. Section 415 safe-harbor Compensation
-----
b. Section 3121(a) wages (wages subject to Social Security tax)
-----
c. Section 3401(a) wages (wages subject to income tax)
-----
2. Which is actually paid to the Participant during the following
period (select one):
a. the Plan Year
-----
b. the taxable year ending with or within the Plan Year
-----
c. the Limitation Year ending with or within the Plan Year
-----
3. Employer contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code (select one):
a. shall be included in Compensation
-----
b. shall not be included in Compensation
-----
B. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none or those
applicable):
1. The following job classifications are not covered (select
-----
those applicable):
a. hourly pay
-----
b. commission pay
-----
c. salary pay
-----
d. piecework pay
-----
e. Employees under a comparable Employer plan.
-----
Specify plan
-----------------------------------
If any of these job classifications are not covered under this
Plan, the Plan must still satisfy on a continuing basis the
coverage tests of Code section 410(b), the anti-discrimination
tests of Code section 401(a)(4) and the participation test of
Code section 401(a)(26).
2. Union Employees who are included in a unit of employees covered
-----
by a collective bargaining agreement between the Employer and
the employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or less of
the employees of the employer who are covered pursuant to that
agreement are professionals as defined in section 1.410(b)-9(g)
of the proposed regulations. For this purpose, the term
"employee representatives" does not include any organization
more than half of whose members are employees who are owners,
officers, or executives of the Employer.
3. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within
the United States.
C. ENTRY DATE
Entry date shall mean (select one):
1. Single Entry Date on the first day of the Plan
-----
Year (select one):
a. Nearest to the date an Employee first meets the age and
-----
service requirements.
b. In which an Employee first meets age and
-----
service requirements.
2. Dual Entry Dates on the first day of the Plan Year and
-----
six (6) months later.
3. Multiple Entry Dates on the first day of the Plan Year and
-----
the first day of each month after an Employee first meets age
and service requirements.
D. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service may be credited in a number of different ways.
Select one of the methods listed below. The method selected will be
applied to all Employees covered under the Plan.
1. On the basis of actual hours for which an Employee is paid or
-----
entitled to be paid.
2. On the basis of days worked:
-----
An Employee shall be credited with ten (10) Hours of Service if
under Section 2.18 of the Plan the Employee would be credited
with at least one (1) Hour of Service during the day.
3. On the basis of weeks worked:
-----
An Employee shall be credited with forty-five (45) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the week.
4. On the basis of semi-monthly payroll periods:
-----
An Employee shall be credited with ninety-five (95) Hours of
Service if under Section 2.18 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the
semi-monthly payroll period.
5. On the basis of months worked:
-----
An Employee shall be credited with one hundred ninety (190)
Hours of Service if under Section 2.18 of the Plan the Employee
would be credited with at least one (1) Hour of Service during
the month.
E. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the Years
-----
of Service requirements. (Check this option if predecessor
employer maintained a plan.)
Name of predecessor employer
----------------------------------
2. shall not be taken into account for purposes of meeting the
-----
Years of Service requirements.
F. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
----- -----
2. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation in the Plan.
3. the later of (a) the time the Participant attains age (not
----- -----
to exceed 65) or (b) the completion of the (5th or less)
-----
anniversary of the date upon which the Participant commenced
participation, but in no event later than the Participant's
seventieth (70th) birthday.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21).
----- -----
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required. (Service cannot
----- ----- -----
exceed one (1) year and zero (0) months if graded vesting is
selected or two (2) years and zero (0) months if full and
immediate vesting is selected.)
IV. CONTRIBUTIONS
A. CONTRIBUTION FORMULA
The Employer shall contribute to the Plan a percentage of annual
Compensation to be determined annually not to exceed 15% of the
Compensation of Plan Participants. Compensation shall mean
Compensation as defined in Section 5.3(m)(2) of the Plan (select one):
1. Contributions shall be out of current or accumulated
-----
net profits.
2. Contributions shall not be limited to current or
-----
accumulated net profits.
B. INTEGRATION LEVEL
The integration level shall be equal to the Taxable Wage Base or such
lesser amount elected by the employer below. The Taxable Wage Base is
the contribution and benefit base in effect under section 230 of the
Social Security Act at the beginning of the Plan Year. The
integration level is equal to (select one):
1. Taxable Wage Base
-----
2. $ (a dollar amount less than the Taxable Wage Base
----- -----
3. % of Taxable Wage Base (not to exceed 100%)
----- -----
C. ALLOCATION OF CONTRIBUTIONS AND FORFEITURES
Employer contributions for the Plan Year plus any Forfeitures will be
allocated to Participants' Individual Accounts as follows:
1. Contributions and Forfeitures will be allocated to each
Participant's account in the ratio that each Participant's total
Compensation bears to all Participants' total Compensation, but not
in excess of 3% of each Participant's Compensation.
2. Any contributions and Forfeitures remaining after the allocation in
Subparagraph 1 will be allocated to each Participant's account in
the ratio that each Participant's Compensation for the Plan Year in
excess of the integration level bears to the excess Compensation of
all Participants but not in excess of 3%.
3. Any contributions and Forfeitures remaining after the allocation in
Subparagraph 2 will be allocated to each Participant's account in
the ratio that the sum of each Participant's total Compensation and
Compensation in excess of the integration level bears to the sum of
all Participants total Compensation and Compensation in excess of
the integration level, but not in excess of the profit-sharing
maximum disparity rate.
4. Any remaining Employer contributions or Forfeitures will be
allocated to each Participant's account in the ratio that each
Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that year.
D. MAXIMUM PROFIT SHARING DISPARITY RATE
The maximum profit-sharing disparity rate is equal to the lesser of:
1. 2.7%, or
2. the applicable percentage determined in accordance with the
table below.
If the integration level:
THE APPLICABLE
IS MORE THAN BUT NOT MORE THAN PERCENTAGE IS:
$0 X* 2.7%
X* of TWB 80% of TWB 1.3%
80% of TWB Y** 2.4%
*X = the greater of $10,000 or 20 percent of the TWB
**Y = any amount more than 80% of the TWB but less
than 100% of the TWB.
If the integration level used is equal to the Taxable Wage Base, the
applicable percentage is 2.7%.
E. TERMINATED PARTICIPANTS
Participants who terminate employment for other than death,
disability, or retirement before the end of the Plan Year but after
completion of 1000 Hours of Service (select one):
1. shall share in Employer contributions
-----
2. shall not share in Employer contributions for Plan Year in
-----
which termination occurred. (Selection of this option could be
considered discriminatory or lead to Plan disqualification in
some cases.)
F. MINIMUM TOP-HEAVY ALLOCATIONS
1. If this Plan becomes top-heavy, the required minimum contribution
on behalf of each Participant shall be provided under (select one):
a. this Plan
-----
b. another qualified Plan maintained by the Employer in which
-----
the Participants in this Plan also participate.
2. If more than one qualified plan is maintained by the Employer, for
purposes of minimum top-heavy allocations as explained in
Section 11.3 of the Plan, contributions and Forfeitures equal
to % of each non-key Employee's Compensation will be allocated
-----
to the Employee's individual Account when the Plan is top-heavy.
The minimum top-heavy allocation is required for each eligible
Participant employed at the end of the year, regardless of the
number of Hours of Service performed during the Plan Year.
3. Do you now or have you ever had a defined benefit plan?
No
-----
Yes (if yes, complete the following):
-----
Present value: For purposes of establishing present value
to compute the top-heavy ratio, any benefit shall be
discounted only for mortality and interest based on the
following:
Interest rate %
--------
Mortality table
-------
V. VESTING
A. Subject to the provisions of Article IX of the Plan, the
nonforfeitable percentage of a Participant's Account Balance derived
from Employer contributions prior to attainment of Normal Retirement
Age ,shall be (select one):
1. 100% immediate vesting (satisfies top-heavy requirement; must
-----
be selected if service of more than one (1) year is required
for vesting)
2. 100% vesting after three (3) Years of Service (satisfies
-----
top-heavy requirement)
3. 100% vesting after five (5) Years of Service
-----
4. Six-Year Graded Vesting (satisfies top-heavy requirement)
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5. Two to seven year graded vesting.
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
6. Vesting shall be % after years, then yearly increase
----- ----- -----
of % for year(s) and thereafter for
----- ----- -----
each year until 100% vested. Vesting selected under this
option must be at least as favorable as provided by the other
above options.
B. In accordance with Section 2.44 of the Plan, service for vesting for
purposes of calculating the Participant's nonforfeitable percentage
shall include all Years of Service except service disregarded under
Section 9.9 of the Plan, and service (check if applicable):
1. Service prior to the effective date of this Plan or
-----
Predecessor Plan
2. Service prior to the Participant's attainment of
-----
age (not exceeding 18 years).
-----
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be 50% of the amount of the annuity payable during the joint
lives of the Participant and his or her Spouse unless a different
percentage is elected on the line below.
% (not less than 50% nor greater than 100%)
-----
B. EARLY RETIREMENT BENEFITS (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire after attaining age (not less than
----- -----
55 nor greater than 64) and with at least Years of
-----
Service (not less than the number of years required for 100%
vesting).
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect
an early retirement benefit upon satisfaction of such age
requirement.
C. DISABILITY RETIREMENT BENEFITS (select one):
1. Permitted (If an Employee becomes disabled, he or she will
-----
be 100% immediately vested.)
2. Not permitted (If an Employee becomes disabled, vesting will be
-----
according to the vesting schedule selected in Section V.)
VII. LIFE INSURANCE
In addition to the limitations on the purchase of life insurance set
forth in Section 4.3 of the Plan, the minimum face amount of life
insurance to be issued shall be $2500.
VIII. LOANS TO PARTICIPANTS
A. Loans to Self-Employed Individuals and to more than 5% owners of a
Subchapter S corporation are prohibited transactions unless an
exemption is obtained from the Department of Labor.
Select one of the following:
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
a. loan interest to be credited to Participant's
-----
Individual Account
b. loan interest treated as a Plan investment.
-----
B. If loans are permitted, they must be made in accordance with the
provisions of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
-------------------------------------------------------
-------------------------------------------------------------------
2. Procedure for applying for loans
-----------------------------------
-------------------------------------------------------------------
3. Basis on which loans will be approved or denied
--------------------
-------------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans offered
-----
-------------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
------------
-------------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
------------
-------------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
-----------------------
-------------------------------------------------------------------
IX. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection with
Section 5.3 where the Employer maintains certain other qualified plans.)
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you
maintain(ed) such a Plan, failure to complete this Section may adversely
affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
A. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer,
other than a master or prototype plan (select one):
1. The provisions of Section 5.3(e) through (j) of
-----
the Plan will apply as if the other plan were a
master or prototype plan.
2. 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 in the following
manner:
-------------------------------------------------
-------------------------------------------------
B. If the participant is or ever has been a Participant in
a defined benefit plan maintained by the Employer, the
plan involved will satisfy the 1.0 limitation of section
415(e) of the code in a manner that precludes Employer
discretion in the following manner:
--------------------------------------------------------
--------------------------------------------------------
X. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of the
minimum funding requirement of section 412(d) of the Code, the Employer
will no longer participate in this prototype plan and the plan will be
considered an individually designed plan. The Employer must apply for a
determination letter from the appropriate Key District Director of
Internal Revenue.
XI. RELIANCE ON OPINION LETTER
The adopting Employer may not rely on an opinion letter issued by
the National Office of the Internal Revenue Service as evidence that the
Plan is qualified under section 401 of the Code. In order to obtain
reliance with respect to Plan qualification, the Employer must apply to
the appropriate key district office of the Internal Revenue Service for a
determination letter.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Contribution Plan and Trust, document #01.
XII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual fund
which it has selected for investment of contributions to the Trust;
2. Agrees to provide any Participant who contributes under the Trust a
prospectus of any mutual fund in which his or her contributions may
be invested;
3. Agrees that any direction to the Trustee to invest a contribution
in a particular mutual fund shall be a representation to the
Trustee that the appropriate prospectus has been received and
examined by the party making such contribution;
4. Acknowledges receipt of the appropriate life insurance commission
disclosure statements required for investment of Trust funds in
life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the Department
of Labor all information as to any taxable or Plan Year which is
required of the Employer to be filed with said agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the Sponsor
nor the representative of the Sponsor can assume responsibility. The
Sponsor urges the Employer to consult with its own attorney with regard
to the adoption of this Plan and its suitability to the Employer. It is
understood and agreed that neither the Trustees nor the Sponsor shall be
responsible for the tax and legal aspects of the Trust, full
responsibility for which is assumed by the undersigned Employer, which
hereby states that it has consulted legal and tax counsel to the extent
considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the Plan.
Lutheran Brotherhood will inform the adopting Employer of any amendments
made to the Plan or of discontinuance or abandonment of the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
Name of Employer
By
---------------------------------------------------------
Signature of authorized officer
---------------------------------------------------------
Title of authorized officer
Appointment as Trustee accepted:
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
By
---------------------------------------------------------
Trustee Signature
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
EXHIBIT (14)(a)(ii)
LUTHERAN BROTHERHOOD
DEFINED BENEFIT PLAN AND TRUST
DOCUMENT #02
INTRODUCTION
Lutheran Brotherhood is the Sponsor of this Plan which an Employer may adopt
by executing an Adoption Agreement as provided hereunder. This Plan
together with the Trust established by the Adoption Agreement of the
Employer shall constitute a Plan and Trust. It is intended that this Plan
and Trust shall qualify under the Employee Retirement Income Security Act of
1974 (ERISA), as amended, the Internal Revenue Code of 1986, as amended, and
other applicable Federal statutes for the purpose of providing retirement
benefits and other related benefits to participating employees and, in case
of any ambiguity, shall be interpreted to accomplish such result.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I: ESTABLISHMENT, PURPOSE AND ADOPTION OF PLAN AND TRUST
1.1 Purpose
1.2 Adoption
1.3 Intent to Qualify
1.4 Exclusive Benefit
1.5 Right of Employer to Delegate and Allocate Duties
ARTICLE II: DEFINITIONS
2.1 Accrued Benefit
2.2 Actuarial(ly) Equivalent (Actuarial Equivalence)
2.3 Administrative Committee
2.4 Age
2.5 Anniversary Date
2.6 Annual Addition
2.7 Average Annual Compensation
2.8 Beneficiary
2.9 Break in Service
2.10 Compensation
2.11 Contract
2.12 Disability
2.13 Earned Income
2.14 Eligibility Computation Period
2.15 Employee
2.16 Employer
2.17 Fiduciary
2.18 Forfeiture
2.19 Hours of Service
2.20 Individual Account
2.21 Insurer
2.22 Investment Manager
2.23 Leased Employee
2.24 Limitation Year
2.25 Non-Transferable Contract
2.26 Normal Retirement Age
2.27 Normal Retirement Date
2.28 Owner-Employee
2.29 Participant
2.30 Plan Administrator
2.31 Plan Sponsor
2.32 Plan Year
2.33 Predecessor Plan
2.34 Projected Normal Retirement Benefit
2.35 Qualified Joint and Survivor Annuity
2.36 Self-Employed Individual
2.37 Spouse (Surviving Spouse)
2.38 Theoretical contributions
2.39 Top-Heavy Plan
2.40 Trustees
2.41 Trust Fund or Fund
2.42 Valuation Date
2.43 Vested Interest
2.44 Vesting Computation Period
2.45 Year of Participation
2.46 Year of Service
ARTICLE III: ELIGIBILITY AND PARTICIPATION
3.1 Eligibility -- Amendment and Restatement
3.2 Eligibility - Initial Adoption of Plan
3.3 Manner of Becoming a Participant
3.4 Determination of Eligibility
3.5 Leave of Absence
3.6 Reinstatement or Rehire Following Termination of Employment
3.7 Transfer to Eligible Class or Reinstatement of Ineligible
Participant
3.8 Service with Predecessor Employer
3.9 Application of Plan Provisions
ARTICLE IV: METHOD OF PROVIDING BENEFITS
4.1 Manner of Funding Benefits
4.2 Purchase of Life Insurance Contract
4.3 Signatures of Trustees
4.4 Borrowing to Pay Premiums
4.5 Continuance of Insurance in Certain Circumstances
4.6 Special Provision for Distribution of Life Insurance Contract
4.7 Dividends
4.8 Special Endorsements Required on Certain Distributions
4.9 Conflict with Insurance Contracts
4.10 Failure to Purchase Insurance Contract
ARTICLE V: CONTRIBUTIONS
5.1 Employer Contributions
5.2 Control of Trades or Businesses by Owner-Employees
5.3 Funding Standard Account
5.4 Increase in Estimated Monthly Retirement Income
5.5 Decreases in Estimated Monthly Retirement Income
5.6 Limitation on Benefits
5.7 Voluntary Employee Contributions
ARTICLE VI: DEATH BENEFITS
6.1 Beneficiary Designation
6.2 Amount of Death Benefits
6.3 Time for Payment of Death Benefits
6.4 Payment to Minors, Etc.
6.5 Failure of Beneficiary
6.6 Proof of Death
ARTICLE VII: DISTRIBUTION OF RETIREMENT BENEFITS
7.1 Definitions Applicable to Article VII
7.2 General Distribution Rules
7.3 Commencement of Retirement Benefits
7.4 Amount of Normal Monthly Retirement Income
7.5 Normal Annuity Form
7.6 Optional Form of Benefits
7.7 Deferred Retirement
7.8 Minimum Annual Distributions
7.9 Transitional Distribution Rule
7.10 Limitation on Adjustments Related to Social Security
7.11 Disposition of Amount of Benefits in Excess of Limitations
7.12 Early Retirement
7.13 Disability Retirement
Article VIII: Joint and Survivor and
Preretirement Survivor Annuity Requirements
8.1 Application of this Article
8.2 Qualified Joint and Survivor Annuity
8.3 Qualified Preretirement Survivor Annuity
8.4 Definitions
8.5 Notice Requirements
8.6 Transitional Rules
ARTICLE IX: BENEFITS UPON TERMINATION - VESTING
9.1 Termination of Participation
9.2 Application of Forfeitures
9.3 Vesting
9.4 Time and Manner of Payment of Vested Benefits
9.5 Cash Out Procedure
9.6 Restrictions on Immediate Distribution; Consent
9.7 Effect on Vesting of a Break in Service
9.8 Plan Repayment Provision
9.9 Ineligible Participant
9.10 Plan Amendments Affecting Vested and/or Accrued Benefit
9.11 Amendment of Vesting Schedule
9.12 Benefits Protected on Merger, Consolidation or Transfer
9.13 Vesting Upon Termination of Plan
9.14 Vesting of Participant's Voluntary, Rollover and Predecessor
Plan Contributions
9.15 Disability Retirement
ARTICLE X: LOANS TO PARTICIPANTS
10.1 General Rules
10.2 Spousal Consent
10.3 Collateral
10.4 Interest Rate
10.5 Limitations on Loans
10.6 Repayment of Loan
10.7 Default in Repayment
10.8 Effect of Loan on Death Benefit
ARTICLE XI: TOP HEAVY PLAN
11.1 Application of Provisions
11.2 Definitions Applicable to Top-Heavy Plans
11.3 Minimum Accrued Benefit
11.4 Adjustment for Benefit Form Other Than Life Annuity
at Normal Retirement Age
11.5 Nonforfeitability of Minimum Accrued Benefit
11.6 Minimum Vesting Schedule
ARTICLE XII: CLAIMS PROCEDURE
12.1 Filing a Claim for Benefits
12.2 Denial of Claim
12.3 Remedies Available
ARTICLE XIII: THE PLAN ADMINISTRATOR
13.1 Designation and Acceptance
13.2 Resignation and Removal - Appointment of Successor
13.3 Allocation and Delegation of Responsibilities
13.4 Duty and Responsibility of Plan Administrator
13.5 Expenses and Compensation
13.6 Information From Employer
13.7 Administrative Committee -- Multiple Signatures
13.8 Notice of Change in Plan Administrator
13.9 Investment Manager
ARTICLE XIV: TRUST FUND AND ITS ADMINISTRATION - TRUSTEE'S POWERS
AND RESPONSIBILITIES
14.1 Trust Fund
14.2 Valuation of Trust Fund
14.3 Investment Functions
14.4 Records and Reports
14.5 Annual Accounting
14.6 Compensation and Expenses
14.7 Eligibility of Trustee To Participate in the Plan
14.8 Meetings - Majority to Govern - Delegation
14.9 Not Obligated to Question Data
14.10 Liability for Application of Funds
14.11 Manner of Payment
14.12 Unclaimed Benefits
14.13 Certification as to Trustees
14.14 Denial of Liability by Insurer
14.15 Degree of Care - Limitations on Liability
14.16 Prohibited Transactions
14.17 Resignation or Removal of Trustee
14.18 Appointment of Successor Trustee
ARTICLE XV: AMENDMENT OF PLAN AND ADOPTION AGREEMENT
15.1 Right of Employer to Amend the Plan
15.2 Right of Lutheran Brotherhood (LB) to Amend the Plan
15.3 Limitations on Power to Amend
ARTICLE XVI: TERMINATION AND DISCONTINUANCE
16.1 Permanency
16.2 Termination of Plan by Employer
16.3 Involuntary Termination
16.4 Effect of Termination and Partial Termination
16.5 Form of Distribution
16.6 Limitation of Benefits on Early Plan Termination
16.7 Limitation of Benefits on Early Plan Termination for Plan Years
Beginning on or After January 1, 1991
ARTICLE XVII: MISCELLANEOUS
17.1 Standard of Conduct - Co-Fiduciaries
17.2 Prohibition Against Diversion - Correction of Errors
17.3 General Undertaking of All Parties
17.4 Agreement Binds Heirs, Etc.
17.5 Inalienability of Benefits
17.6 Duration of Trust - Rule Against Perpetuities
17.7 Responsibility of Insurer Under this Plan
17.8 Indemnification
17.9 Overpayments, Recoupment
17.10 Invalidity of Certain Provisions
17.11 Disqualification From use of Prototype Plan
17.12 Savings Clause
17.13 Notification of Interested Parties
17.14 Headings
17.15 Gender, Construction
<PAGE>
ARTICLE I
ESTABLISHMENT, PURPOSE AND ADOPTION OF PLAN AND TRUST
1.1 - PURPOSE: The purpose of this Plan and Trust (hereinafter referred to
as "the Plan") is to provide, in accordance with its provisions, a
retirement plan providing benefits upon retirement and other related
benefits for the Employees of the Employer who are eligible to participate.
1.2 - ADOPTION: The Employer has adopted this Plan by completing and signing
the attached Adoption Agreement effective on the date indicated in the
Agreement.
1.3 - INTENT TO QUALIFY: It is the intent of the Employer that this Plan
shall qualify for approval under the Internal Revenue Code of 1986, as
amended, hereinafter referred to as "the Code", the Employee Retirement
Income Security Act of 1974 (ERISA), as amended, hereinafter referred to as
"ERISA", and related Federal statutes, and, in case of any ambiguity, shall
be interpreted to accomplish this result.
1.4 - EXCLUSIVE BENEFIT: It is the intent of the Employer that this Plan is
created for the exclusive benefit of the Employees of the Employer and their
Beneficiaries and shall be interpreted in a manner consistent with it being
an Employees' Plan as defined in section 401(a) of the Code.
1.5 - RIGHT OF EMPLOYER TO DELEGATE AND ALLOCATE DUTIES: The Employer
adopting this Plan has the overall right to appoint Fiduciaries and, to the
extent permitted under current statutes, rules and regulations, to allocate
powers, duties and responsibilities, including Fiduciary duties, among the
respective Fiduciaries.
ARTICLE II
DEFINITIONS
2.1 - ACCRUED BENEFIT: A Participant's benefit on any given date will be an
allocable portion of the benefit on the normal annuity form to which he or
she will be entitled at Normal Retirement Date. The Accrued Benefit is
determined as follows:
A Participant's Accrued Benefit at any time equals the product of the
normal retirement benefit multiplied by a fraction, the numerator of
which is the number of years of credited service at such time, and the
denominator of which is the greater of 25 or the number of years of
credited service the Participant would have at Normal Retirement Age.
When determining the Accrued Benefit, the normal retirement benefit is
the annual benefit to which the Participant would be entitled if he or
she continued to earn annually until the Normal Retirement Age the same
rate of Compensation upon which his or her normal retirement benefit
would be computed. This rate of Compensation is computed on the basis of
Compensation taken into account under the Plan (but not to exceed the ten
(10) years of service immediately preceding the determination).
If this plan initially or upon plan amendment credits or increases
benefits for service prior to the current year, the period for which such
credit or increase is granted shall be limited to the five (5) years
preceding the current year. Such credit or increase must be granted on a
uniform basis to all current Employees under the Plan.
A Participant's years of credited service shall mean (subject to any
maximum limitation on the number of years of credited service specified
in the Adoption Agreement) the sum of: (1) the Participant's Years of
Participation pursuant to Section 2.45 of the Plan, and (2) other years
with the Employer specified in the Adoption Agreement taken into account
under the plan benefit formula.
In accordance with the Code and regulations any Accrued Benefit to which
the Participant is entitled shall be reduced by the amount of any
termination distribution previously made to a Participant. The
Participant shall have the opportunity to repay the full amount of the
previous distribution with interest as specified in Section 9.8 of this
Plan. Upon repayment, the Participant's Accrued Benefit shall be
recomputed without regard to the previous distribution.
All Participants who either complete more than five hundred (500) Hours
of Service during the Plan Year or are employed on the last day of the
Plan Year must accrue a benefit under the Plan.
For Plan Years beginning before section 411 of the Code is applicable
hereto, the Participant's Accrued Benefit shall be the greater of that
provided by the Plan, or one-half (1/2) of the benefit which would have
accrued had the provisions of this Section 2.1 been in effect. In the
event the Accrued Benefit as of the effective date of section 411 of the
Code is less than that provided by this Section such difference shall be
accrued in accordance with this Section.
2.2 - ACTUARIAL(LY) EQUIVALENT (ACTUARIAL EQUIVALENCE): An equivalence in
value between forms of benefit differing in time, period or manner of
payment from a specific benefit provided under the Plan. Any benefit which,
under the terms of the Plan, is the Actuarial Equivalent of a stated benefit
shall have the same present value on the date payment commences as the
stated benefit. For purposes of establishing Actuarial Equivalence, present
value shall be determined by discounting all future payments on the basis of
the mortality tables specified in the Adoption Agreement and either the
interest rates specified in the Adoption Agreement or the interest rates in
section 417 of the Code, whichever produces the greater benefit except to
the extent this application would cause the Plan to fail to satisfy the
requirements of Section 5.6
The Section 417 Interest Rates are as follows:
(a) the "applicable interest rate" if the present value of the benefit
(using these rate(s)) is not in excess of $25.000; or
(b) 120 percent of the "applicable interest rate" if the present value of
the benefit exceeds $25,000 (as determined under clause (a) above).
In no event shall the present value determined under this clause (b)
be less than $25,000.
The "applicable interest rate" is the interest rate(s) which would be used
as of the distribution date by the Pension Benefit Guaranty Corporation
(PBGC) for determining the present value of that benefit upon termination of
an insufficient trusteed single-employer plan. However, if the provisions
of the Plan prior to this amendment and restatement so provided, the
"applicable interest rate" shall be determined as of the first day of the
Plan Year in which a distribution occurs rather than as of the date
distribution commences. Notwithstanding the foregoing, the present value of
Accrued Benefit for the determination of Top Heavy Plan status shall be made
exclusively pursuant to the provisions of Article XI of the Plan.
The section 417 interest rate limitations shall apply to distributions in
Plan Years beginning after December 31, 1984. Nothwithstanding the
foregoing, the section 417 interest rate limitations shall not apply to
distributions in the form of nondecreasing annuities, a Qualified Joint and
Survivor Annuity or a qualified pre-retirement survivor annuity. These
interest rates also shall not apply to any distributions commencing in Plan
Years beginning before January 1, 1987, if those distributions were
determined in accordance with the interest rate(s) as required by
regulations section 1.417(e)-1T(e) (including the PBGC immediate interest
rate).
The section 417 interest rate limitations shall not apply to annuity
contracts distributed to or owned by a Participant prior to
September 17, 1985, unless additional contributions are made under the
plan by the Employer with respect to these contracts. In addition, the
section 417 interest rate limitations shall not apply to annuity contracts
owned by the Employer or distributed to or owned by a Participant prior to
the first plan year after December 3, 1988, if the annuity contracts
satisfied the requirements in sections 1.401(a)-11T and 1.417(e)-1T of the
regulations. The preceding sentence shall not apply if additional
contributions are made under the Plan by the Employer with respect to these
contracts on or after the beginning of the first Plan year beginning after
December 31, 1988.
2.3 - ADMINISTRATIVE COMMITTEE: A group designated by the Employer in the
Adoption Agreement who signify their acceptance of this responsibility by
joining in the execution of the documents creating or amending this Plan; or
any successors appointed in accordance with Section 13.2 of this Plan who so
signify their acceptance in writing. The appointment of an Administrative
Committee is optional, but if so appointed, its members shall collectively
have the duties of the Plan Administrator and all references to the Plan
Administrator shall be deemed to apply to the Committee. The Committee may
delegate among its members specific duties in the event assignments are not
made by the Employer.
2.4 - AGE: The age at last birthday unless otherwise specified.
2.5 - ANNIVERSARY DATE: The first day of the Plan Year as specified in the
Adoption Agreement. Monthly Anniversary Date means the same day of each
month following the Anniversary Date.
2.6 - ANNUAL ADDITION: Annual Addition is defined in Section 5.6(d).
Rollovers, contributions from an Individual Retirement Account or transfers
of assets from other plans are not included in the Annual Addition
computation.
2.7 - AVERAGE ANNUAL COMPENSATION: The annual Compensation of a Participant
averaged over the period selected by the Employer in the Adoption Agreement.
If the Participant has less than the specified period of participation,
Compensation will be averaged on an annual basis over the Participant's
entire period of service. Average Monthly Compensation shall mean
one-twelfth of the total annual Compensation for the applicable year.
2.8 - BENEFICIARY: Any person, trust or other recipient named by a
Participant to receive any benefits which may be due under this Plan after
his or her death provided that person, trust or other recipient survives the
Participant. Unless otherwise elected in the manner prescribed in Section
8.4(c), the Beneficiary shall be the Participant's Spouse. If there is no
Spouse, or the designated Beneficiary has predeceased the Participant, the
Participant's estate shall be the Beneficiary. Any Beneficiary designation
by the Participant or election of a form of settlement must be approved by
the Plan Administrator after determining that the designation complies with
the Plan provisions. The designation must be in the form prescribed by the
Plan Administrator and filed with the Trustee.
2.9 - BREAK IN SERVICE: A twelve (12) consecutive month period during which
an Employee has not completed more than five hundred (500) Hours of Service
with the Employer.
2.10 - COMPENSATION: Compensation will mean Compensation as that term is
defined in Section 5.6(d)(3) 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 period elected by the Employer
in the Adoption Agreement. If the Employer makes no election, the
applicable period shall be the Plan Year.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not
includible in the gross income of the Employee under sections 125,
402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, the annual Compensation of each
Participant taken into account under the Plan for any year shall not exceed
$200,000 this limitation shall be adjusted by the Secretary at the same time
and in the same manner as under section 415(d) of the Code except that the
dollar increase in effect on January 1 of any calendar year is effective for
years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1, 1990. If a Plan determines
Compensation on a period of time that contains fewer than twelve (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 these 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 these 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 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 that 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.
2.11 - CONTRACT: Any life insurance or annuity contract, either fixed or
variable, or any combination thereof, including both group and individual
contracts issued by Insurer.
2.12 - DISABILITY: 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 twelve (12)
months. The permanence and degree of the impairment shall be supported by
medical evidence.
2.13 - EARNED INCOME: The net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in gross
income and the deductions allocable to these 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
taxpayer by section 164(f) of the Code for taxable years beginning after
December 31, 1989.
2.14 - ELIGIBILITY COMPUTATION PERIOD: A Year of Service commencing on the
date the Employee first performs an Hour of Service for the Employer and
each anniversary thereof.
The succeeding 12-consecutive month periods commence with the first
anniversary of the Employee's employment commencement date.
Years of Service and Breaks in Service will be measured on the same
Eligibility Computation Period.
2.15 - EMPLOYEE: Any person who is currently employed by the Employer, and
who is a covered Employee as specified in the Adoption Agreement; any Owner-
Employee including any self-employed individual.
The term Employee shall also include any leased Employee deemed to be an
Employee of any Employer described in Section 2.16 of the Plan as provided
in sections 414(n) or (o) of the Code.
2.16 - EMPLOYER: The Employer or Employers specified in the Adoption
Agreement and any successor by merger, purchase, consolidation or otherwise
who assumes the obligations of this Plan.
The term Employer shall also include any other employer required to be
aggregated with the Employer under sections 414(b), (c), (m) or (o) of the
Code.
2.17 - FIDUCIARY: Any person who exercises any discretionary authority or
discretionary control respecting the management of the Plan or exercises any
authority or control respecting the management or disposition of Plan
assets; who renders investment advice for a fee or other compensation,
direct or indirect, with respect to any monies or other property of the
Plan, or has any authority or discretionary responsibility to do so (unless
and to the extent exempted under the provisions of the law); or who has any
discretionary authority or discretionary responsibility in the
administration of the Plan.
2.18 - FORFEITURE: The nonvested Accrued Benefit of any Participant who
terminates in a Plan Year.
2.19 - HOURS OF SERVICE: Hour 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 five hundred and one (501) Hours of Service will be credited
under this paragraph for any single continuous period (whether or not
this period occurs in a single computation period). Hours under this
paragraph will be calculated and credited pursuant to section
2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference; 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.
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.
Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under section 414(n) or section 414(o) of
the Code.
Solely for purposes of determining whether a Break in Service as defined in
Section 2.9 for participation and vesting purposes has occurred in a
computation period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to an individual but for the absence, or in any
case in which hours cannot be determined, 8 hours of service per day of
absence. For purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence by reason of the pregnancy of the
individual, by reason of a birth of a child of the individual, by reason of
the placement of a child with the individual in connection with the adoption
of a child by an individual, or for purposes of caring for a child for a
period beginning immediately following the birth or placement. The Hours of
Service credited under this paragraph shall be credited in the computation
period in which the absence begins if the crediting is necessary to prevent
a Break in Service in that period, or in all other cases, in the following
computation period.
Hours of Service will be determined on the basis of the method selected in
the Adoption Agreement.
2.20 - INDIVIDUAL ACCOUNT: The account established and maintained in
accordance with the Plan for each Participant with respect to his or her
interest in assets accumulated under the Plan from his or her own voluntary
Employee contributions as described in Section 5.7, rollovers and
Predecessor Plan assets, if any, including his or her proportionate share of
the net gains less any amounts applied to purchase insurance and less his or
her proportionate share of the net losses as determined in accordance with
this Plan. The maintenance of an Individual Account is for accounting
purposes only, and segregation of the assets of the Plan shall not be
required.
2.21 - INSURER: Lutheran Brotherhood, Minneapolis, Minnesota, or any legal
reserve life insurance company approved by Lutheran Brotherhood to issue an
annuity or a life insurance contract under the Plan.
2.22 - INVESTMENT MANAGER: Any person so designated by the Plan
Administrator or Administrative Committee or the Employer to manage and
invest designated Plan assets and who acknowledges his or her acceptance in
writing.
2.23 - LEASED EMPLOYEE: Any person (other than an Employee of the recipient)
who pursuant to an agreement between the recipient and a "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 (1)
year, and these 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:
(i) the Employee is covered by a money purchase pension plan providing: (1)
a nonintegrated Employer contribution rate of at least ten percent (10%) of
Compensation, as defined in Section 5.6(d)(3) of the Plan, but including
amounts contributed pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under section 125, section
402(a)(8), section 402(h) or section 403(b) of the Code, (2) immediate
participation, and (3) full and immediate vesting; and (ii) Leased Employees
do not constitute more than twenty percent (20%) of the recipient's
nonhighly compensated workforce.
2.24 - LIMITATION YEAR: A calendar year, or the twelve (12) consecutive
month period as elected by the Employer in the Adoption Agreement.
2.25 - NON-TRANSFERABLE CONTRACT: A Contract which shall, by its terms or by
special endorsement, provide that it may not be assigned, sold, transferred
discounted, or pledged for any purpose other than by the Trustee of the
Contract.
2.26 - NORMAL RETIREMENT AGE: Age sixty-five (65) unless otherwise elected
in the Adoption Agreement. If the Employer enforces a mandatory retirement
age, the Normal Retirement Age is the lesser of that mandatory age or the
age specified in the Adoption Agreement.
2.27 - NORMAL RETIREMENT DATE: The day on which the Participant attains age
sixty-five (65) unless a different Normal Retirement Age is elected in the
Adoption Agreement.
2.28 - OWNER-EMPLOYEE: An individual who is a sole proprietor, or who is a
partner owning more than ten percent (10%) of either the capital or profits
interest of the partnership.
2.29 - PARTICIPANT: Any Employee or former Employee of an Employer who has
met the eligibility requirements of the Adoption Agreement 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 benefit. A sole proprietor or
partner is eligible to become a Participant under this Plan.
2.30 - PLAN ADMINISTRATOR: The person designated in the Adoption Agreement
whose duties shall be to administer the Plan and who signified acceptance of
this responsibility by joining in the execution of the documents creating or
amending this Plan; or any successor, appointed in accordance with Section
13.2 of this Plan who so signifies acceptance in writing. If no Plan
Administrator is designated in the Adoption Agreement, then the Employer
shall be deemed to be the designated Plan Administrator.
2.31 - PLAN SPONSOR: Lutheran Brotherhood, Minneapolis, Minnesota.
2.32 - PLAN YEAR: The twelve (12) consecutive month period designated by the
Employer in the Adoption Agreement.
2.33 - PREDECESSOR PLAN: Any pension or profit-sharing plan previously
established and maintained by the Employer.
2.34 - PROJECTED NORMAL RETIREMENT BENEFIT: The monthly pension commencing
at Normal Retirement Date to which the Participant would be entitled under
the Plan if he or she continued to earn the same rate of monthly
Compensation.
2.35 - QUALIFIED JOINT AND SURVIVOR ANNUITY: An immediate annuity payable
for the life of the Participant with a survivor annuity for the life of the
Participant's Spouse which is not less than one-half (1/2) of nor greater
than one hundred percent (100%) of the amount of the annuity which is
payable during the joint lives of the Participant and the Participant's
Spouse. The Qualified Joint and Survivor Annuity shall always be the
Actuarial Equivalent of the normal annuity form of benefit as specified in
the Adoption Agreement or, if greater, any optional form of benefit. The
percentage of the Qualified Joint and Survivor Annuity shall be as elected
in the Adoption Agreement; however, if no election has been made, the
percentage shall be fifty percent (50%).
2.36 - SELF-EMPLOYED INDIVIDUAL: 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.
2.37 - SPOUSE (SURVIVING SPOUSE): The Spouse or Surviving Spouse of the
Participant. However, 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.
2.38 - THEORETICAL CONTRIBUTIONS: The contribution that would be made on
behalf of the Participant, using the individual level premium funding method
from the age at which participation commenced to Normal Retirement Age, to
fund the Participant's entire retirement benefit without regard to
preretirement ancillary benefits. The entire retirement benefit for this
purpose is based upon the normal form of annuity provided under the Plan and
assumes continuation of current salary (no salary scale) and the current
defined benefit fraction under section 415(e) of the Code.
2.39 - TOP-HEAVY PLAN: A plan described in Article XI.
2.40 - TRUSTEES: The individuals or the corporation named in the Adoption
Agreement and any successors to the original Trustee.
2.41 - TRUST FUND OR FUND: All cash, securities, life insurance, annuity
Contracts (individual or group), real estate and any other property held by
the Trustee pursuant to the terms of this Plan, together with income
therefrom.
2.42 - VALUATION DATE: The date the Individual Accounts and Trust Fund are
valued under the terms of the Plan. Other Valuation Dates shall be as
required by the provisions of the Plan or Plan Administrator.
2.43 - VESTED INTEREST: A nonforfeitable right to all or a portion of the
Accrued Benefit from Employer contributions to the Plan. The Employee's
contributions are always nonforfeitable.
2.44 - VESTING COMPUTATION PERIOD: A Year of Service commencing on the date
the Employee first performs an Hour of Service for the Employer and each
twelve (12) consecutive month period commencing on the anniversary of that
date. For purposes of computing an Employee's right to his or her Accrued
Benefit, Years of Service and Breaks in Service shall be measured on the
same computation period.
2.45 - YEAR OF PARTICIPATION: A Plan Year during which a Participant either
completes more than five hundred (500) Hours of Service during the Plan Year
or is employed on the last day of the Plan Year.
2.46 - YEAR OF SERVICE: A twelve (12) consecutive month period during which
an Employee completes at least one thousand (1,000) Hours of Service.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 - ELIGIBILITY -- AMENDMENT AND RESTATEMENT: In those cases in which this
constitutes an amendment and restatement of an existing plan, any Employee
who was a Participant in the Plan immediately prior to the effective date of
the amendment and who is an Employee of the Employer on the effective date
of the amendment shall continue to be a Participant under this Plan. Any
Employee who is not a Participant immediately prior to the effective date of
this amendment and any future Employee shall be eligible to become a
Participant on the next entry date coincident with or next following his or
her satisfaction of the eligibility requirements established in the Adoption
Agreement.
3.2- ELIGIBILITY - INITIAL ADOPTION OF PLAN: If the Adoption Agreement
constitutes the initial adoption of a Plan by the Employer, an Employee
shall be eligible to become a Participant upon satisfying the eligibility
requirements established in the Adoption Agreement.
3.3 - MANNER OF BECOMING A PARTICIPANT: The Plan Administrator shall notify
each Employee who becomes eligible to participate under this Plan and shall
furnish him or her with any application forms, enrollment forms, or other
documents which are required of Participants. The eligible Employee shall
execute any forms or documents and make available information as required
for the administration of the Plan. Eligible Employees must perform all
acts required within thirty (30) days of the date on which they are notified
of eligibility. Failure to comply with the requirements will result in
being excluded from the Plan.
3.4 - DETERMINATION OF ELIGIBILITY: The Plan Administrator or, if
applicable, the Administrative Committee, shall determine the eligibility of
each Employee for participation in the Plan in accordance with the Plan's
minimum age and service requirements. The determination shall be conclusive
and binding upon all persons except as otherwise provided herein or by law.
3.5 - LEAVE OF ABSENCE: An Employee on an authorized leave of absence shall
not be deemed to have incurred a Break in Service provided he or she resumes
employment with the Employer within the period specified in the leave. A
"leave of absence" means an absence authorized by the Employer under its
standard personnel practices as applied in a uniform and nondiscriminatory
manner to all persons similarly situated or a leave such as military service
during which the Employee's re-employment rights are guaranteed by law.
3.6 - REINSTATEMENT OR REHIRE FOLLOWING TERMINATION OF EMPLOYMENT: If a
Participant terminates employment other than by reason of retirement, death
or disability, the former Participant shall again participate in this Plan
in accordance with the following:
(a) PARTICIPANTS WHO HAD A VESTED INTEREST AT TERMINATION DATE: A former
Participant who has sustained a Break in Service and who had a vested
nonforfeitable interest in all or a portion of his or her Accrued
Benefit which was derived from Employer contributions at the time of
termination shall become a Participant immediately upon returning to
the employ of the Employer.
(b) PARTICIPANTS WHO HAD NO VESTED INTEREST AT TERMINATION DATE: A former
Participant who has sustained a Break in Service and who had no vested
nonforfeitable interest in his or her Accrued Benefit which was
derived from Employer contributions at the time of termination shall
be considered a new Employee, for eligibility purposes, if the number
of consecutive one (1) year Breaks in Service equals or exceeds the
greater of five (5) or the aggregate number of Years of Service before
the break the aggregate number of Years of Service will not include
any Years of Service disregarded under the preceding sentence by
reason of prior Breaks in Service. The computation period for Years
of Service for eligibility purposes shall be made with reference to
the first date on which the Employee completes an Hour of Service
following his or her termination. If the former Participant's Years
of Service before the termination exceeds the number of consecutive
one year Breaks in Service after the termination, the Participant
shall participate immediately.
3.7 - TRANSFER TO ELIGIBLE CLASS OR REINSTATEMENT OF INELIGIBLE PARTICIPANT:
If a Participant becomes ineligible to participate because he or she is no
longer a member of an eligible class of Employees, but has not incurred a
Break in Service, that Employee shall participate immediately upon returning
to an eligible class of Employees. If the Participant incurs a Break in
Service, eligibility to participate shall be determined pursuant to the
provisions of Section 3.6(a) or (b).
If an Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, the Employee shall participate
immediately if the Employee has satisfied the minimum age and service
requirements and would have previously become a Participant had he or she
been in the eligible class.
3.8 - SERVICE WITH PREDECESSOR EMPLOYER: If the Employer maintains the plan
of a predecessor Employer, service for that predecessor shall be treated as
service for the Employer.
3.9 - APPLICATION OF PLAN PROVISIONS: All Participants shall be bound by the
terms of the Plan, including all amendments made in the manner authorized
herein. Participants shall also be entitled to all of the rights and
privileges afforded under the Plan, including those specifically granted by
the Code and ERISA.
ARTICLE IV
METHOD OF PROVIDING BENEFITS
4.1 - MANNER OF FUNDING BENEFITS: The benefits to be provided by this Plan
shall be funded either by means of a Contract as defined in Section 2.11, a
combination of these Contracts, subject to the limitations in Section 4.2,
and/or contributions to the Trust Fund. (See Section 14.3(b) for allowable
investments.)
4.2 - PURCHASE OF LIFE INSURANCE CONTRACT: If a Participant is insurable at
a standard rate by the Insurer, the Trustee may purchase a Contract to
provide a death benefit prior to Normal Retirement Date of an amount up to
one hundred (100) times the monthly pension to which he or she is entitled,
but in no event shall the premium exceed 66% of the Theoretical
Contribution. However, each Participant shall have the right to have less
than the maximum amount of insurance that can be purchased on his or her
behalf. If the Participant is insurable only at a substandard premium rate,
the Contract shall provide a reduced death benefit prior to Normal
Retirement Date, using the same premium as would be required if the
Participant were a standard risk, the amount of the death benefit being
determined in accordance with the amount of the rating, unless the
Participant or the Employer for all Participants agrees to pay the cost of
the rating, in which case the Contract shall provide the regular death
benefit. If insurance is not available, the Contract shall provide a death
benefit prior to Normal Retirement Date equal to the sum of premiums paid or
cash value of the Contract, if greater, or, alternatively, these benefits
shall be funded exclusively through the Trust Fund.
If this Plan substitutes for a previous plan which was nontrusteed, any life
insurance or annuity contract which was purchased under the previously
existing plan may be kept in force under this Plan even though it is owned
by the Participant and not the Trustee. Each contract shall be
nontransferrable. Any loan, partial surrender or assignment privilege
exercised by the owner shall be subject to the Joint and Survivor Annuity
requirements of Article VIII of the Plan.
4.3 - SIGNATURES OF TRUSTEES: Any and all forms or other documents required
by the Insurer may be executed and signed by any one Trustee. When so
executed, any document, form, or written direction shall be accepted by the
Insurer as conclusive evidence as to any matter mentioned in this Plan, and
the Insurer shall be fully protected in taking any action on the basis of
this document, form, or information and shall incur no liability or
responsibility for doing so.
4.4 - BORROWING TO PAY PREMIUMS: If, for any reason, there are insufficient
contributions to pay premiums on a Participant's Contract, the Trustee,
acting upon the request of the Participant communicated to the Plan
Administrator, shall borrow the amount necessary to pay premiums, using the
cash value of the Contract as security. This borrowing shall be repaid by
application of earnings, contributions or forfeitures.
4.5 - DISCONTINUANCE OF INSURANCE IN CERTAIN CIRCUMSTANCES: If payment of
premiums on a Contract on behalf of any Participant is not permitted because
of the limitations contained in Section 4.2, the Contract shall be put on a
paid-up basis or, if it has no cash value, cancelled.
4.6 - SPECIAL PROVISION FOR DISTRIBUTION OF LIFE INSURANCE CONTRACT: Subject
to the Joint and Survivor Annuity requirements of Article VIII, the Trustee
shall either surrender the Contract for its cash surrender value or convert
it to an annuity to provide a periodic income or distribute the Contract to
the Participant. In no event shall the Contract provide life insurance
protection under the plan beyond the date the Participant terminates his or
her employment, unless the Contract is distributed to the Participant at
that time. If the Participant becomes entitled to benefits prior to the
Normal Retirement Date and the Contract on his or her life has a cash value,
the Trustee shall, upon the direction of the Plan Administrator, borrow the
cash value on the security of the Contract, distribute the Contract to the
Participant, and the cash obtained shall be added to the Participant's
Account(s) in the Plan.
4.7 - DIVIDENDS: Dividends, experience rating credits, or surrender or
cancellation credits, if any, shall first be applied while the Contract is
in a premium paying status to the reduction of the premium due from the
Employer to maintain the Contract. If no premium is due within the taxable
year of the Employer in which the dividend is received or within the next
taxable year, the dividend shall be applied in reduction of the Employer's
contributions under the Plan. Any other dividend payable when, under the
terms of the Contract or under the terms of the Plan, there is no longer any
premium due, shall be used to increase the proceeds of the Contract.
4.8 - SPECIAL ENDORSEMENTS REQUIRED ON CERTAIN DISTRIBUTIONS: Prior to
making a distribution of any annuity Contract providing monthly income
commencing on the date of distribution or at some future date in accordance
with the terms of this Plan, the Trustee shall direct the Insurer to endorse
the Contract in substantially the following form:
"Except when this Contract is owned by the Trustee of an Employee
Trust or the custodial account treated as a Trust, either of which is
qualified under Section 401(a) of the Internal Revenue Code, this
Contract may not be assigned, sold, transferred, discounted or pledged
as collateral for a loan or as security for the performance of an
obligation or for any other purpose to any person or entity other than
the issuing company."
In addition, the words "Nontransferable" shall be placed on the face of
the Contract.
4.9 - CONFLICT WITH INSURANCE CONTRACTS: In the event of any conflict
between the terms of this Plan and the terms of any insurance Contracts
issued hereunder, the Plan provisions shall control.
4.10 - FAILURE TO PURCHASE INSURANCE CONTRACT: If an eligible Employee dies
after having complied with all the requirements for participation but before
a Contract is purchased or is effective covering the initial amount or an
increase in compensation, the death benefit payable with respect to the
Contract shall be only the amount of the premium for the initial Contract or
for the Contract covering the increase in Compensation.
ARTICLE V
CONTRIBUTIONS
5.1 - EMPLOYER CONTRIBUTIONS:
(a) OBLIGATION TO CONTRIBUTE - The Employer shall contribute each taxable
year that amount, which, together with the Employees' contributions,
if any, is deemed necessary by actuarial valuation to fund the Plan
under the normal form of retirement benefit selected in the Adoption
Agreement.
If the combination of Contracts and a Trust Fund has been selected as
the method of funding, the contribution to the Trust Fund shall be an
amount determined in accordance with the actuarial valuation which is
needed in order that sufficient funds will be available to convert or
exchange the Contracts at the Participant's Normal Retirement Date, or
otherwise as provided by the Plan, to provide the benefits provided
hereunder. All determinations shall be in accordance with actuarial
methods and assumptions that will reasonably reflect the cost of the
benefits. The Plan assets are to be valued on the basis of any
reasonable method of valuation that takes into account fair market
value pursuant to regulations prescribed by the Secretary of the
Treasury.
(b) TIMING OF CONTRIBUTIONS - The employer's contributions for any Plan
Year shall be due not later than the final date for filing its federal
income tax return, including any extensions of time for filing.
Participant contributions shall be paid to the Trustee prior to each
Plan Anniversary Date.
5.2 - CONTROL OF TRADES OR BUSINESSES BY 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 section
401(a) and (d) for the Employees of this and the other 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 section 401(a) and (d) 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 are controlled must
be as favorable as those provided 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:
(1) own the entire interest in an unincorporated trade or business; or
(2) in the case of a partnership, own more than fifty percent (50%)
of either the capital interest or the profits interest in the
partnership.
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 the Owner-Employee, or two or more Owner-Employees, are considered
to control within the meaning of the preceding sentence.
5.3 - FUNDING STANDARD ACCOUNT: The Plan Administrator shall establish and
maintain a funding standard account in accordance with the regulations,
rulings, or procedures established by any governmental agency. Each Plan
Year the funding standard account shall be charged or credited, as
appropriate, with amounts which shall include, but shall not be limited to,
the normal cost of the Plan for the Plan Year, actuarial assumption changes,
net experience gains and losses, approved funding deficiencies, amortization
cost for past service liabilities, and any other charges or credits as
required by law or regulation.
5.4 - INCREASE IN ESTIMATED MONTHLY RETIREMENT INCOME: Subject to the
limitations contained in this Plan, if on any Anniversary Date the
Compensation of a Participant is increased over the base used to compute the
Projected Normal Retirement Benefit, the formula elected in the Adoption
Agreement shall be applied. If the result is ten dollars ($10) or more than
the last determined Projected Normal Retirement Benefit, contributions shall
be increased in an amount sufficient to fund the revised pension benefits.
If the increase is sufficient to allow the purchase of additional Contracts
as required, these Contracts may be purchased and where applicable,
contributions to the Trust Fund shall be increased in accordance with the
funding policy of the Plan and minimum funding standards of ERISA in order
to convert or exchange the new Contract or the addition to the Contract(s)
on that Participant's life at Normal Retirement Date.
5.5 - DECREASES IN ESTIMATED MONTHLY RETIREMENT INCOME: Subject to the
limitations contained in this Plan, if on any Anniversary Date the
Compensation of a Participant is reduced from that last used to compute the
Projected Normal Retirement Benefit, the formula elected in the Adoption
Agreement shall be applied. If the result is ten dollars ($10) or more less
than the last determined Projected Normal Retirement Benefit, steps shall be
taken to make the adjustments resulting from this computation; provided,
however, that the adjustment shall not be applied to reduce a Participant's
Normal Retirement Benefit until the condition requiring the reduction has
existed for two (2) years.
5.6 - LIMITATION ON BENEFITS:
(a) LIMITATION APPLICABLE TO ALL PARTICIPANTS: This Section, except for
subsection (3) below, applies regardless of whether any Participant is
or has ever been a Participant in another qualified plan maintained by
the adopting Employer. If any Participant is or has ever been a
Participant 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, which provides an Annual
Addition as defined in Section 5.6(d)(1), Subsection (b) is also
applicable to that Participant's benefits.
(1) The annual benefit otherwise payable to a Participant at any time
will not exceed the maximum permissible amount. If the benefit the
Participant would otherwise accrue in a Limitation Year would
produce an annual benefit in excess of the maximum permissible
amount, the rate of accrual will be reduced so that the annual
benefit will equal the maximum permissible amount.
(2) If a Participant has made Voluntary Employee Contributions under
the terms of this Plan, the amount of these contributions is
treated as an Annual Addition to a qualified defined contribution
plan, for purposes of Sections 5.6(a)(1) and 5.6(b)(1).
(3) The limitation in Section 5.6(a)(1) is deemed satisfied if the
annual benefit payable to a Participant is not more than one
thousand dollars ($1,000) multiplied by the Participant's number of
Years of Service or parts thereof (not to exceed ten (10)) with the
Employer, and the Employer has not at any time maintained a defined
contribution plan, a welfare benefit plan as defined in section
419(e) of the Code, or an individual medical account as defined
in section 415(l)(2) of the Code in which the Participant
participated.
(b) LIMITATION APPLICABLE FOR PARTICIPANT COVERED BY ANOTHER PLAN: This
Section applies if any Participant is covered, or has ever been
covered, by another plan maintained by the Employer, including a
qualified plan, or 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, which provides an Annual Addition described in
Section 5.6(d)(1).
(1) If a Participant is, or has ever been, covered under more than one
defined benefit plan maintained by the Employer, the sum of the
Participant's annual benefits from all of these plans may not
exceed the maximum permissible amount. The Employer will choose in
the Adoption Agreement the method by which the plans will meet this
limitation.
(2) If the Employer maintains, or at any time maintained, one or more
qualified defined contribution plans covering any Participant in
this Plan, 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, the sum of the Participant's defined
contribution fraction and defined benefit fraction will not exceed
one (1.0) in any Limitation Year, and the annual benefit otherwise
payable to the Participant under this Plan will be limited in
accordance with the Adoption Agreement.
(c) In the case of an individual who was a Participant in one or more
defined benefit plans of the Employer as of the first day of the first
Limitation Year beginning after December 31, 1986, the application of
the limitations of this Article shall not cause the maximum
permissible amount for that individual under all of these defined
benefit plans to be less than the individual's Accrued Benefit. The
preceding sentence applies only if these defined benefit plans met the
requirements of section 415 of the Code for all Limitation Years
beginning before January 1, 1987.
(d) DEFINITIONS:
(1) ANNUAL ADDITIONS: The sum of the following amounts credited to a
Participant's account for the Limitation Year:
(i) Employer contributions;
(ii) Employee contributions;
(iii) Forfeitures, and
(iv) Amounts allocated 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 that 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.
(2) ANNUAL BENEFIT: A retirement benefit under the Plan which is
payable annually in the form of a straight life annuity. Except as
provided below, a benefit payable in a form other than a straight
life annuity must be adjusted to an Actuarially Equivalent
straight life annuity before applying the limitations of this
Article. The interest rate assumption used to determine Actuarial
Equivalence will be the greater of the interest rate specified in
this Plan or five percent (5%). The annual benefit does not
include any benefits attributable to Employee contributions or
rollover contributions, or the assets transferred from a qualified
plan that was not maintained by the Employer. No actuarial
adjustment to the benefit is required for (i) the value of a
Qualified Joint and Survivor Annuity, (ii) the value of benefits
that are not directly related to retirement benefits (such as the
qualified disability benefit, pre-retirement death benefits,
and post-retirement medical benefits), and (iii) the value of
post-retirement cost-of-living increases made in accordance with
section 415(d) of the Code and section 1.415-3(c)(2)(iii) of the
Federal Income Tax Regulations.
(3) COMPENSATION: As elected by the Employer in the Adoption
Agreement, Compensation shall mean all of a Participant's:
(i) Section 3121 wages: Wages as defined in section 3121(a), for
purposes of calculating social security taxes, but determined
without regard to the wage base limitation in section
3121(a)(1), the limitations on the exclusions from wages in
section 3121(a)(5)(C) and (D) for elective contributions and
payments by reason of salary reduction agreements, 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)).
(ii) Section 3401(a) wages: Wages as defined in section 3401(a) 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)).
(iii) 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:
(A) Employer contributions to a plan of deferred compensation
which are not included 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 the
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(B) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(D) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity described in section 403(b) of the Code (whether or
not the amounts are actually excludable 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 Article, Compensation
for any Limitation Year is the Compensation actually paid or
includible in gross income during such year.
(4) CURRENT ACCRUED BENEFIT: A Participant's Accrued Benefit under the
Plan, determined as if the Participant had separated from service
as of the close of the last Limitation Year beginning before
January 1, 1987, when expressed as an annual benefit within the
meaning of 415(b)(2) of the Code. In determining the amount of a
Participant's current Accrued Benefit, the following shall be
disregarded:
(i) any change in the terms and conditions of the Plan after
May 5, 1986; and
(ii) any cost of living adjustments occurring after May 5, 1986.
(5) DEFINED BENEFIT DOLLAR LIMITATION: Ninety thousand dollars
($90,000). Effective on January 1, 1988, and each
January thereafter, the $90,000 limitation will be automatically
adjusted by multiplying this limit by the cost of living adjustment
factor prescribed by the Secretary of the Treasury under section
415(d) of the Code in the manner as the Secretary shall prescribe.
The new limitation will apply to Limitation Years ending within the
calendar year of the date of the adjustment.
(6) DEFINED BENEFIT FRACTION: A fraction, the numerator of which is
the sum of the Participant's projected annual benefits under
all the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the
lesser of one hundred twenty-five percent (125%) of the dollar
limitation determined for the Limitation Year under sections 415(b)
and (d) of the Code and in accordance with section 5.6(d)(11)(b)
below or one hundred forty percent (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
one hundred twenty-five percent (125%) of the sum of the annual
benefits under these Plans which the Participant had accrued as of
the close of the last Limitation Year beginning before
January 1, 1987, disregarding any changes in the terms and
conditions of the plans after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of section 415 for all
Limitation Years beginning before January 1, 1987.
(7) DEFINED CONTRIBUTION FRACTION: A fraction, the numerator of which
is the sum of the Annual Additions to the Participant's Individual
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 this
and all other 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, or individual medical accounts, as defined in section
415(l)(2) of the Code maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts
for the current and all prior Limitation Years of service with the
Employer (regardless of whether a defined contribution plan was
maintained by the Employer).
The maximum aggregate amount in any Limitation Year is the lesser
of one hundred twenty-five percent (125%) of the dollar limitation
determined under sections 415(b) and (d) of the Code in effect
under section 415(c)(1)(A) of the Code or thirty-five percent (35%)
of the Participant's Compensation for that year.
If the Employee was a Participant as 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 one (1.0) under the terms of this
Plan. Under the adjustment, an amount equal to the product of
(i) the excess of the sum of the fractions over one (1.0) times
(ii) 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
plans 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.
(8) EMPLOYER: For purposes of Section 5.6, Employer shall mean the
Employer that adopts this Plan, and all members of a controlled
group of corporations (as defined in section 414(b) of the Code, as
modified by section 415(h)), all commonly controlled trades or
businesses (as defined in section 414(c) as modified by
section 415(h)), or affiliated service groups (as defined
in section 414(m)) of which the adopting Employer is a part and any
other entity required to be aggregated with the employer pursuant
to regulations under section 414(o) of the Code.
(9) HIGHEST AVERAGE COMPENSATION: The average Compensation for the
three consecutive Years of Service with the Employer that produces
the highest average. A Year of Service with the Employer is the
Plan Year unless otherwise elected in the Adoption Agreement.
(10) LIMITATION YEAR: A calendar year, or the twelve (12) consecutive
month period as elected by the Employer in the Adoption Agreement.
All qualified plans maintained by the Employer must use the same
Limitation Year. If the Limitation Year is amended to a different
12-consecutive month period, the new Limitation Year must begin on
a date within the Limitation Year in which the amendment is made.
(11) MAXIMUM PERMISSIBLE AMOUNT:
(a) The lesser of the defined benefit dollar limitation or
100 percent of the Participant's highest average Compensation.
(b) If the Participant has less than ten (10) years of
participation with the Employer, the defined benefit dollar
limitation is reduced by one-tenth for each year of
participation, (or part thereof) less than ten. To the extent
provided in regulations or in other guidance issued by the
Internal Revenue Service, the preceding sentence shall be
applied separately with respect to each change in the benefit
structure of the Plan. If the Participant has less than
ten (10) Years of Service with the Employer, the Compensation
limitation is reduced by one-tenth for each Year of Service (or
part thereof) less than ten. The adjustments of this
Subsection (b) shall be applied in the denominator of the
defined benefit fraction based upon Years of Service. Years of
Service shall include future years occurring before the
Participant's Normal Retirement Age. Future years shall include
the year which contains the date the Participant reaches Normal
Retirement Age, only if it can be reasonably anticipated that
the Participant will receive a Year of Service for that year.
(c) If the annual benefit of the Participant commences before the
Participant's social security retirement age, but on or after
age 62, the defined benefit plan dollar limitation as reduced
above, if necessary, shall be determined as follows:
(i) If a Participant's social security retirement age is 65, the
dollar limitation for benefits commencing on or after age 62
is determined by reducing the defined benefit dollar
limitation by 5/9 of one percent for each month by which
benefits commence before the month in which the Participant
attains age 65.
(ii) If a Participant's social security retirement age is
greater than 65, the dollar limitation for benefits
commencing on or after age 62 is determined by reducing the
defined benefit dollar limitation by 5/9 of one percent for
each of the first 36 months and 5/12 of one percent for each
of the additional months (up to 24 months) by which benefits
commence before the month of the Participant's social
security retirement age.
(d) If the annual benefit of a Participant commences prior to
age 62, the defined benefit dollar limitation shall be the
Actuarial Equivalent of an annual benefit beginning at age 62,
as determined above, reduced for each month by which benefits
commence before the month in which the Participant attains
age 62. To determine Actuarial Equivalence, the interest rate
assumption is the greater of the rate specified in the Plan or
five percent (5%). Any decrease in the defined benefit dollar
limitation determined in accordance with this provision (d)
shall not reflect the mortality decrement to the extent that
benefits will not be forfeited upon the death of the
Participant.
(e) If the annual benefit of a Participant commences after the
Participant's social security retirement age, the defined
benefit dollar limitation as reduced in (b) above, if necessary,
shall be reduced so that it is the Actuarial Equivalent of an
annual benefit of that dollar limitation beginning at the
Participant's social security retirement age. To determine
Actuarial Equivalence, the interest rate assumption used is the
lesser of the rate specified in the Plan or five percent (5%).
(12) PROJECTED ANNUAL BENEFIT: The annual benefit as defined in
Subsection (2) of this section, 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.
(13) SOCIAL SECURITY RETIREMENT AGE: Age 65 in the case of a
Participant attaining age 62 before January 1, 2000 (i.e., born
before January 1, 1938), age 66 for a Participant attaining
age 62 after December 31, 1999, and before January 1, 2017 (i.e.,
born after December 31, 1937, but before January 1, 1955), and
age 67 for a Participant attaining age 62 after December 31, 2016
(i.e., born after December 31, 1954).
(14) YEAR OF PARTICIPATION: The Participant shall be credited with a
year of participation (computed to fractional parts of a year) for
each accrual computation period for which the following conditions
are met: (1) The Participant is credited with at least the number
of Hours of Service for benefit accrual purposes required under the
terms of the Plan in order to accrue a benefit for the accrual
computation period, and (2) the Participant is included as a
Participant under the eligibility provisions of the Plan for at
least one day of the accrual computation period. If these two
conditions are met, the portion of a year of participation credited
to the Participant shall equal the amount of benefit accrual
service credited to the Participant for that accrual computation
period. A Participant who is permanently and totally disabled
within the meaning of section 415(c)(3)(C)(i) of the Code for an
accrual computation period shall receive a year of participation
with respect to that period. In addition, for a Participant to
receive a year of participation (or part thereof) for an accrual
computation period, the Plan must be established no later than the
last day of that accrual computation period. In no event will more
than one year of participation be credited for any 12-month period.
5.7 - VOLUNTARY EMPLOYEE CONTRIBUTIONS:
(a) This Plan will not accept Voluntary Employee Contributions or
matching contributions which are allocated to a separate account for
Plan Years beginning after December 31, 1986. Employee contributions
for Plan Years beginning after December 31, 1986, together with any
matching contributions as defined in section 401(m) of the Code, will
be limited so as to meet the nondiscrimination test of section 401(m).
(b) INVESTMENT OF VOLUNTARY CONTRIBUTIONS: For Voluntary Employee
Contributions made prior to Plan Years beginning on or before
December 31, 1986, the Trustee shall credit these contributions to the
Participant's Individual Account and maintain a separate account for
them. Voluntary contributions shall be invested in the same type of
assets as the Employer contributions unless otherwise directed by the
Plan Administrator.
(c) ANNUAL VALUATION: At least once each year the Trustee shall value the
Participant's Individual Accounts at their fair market value on the
Valuation Date specified in Section 2.42. On that date, the earnings
and losses attributable to the accumulated Voluntary Employee
Contributions will be allocated to each Participant's Individual
Account in the ratio that each account balance bears to all account
balances.
(d) WITHDRAWAL OF VOLUNTARY CONTRIBUTIONS:
(1) The Plan Administrator, or if applicable, the Administrative
Committee, may prescribe rules under which the Trustee shall pay
withdrawals of Voluntary Contributions to Participants. All rules
regarding withdrawals shall be administered on a uniform and
nondiscriminatory basis.
(2) Subject to the Joint and Survivor Annuity requirements of
Article VIII, a Participant may withdraw part or all of the values
attributable to Voluntary Contributions, without earnings, on any
anniversary date upon giving the Trustee thirty (30) days notice.
(3) If the Participant requests withdrawal on account of undue
hardship, the Plan Administrator or Administrative Committee may
permit the withdrawal of earnings on the Participant's Voluntary
Contributions. Undue hardship includes medical expenditures for
the Participant or Participant's dependents, acquisition of or
major investments in the Participant's home, education of the
Participant's dependents or financial emergency.
(4) If a Participant has a nonforfeitable right to at least fifty
percent (50%) of his or her Employer-derived Accrued Benefit, then
no Forfeitures will occur solely as a result of an Employee's
withdrawal of Employee contributions. Regardless of a
Participant's nonforfeitable percentage, a withdrawal of Employee
contributions will not result in a Forfeiture of the minimum
benefit, if any, provided under Section 11.3.
ARTICLE VI
DEATH BENEFITS
6.1 - BENEFICIARY DESIGNATION: Unless the Participant's Spouse has elected
otherwise in writing pursuant to a Qualified Election under Section 8.4(c),
the Beneficiary of the death benefit shall be the Participant's Spouse. If
the Participant is unmarried at the time of his or her death, or if the
Surviving Spouse has consented to a designated Beneficiary in the manner
prescribed in Section 8.4(c), then the Participant may designate a
Beneficiary other than the Spouse.
The Participant may at any time change the Beneficiary designation by filing
a written notice of the change in a form satisfactory to the Plan
Administrator. The Participant's Spouse must consent in writing to any
change in Beneficiary unless the Spouse has expressly permitted the
designation of a Beneficiary by the Participant without the requirement of
any further consent by the Spouse.
The term designated Beneficiary means the individual who is designated as
the Beneficiary under the Plan in accordance with section 401(a)(9) of the
Code and the proposed regulations thereunder.
6.2 - AMOUNT OF DEATH BENEFITS: The present value and actuarial value of any
benefit under the Plan shall be based on the same interest rate assumption
and mortality table used to compute the Actuarial Equivalence of optional
forms of benefits under the Plan.
(a) DEATH PRIOR TO NORMAL RETIREMENT: The amount of the death benefit
payable on behalf of a Participant who dies prior to the Normal
Retirement Date and while still employed shall be the amount specified
in the Adoption Agreement.
(b) DEATH AFTER NORMAL RETIREMENT DATE BUT PRIOR TO ACTUAL RETIREMENT: A
survivor annuity shall be payable at the death of a Participant who
continues active employment beyond Normal Retirement Date but who dies
before actual retirement unless the Participant has otherwise elected
in writing with the consent of the Spouse. The benefit payable under
this annuity shall be that which can be purchased with the entire
value of the Participant's Accrued Benefit as of the date of death.
(c) DEATH AFTER ACTUAL RETIREMENT: The amount of the death benefit, if
any, payable on behalf of a Participant who dies after actual
retirement will be that amount available under the particular benefit
form selected at the time of actual retirement and which is in effect
on the Participant's date of death.
(d) DEATH AFTER TERMINATION AND PRIOR TO NORMAL RETIREMENT DATE: If no
death benefit is selected under the Adoption Agreement, then no death
benefit or vested benefits attributable to the Employer's
contributions will be payable on a terminated Participant's death
prior to the Normal Retirement Date other than as required under the
Joint and Survivor Annuity requirements of Article VIII.
6.3 - TIME FOR PAYMENT OF DEATH BENEFITS:
(a) DISTRIBUTION BEGINNING BEFORE DEATH: If the Participant dies after
distribution of his or her interest has begun, the remaining portion
of this interest will continue to be distributed at least as rapidly
as under the method of distribution being used prior to the
Participant's death.
(b) DISTRIBUTION BEGINNING AFTER DEATH: If the Participant dies before
distribution of his or her interest begins, distribution of the
Participant's entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the Participant's
death except to the extent that an election is made to receive
distributions in accordance with (1) or (2) below:
(1) 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;
(2) If the designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to begin in accordance
with (1) above shall not be earlier than the later of (1)
December 31 of the calendar year immediately following the calendar
year in which the Participant died and (2) December 31 of the
calendar year in which the Participant would have attained age
seventy and one-half (70 1/2).
If the participant has not made an election pursuant to this
Section 6.3(b) by the time of his or her death, the Participant's
designated Beneficiary must elect the method of distribution no later
than the earlier of (1) December 31 of the calendar year in which
distributions would be required to begin under this section,
or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the
Participant has no designated Beneficiary, or if the designated
Beneficiary does not elect a method of distribution, distribution
of the Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(c) For purposes of section 6.3(b) above, if the Surviving Spouse dies
after the Participant, but before payments to the Spouse begin, the
provisions of Section 6.3(b), with the exception of paragraph (2)
therein, shall be applied as if the Surviving Spouse were the
Participant.
(d) PAYMENTS TO CHILD OF PARTICIPANT: For the purposes of this
Section 6.3, 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.
(e) COMMENCEMENT OF DISTRIBUTION: For the purposes of this Section 6.3,
distribution of a Participant's interest is considered to begin on the
Participant's required beginning date (or, if Section 6.3(c) above is
applicable, the date distribution is required to begin to the
Surviving Spouse pursuant to Section 6.3(b) above). If distribution
in the form of an annuity described in Section 7.8 irrevocably
commences to the Participant before the required beginning date, the
date distribution is considered to begin is the date distribution
actually commences. Required beginning date is defined in
Section 7.1(d).
6.4 - PAYMENT TO MINORS, ETC.: In making any distribution to or for the
benefit of any minor or any person who is judged incompetent the Trustee
shall make the distribution to a legal guardian, conservator or other person
legally charged with the care of the estate or person of the minor or
incompetent person. The recipient shall have full authority and discretion
to expend the distribution for the use and benefit of the minor or
incompetent person. Any payment made pursuant to this Section shall fully
discharge the Trustee, the Plan Administrator, the Employer and the Insurer
from further liability on account thereof. Any actions taken by the Plan
Administrator and Trustee under this Section shall be completed in
accordance with applicable state law.
6.5 - FAILURE OF BENEFICIARY: If the Participant fails to designate a
Beneficiary or if the Participant is predeceased by all designated primary
and contingent Beneficiaries, any death benefit shall be payable to the
Participant's Surviving Spouse or, if the Participant is not survived by a
Spouse, to any living issue in equal shares, per stirpes, or, in default of
issue, to the estate.
6.6 - PROOF OF DEATH: The Plan Administrator may require proof of death and
evidence of the right of any person to receive all or part of the death
benefits of a deceased Participant. Except with respect to payments due
from an Insurer, the Plan Administrator's determination of the Participant's
death and the right of any person to receive payment as a result thereof
shall be binding upon the legal representative of the Participant and all
persons having or claiming any right in the Trust on account of the deceased
Participant. The right to payments due directly or indirectly from an
Insurer shall be governed by the terms of the Contract under which payable.
ARTICLE VII
DISTRIBUTION OF RETIREMENT BENEFITS
7.1 - DEFINITIONS APPLICABLE TO ARTICLE VII:
(a) 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 proposed regulations thereunder.
(b) 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 6.3.
(c) 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. The
applicable calendar year shall be the first distribution calendar
year. If annuity payments commence before the required beginning
date, the applicable calendar year is the year these payments
commence. 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.
(d) REQUIRED BEGINNING DATE:
(1) GENERAL RULE: The required beginning date of a Participant is the
first day of April of the calendar year following the calendar year
in which the Participant attains age seventy and one-half (70 1/2).
(2) TRANSITIONAL RULE: The required beginning date of a Participant
who attains age seventy and one-half (70 1/2) before
January 1, 1988, shall be determined in accordance with (i)
and (ii) below:
(i) NON-5-PERCENT OWNERS: The required beginning date of a
Participant who is not a "5-percent-owner" (as defined in
Subsection (3) below) is the first day of April of the calendar
year following the calendar year in which the later of
retirement or attainment of age seventy and one-half (70 1/2)
occurs.
(ii) 5-PERCENT OWNERS: The required beginning date of a Participant
who is a 5-percent owner during any year beginning after
December 31, 1979, is the first day of April following the
later of:
(A) the calendar year in which the Participant attains age
seventy and one-half (70 1/2), or
(B) the earlier of the calendar year with or within which ends
the Plan Year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant retires.
The required beginning date of a Participant who is not a 5-percent
owner who attains age seventy and one-half (70 1/2) during 1988 and
who has not retired as of January 1. 1989, is April 1, 1990.
(3) 5-PERCENT OWNER: A Participant is treated as a 5-percent owner for
purposes of this Section if the Participant is a 5-percent owner as
defined in section 416(i) of the Code (determined in accordance
with section 416(i) 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 the owner attains age sixty six and
one-half (66 1/2) or any subsequent Plan Year.
(4) Once distributions have begun to a 5-percent owner under this
Section, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
7.2 - GENERAL DISTRIBUTION RULES
(a) Subject to the Joint and Survivor Annuity requirements of
Article VIII, the requirements of this Article shall apply to any
distribution of a Participant's interest and will take precedence over
any inconsistent provisions of this Plan. Unless otherwise specified,
the provisions of this Article apply to calendar years beginning after
December 31, 1984.
(b) All distributions required under this Article shall be determined and
made in accordance with the proposed Income Tax Regulations under
section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2 of the
proposed regulations.
(c) REQUIRED BEGINNING DATE: The entire interest of a Participant must
be distributed or begin to be distributed no later than the
Participant's required beginning date.
(d) LIMITS ON DISTRIBUTION PERIODS: As of the first distribution calendar
year, distributions, if not made in a single-sum, may only be made
over one of the following periods (or a combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a designated Beneficiary,
(3) a period certain not extending beyond the life expectancy of
the Participant, or
(4) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
7.3 - COMMENCEMENT OF RETIREMENT BENEFITS: Monthly Retirement Benefits will
commence at Normal Retirement Date as defined in Section 2.28. If a
Participant continues employment after that date, the provisions of Section
7.7 will apply.
Unless the Participant elects otherwise in writing, distribution of benefits
will begin no later than the sixtieth (60th) day after the latest of the
close of the Plan Year in which
(1) the Participant attains the earlier of age 65 or Normal
Retirement Age;
(2) occurs the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or
(3) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse to
consent to a distribution while a benefit is immediately distributable,
within the meaning of Section 9.6 of the Plan, shall be deemed to be an
election to defer commencement of payment of any benefit sufficient to
satisfy this Section.
7.4 - AMOUNT OF NORMAL RETIREMENT INCOME: Subject to the limitations and
conditions contained elsewhere in this Plan, each Participant shall be
entitled to a retirement benefit in the normal annuity form commencing on
his or her Normal Retirement Date. The normal retirement benefit of each
Participant shall not be less than the largest periodic benefit that would
have been payable to the Participant upon separation from service at or
prior to Normal Retirement Age under the Plan exclusive of Social Security
supplements, premiums on disability or term insurance, and the value of
disability benefits not in excess of the normal retirement benefit. For
purposes of comparing periodic benefits in the same form, commencing prior
to and at Normal Retirement Age, the greater benefit is determined by
converting the benefit payable prior to Normal Retirement Age into the same
form of annuity benefit payable at Normal Retirement Age and comparing the
amount of such annuity payments. In the case of a Top-Heavy Plan, the
normal retirement benefit shall not be smaller than the minimum benefit to
which the Employee is entitled under Section 11.3.
A Participant's right to his or her monthly retirement benefit shall be
nonforfeitable upon reaching Normal Retirement Age.
In no event shall any eligible Employee who has not been credited with at
least one Year of Service be entitled to any retirement benefit at any
termination date.
7.5 - NORMAL ANNUITY FORM: The normal form of settlement is a Qualified
Joint and Survivor Annuity for a married Participant and a life annuity for
an unmarried Participant unless an optional form is selected as provided in
Section 7.6. The amount of the normal retirement benefit shall be paid to
the Participant in accordance with the normal annuity form of settlement.
The terms of any annuity contract purchased and distributed by the Plan to a
Participant or Spouse shall comply with the requirements of this Plan.
7.6 - OPTIONAL FORM OF BENEFITS: Subject to the Joint and Survivor Annuity
requirements of Article VIII, the selection of an optional method of payment
of benefits with respect to any amounts which become payable under this Plan
during the lifetime of the Participant shall be subject to and in accordance
with the following:
(a) METHOD OF ELECTING OPTIONAL PAYMENTS: If a Participant elects in the
manner prescribed in Section 8.4(c) not to take the monthly retirement
benefit in the form of a Qualified Joint and Survivor Annuity pursuant
to a Qualified Election, the Participant shall have the right at any
time prior to commencement of the distribution of benefits to request,
in writing, the Plan Administrator to direct the Trustee to arrange to
make the distribution in an optional form permitted in Subsection (d)
below.
(b) VALUE OF OPTIONAL FORM: All optional forms of payment, including any
Qualified Joint and Survivor Annuity and Qualified Preretirement
Survivor Annuity, shall be the Actuarial Equivalent of each other and
the Actuarial Equivalent of the normal annuity form. The optional
form may provide more or may provide less monthly retirement amounts
than the normal annuity form, depending on the option selected. In no
event may the amount payable to a Beneficiary exceed that payable to
the Participant.
(c) Subject to the provisions of Section 8.4(c), distributions prior to
Normal Retirement Date may be in the form of a lump sum settlement.
(d) OPTIONAL FORMS PERMITTED: Whenever an optional form of payment is
requested, whether under the Contract(s) or the election is made
outside of the Contract(s), the optional form of payment shall be
limited to one of the following or any combination thereof:
(1) Lump sum,
(2) Annuity for the life of the Participant,
(3) Annuity for the life of the Participant and a designated
Beneficiary,
(4) Installments not extending beyond the life expectancy of the
Participant, or
(5) Installments not extending beyond the joint life and last survivor
expectancy of the Participant and a designated Beneficiary.
(e) INTEREST ONLY OPTION NOT AVAILABLE: The "Interest Only" option
contained in the Contract(s) on the life of the Participant or any
similar option outside the Contract(s) shall not be available as an
optional method of payment.
7.7 - DEFERRED RETIREMENT: If a Participant remains in employment after the
Normal Retirement Date, the Plan Administrator shall decide under rules
uniformally applicable to all Participants in similar situations, whether
the Participant's benefits shall be payable beginning at Normal Retirement
Date or whether they shall be postponed to the earlier of actual retirement
or the required beginning date.
When payment of benefits actually commences, the Participant shall receive a
benefit that will be the Actuarial Equivalent of the benefit to which the
Participant would have been entitled if benefits had commenced at Normal
Retirement Age. However, if the benefit to which the Participant was
entitled at Normal Retirement Date was segregated by the Plan Administrator,
the Participant shall upon retirement receive a benefit Actuarially
Equivalent in value to the then value of the segregated account to be
adjusted for actual fund earnings and/or losses as of the valuation date.
In no event, however, shall the benefit received exceed the limitation on
benefits expressed in Section 5.6.
7.8 - MINIMUM ANNUAL DISTRIBUTIONS: If the Participant's interest is to be
distributed in other than a single sum, the following minimum distribution
rules shall apply:
(a) If the Participant's interest is to be paid in the form of annuity
distributions under the Plan, payments under the annuity shall satisfy
the following requirements:
(1) the annuity distributions must be paid in periodic payments made
at intervals not longer than one (1) year;
(2) the distribution period must be over a life (or lives) or over a
period certain not longer than a life expectancy (or joint life and
last survivor expectancy) described in section 401(a)(9)(A)(ii) or
section 401(a)(9)(B)(iii) of the Code, whichever is applicable;
(3) the life expectancy (or joint life and last survivor expectancy)
for purposes of determining the period certain shall be determined
without recalculation of life expectancy;
(4) once payments have begun over a period certain, the period certain
may not be lengthened even if the period certain is shorter than
the maximum permitted;
(5) payments must either be nonincreasing or increase only as follows:
(i) with any percentage increase in a specified and generally
recognized cost-of-living index;
(ii) to the extent of the reduction to the amount of the
Participant's payments to provide for a survivor benefit upon
death, but only if the Beneficiary whose life was being used to
determine the distribution period described in Subsection 3
above dies and the payments continue otherwise in accordance
with that Subsection over the life of the Participant;
(iii) to provide cash refunds of Employee contributions upon the
Participant's death; or
(iv) because of an increase in benefits under the Plan.
(6) If the annuity is a life annuity (or a life annuity with a period
certain not exceeding twenty (20) years), the amount which must be
distributed on or before the Participant's required beginning date
(or, in the case of distributions after the death of the
Participant, the date distributions are required to begin pursuant
to Article VI) shall be the payment which is required for one
payment interval. The second payment need not be made until
the end of the next payment interval even if that payment
interval ends in the next calendar year. Payment intervals
are the periods for which payments are received, e.g., bimonthly,
monthly, semi-annually, or annually.
If the annuity is a period certain annuity without a life
contingency (or is a life annuity with a period certain exceeding
twenty (20) years) periodic payments for each distribution calendar
year shall be combined and treated as an annual amount. The amount
which must be distributed by the Participant's required beginning
date (or, in the case of distributions after the death of the
Participant, the date distributions are required to begin pursuant
to Subsection 5 above) is the annual amount for the first
distribution calendar year. The annual amount for other
distribution calendar years, including the annual amount for the
calendar year in which the Participant's required beginning date
(or the date distributions are required to begin pursuant to
Article VI) occurs, must be distributed on or before December 31 of
the calendar year for which the distribution is required.
(b) Annuities purchased after December 31, 1988, are subject to the
following additional conditions:
(1) Unless the Participant's Spouse is the designated Beneficiary, if
the Participant's interest is being distributed in the form of a
period certain annuity without a life contingency, the period
certain as of the beginning of the first distribution calendar year
may not exceed the applicable period determined using the table set
forth in Q&A A-5 of section 1.401(a)(9)-2 of the proposed
regulations.
(2) If the Participant's interest is being distributed in the form of
a Joint and Survivor Annuity for the joint lives of the Participant
and a nonspouse Beneficiary, annuity payments to be made on or
after the Participant's required beginning date to the designated
Beneficiary at the Participant's death must not at any time exceed
the applicable percentage of the annuity payment for the period
that would have been payable to the Participant using the table set
forth in Q&A A-6 of section 1.401(a)(9)-2 of the proposed
regulations.
(c) Transitional rule. If payments under an annuity which complies with
Subsection (a) above begin prior to January 1, 1989, the minimum
distribution requirements in effect as of July 27, 1987, shall apply
to distributions from this Plan, regardless of whether the annuity
form of payment is irrevocable. This transitional rule also applies
to deferred annuity contracts distributed to or owned by the Employee
prior to January 1, 1989, unless additional contributions are made
under the Plan by the Employer with respect to that contract.
(d) If the form of distribution is an annuity made in accordance with
this Section 7.8, any additional benefits accruing to the Participant
after his or her required beginning date shall be distributed as a
separate and identifiable component of the annuity beginning with the
first payment interval ending in the calendar year immediately
following the calendar year in which that amount accrues.
(e) Any part of the Participant's interest which is in the form of an
individual account shall be distributed in a manner satisfying the
requirements of section 401(a)(9) of the Code and the regulations
thereunder.
7.9 - TRANSITIONAL DISTRIBUTION RULE:
(a) Notwithstanding the other requirements of this Article and subject to
the Joint and Survivor Annuity requirements of Article VIII,
distribution on behalf of any Employee, including a five percent (5%)
owner, may be made in accordance with all of the following
requirements (regardless of when distribution commences):
(1) The distribution by the trust is one which would not have
disqualified the trust under section 401(a)(9) of the Code as in
effect prior to amendment by the Deficit Reduction Act of 1984.
(2) The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the trust is being
distributed or, if the Employee is deceased, by a Beneficiary of
that Employee.
(3) The designation was in writing, was signed by the Employee or the
Beneficiary, and was made before January 1, 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) 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. The method of
distribution selected must assure that at least fifty (50) percent
of the present value of the amount available for distribution is
paid within the life expectancy of the Participant.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the Beneficiary,
to whom that distribution is being made, will be presumed to have
designated the method of distribution under which the distribution is
being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in Subsections (a)(1) and
(5) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of section 401(a)(9) of the Code and the proposed
regulations thereunder. If a designation is revoked subsequent to the
date distributions are required to begin, the trust must distribute by
the end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would
have been required to have been distributed to satisfy section
401(a)(9) of the Code and the proposed regulations thereunder, but for
the section 242(b)(2) election. For calendar years beginning after
December 31, 1988, distributions must meet the minimum distribution
incidental benefit requirements in section 1.401(a)(9)-2 of the
proposed regulations. Any changes in the designation will be
considered to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as the substitution or addition
does not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount
is transferred or rolled over from one plan to another plan, the rules
in Q&A J-2 and Q&A J-3 of section 1.401(a)(9)-l of the proposed
regulations shall apply.
7.10 - LIMITATION ON ADJUSTMENTS RELATED TO SOCIAL SECURITY: Changes in the
Social Security benefit level or wage base shall not reduce any retirement
benefits under this Plan to the Participant or Beneficiary if the change
occurs after payment of benefits under the Plan has commenced or after the
date a Participant with vested benefits has separated from service. If a
Participant separates from the service of the Employer and later returns to
the service of the Employer and again participates in the Plan, future
changes in social security benefits payable or in the social security wage
base shall not reduce any benefits payable to the returned Participant below
that which he or she would have received had he or she not returned to
employment.
7.11 - DISPOSITION OF AMOUNT OF BENEFITS IN EXCESS OF LIMITATIONS: The
values of any benefits which are not to be used for a Participant's benefit,
because of the limitation of benefits imposed by this or any other Article,
shall not be used to increase the benefits of any other Participants, but
shall be used to reduce the Employer's cost of the Plan.
7.12 - EARLY RETIREMENT: If the Plan provides for early retirement as
elected in Section VI of the Adoption Agreement, payment of benefits may
commence on a date prior to a Participant's Normal Retirement Date. A
Participant who terminates employment and has satisfied the eligibility
requirements as set forth in Section VI.B. of the Adoption Agreement, shall
be entitled to receive an early retirement benefit. The early retirement
benefit shall be equal to the Participant's Accrued Benefit reduced for each
year that the early retirement date precedes his or her Normal Retirement
Date. The amount of the reduction in the Accrued Benefit shall be as
specified in the Adoption Agreement.
A Participant who satisfied the service requirement for an early retirement
benefit, but separated from service (with any nonforfeitable right to an
Accrued Benefit) before satisfying the age requirement for early retirement,
will be entitled to elect an early retirement benefit upon satisfaction of
the age requirement.
7.13 - DISABILITY RETIREMENT: Disability retirement benefits under this
Section are subject to the election in Section VI of the Adoption Agreement.
If a Participant becomes disabled within the meaning of Section 2.12 and
terminates employment prior to retirement or separation from service the
disabled Participant shall be entitled to receive a benefit in accordance
with the election in the Adoption Agreement. The Plan Administrator shall
certify fact of the disability to the Trustee and distribution of the
benefits payable may be made pursuant to Article VII and VIII of the Plan as
though the Participant had retired.
ARTICLE VIII
JOINT AND SURVIVOR AND PRERETIREMENT
SURVIVOR ANNUITY REQUIREMENTS
8.1 - APPLICATION OF THIS ARTICLE: The provisions of this Article shall
apply to any Participant who is credited with at least one (1) Hour of
Service with the Employer on or after August 23, 1984, and other
Participants as provided in Section 8.6.
8.2 - QUALIFIED JOINT AND SURVIVOR ANNUITY: Unless an alternative form of
benefit is selected pursuant to a qualified election within the ninety (90)
day period ending on the annuity starting date, a married Participant's
vested Accrued Benefit will be paid in the form of a Qualified Joint and
Survivor Annuity and an unmarried Participant's vested Accrued Benefit will
be paid in the normal form of an immediate life annuity. The Participant
may elect to have the annuity distributed upon attainment of the earliest
retirement age under the Plan.
8.3 - QUALIFIED PRERETIREMENT SURVIVOR ANNUITY:
(a) DEATH OF PARTICIPANT AFTER EARLIEST RETIREMENT AGE: Unless an
alternative form of benefit is selected within the election period
pursuant to a qualified election, if a Participant dies after the
earliest retirement age but before commencement of retirement
benefits, the Participant's Surviving Spouse, if any, will receive the
same benefit that would be payable if the Participant had retired with
an immediate Qualified Joint and Survivor Annuity on the day before
the Participant's date of death.
The Surviving Spouse may elect to commence payment under the annuity
within a reasonable period after the Participant's death. The
actuarial value of benefits which commence later than the date on
which payments would have been made to the Surviving Spouse under a
Qualified Joint and Survivor Annuity in accordance with this provision
shall be adjusted to reflect the delayed payment.
(b) DEATH OF PARTICIPANT ON OR BEFORE EARLIEST RETIREMENT AGE: Unless an
alternative form of benefit is selected within the election period
pursuant to a qualified election, if a Participant dies on or before
the earliest retirement age, the Participant's Surviving Spouse, if
any, will receive the same benefit that would be payable if the
Participant had:
(i) separated from service on the date of death (or date of separation
from service, if earlier),
(ii) survived to the earliest retirement age,
(iii) retired with an immediate Qualified Joint and Survivor Annuity
at the earliest retirement age, and
(iv) died on the day after the earliest retirement age.
For purposes of this Subsection (b) and subject to the provisions of
section 9.5 of the Plan, a Surviving Spouse will begin to receive
payments at the earliest retirement age. Benefits commencing after
the earliest retirement age will be the Actuarial Equivalent of
the benefit to which the Surviving Spouse would have been entitled
if benefits had commenced at the earliest retirement age under an
immediate Qualified Joint and Survivor Annuity in accordance with
this Subsection (b).
(c) For the purposes of this Section 8.3, the benefit payable to the
Surviving Spouse shall be attributable to Employee contributions in
the same proportion as the total Accrued Benefit derived from Employee
contributions is to the Accrued Benefit of the Participant.
8.4 - DEFINITIONS:
(a) ELECTION PERIOD: The period which begins on the first day of the Plan
Year in which the Participant attains age thirty-five (35) and ends on
the date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age
thirty-five (35) is attained, with respect to benefits accrued
prior to separation, the election period shall begin on the date of
separation.
PRE-AGE THIRTY-FIVE (35) WAIVER: A Participant who will not yet attain
age thirty-five (35) as of the end of any current Plan Year may make a
special qualified election to waive the qualified pre-retirement
survivor annuity for the period beginning on the date of such election
and ending on the first day of the Plan Year in which the Participant
will attain age thirty-five (35). This election will not be valid
unless the Participant receives a written explanation of the qualified
pre-retirement survivor annuity in terms as are comparable to the
explanation required under section 8.5(a). Qualified pre-retirement
survivor annuity coverage will be automatically reinstated as of the
first day of the Plan Year in which the Participant attains age
thirty-five (35). Any new waiver on or after such date shall be
subject to the full requirements of this Article.
(b) EARLIEST RETIREMENT AGE: The earliest date on which, under the Plan,
the Participant could elect to receive retirement benefits.
(c) QUALIFIED ELECTION: A waiver of a Qualified Joint and Survivor
Annuity or a Qualified Preretirement Survivor Annuity. Any waiver of
a Qualified Joint and Survivor Annuity or a Qualified Preretirement
Survivor Annuity shall not be effective unless:
(1) the Participant's Spouse consents in writing to the election;
(2) the election designates a specific alternate Beneficiary,
including any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal consent (or
the Spouse expressly permits designations by the Participant
without any further spousal consent);
(3) the Spouse's consent acknowledges the effect of the election; and
(4) the Spouse's consent is witnessed by a plan representative or
notary public.
Additionally, a Participant's waiver of the Qualified Joint and
Survivor Annuity will not be effective unless the election designates
a form of benefit payment which may not be changed without Spousal
consent (or the Spouse expressly permits designations by the
Participant without any further Spousal consent). If it is
established to the satisfaction of a plan representative that the
written consent may not be obtained because there is no Spouse or the
Spouse cannot be located, a waiver will be deemed a qualified
election.
Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall
be effective only with respect to that Spouse. A consent that permits
designations by the Participant without any requirement of further
consent by the 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 these rights. A revocation of a prior
waiver may be made by a Participant without the consent of the Spouse
at any time prior to the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has received notice as
provided in Section 8.5 below.
(d) ANNUITY STARTING DATE: The first day of the first period for which an
amount is paid as an annuity or any in other form.
The annuity starting date for disability benefits shall be the date
benefits commence if the disability benefit is not an auxiliary
benefit. An auxiliary benefit is a disability benefit which does not
reduce the benefit payable at Normal Retirement Age.
If benefit payments in any form are suspended pursuant to Section 7.7
of the Plan for an Employee who continues in service without a
separation and who does not receive a benefit payment, the
recommencement of benefit payments shall be treated as a new annuity
starting date.
(e) VESTED ACCRUED BENEFIT: The value of the Participant's vested Accrued
Benefit derived from Employer and Employee contributions (including
rollovers). The provisions of this Article shall apply to a
Participant who is vested in amounts attributable to Employer
contributions, Employee contributions (or both) at the time of death
or distribution.
8.5 - NOTICE REQUIREMENTS:
(a) QUALIFIED JOINT AND SURVIVOR ANNUITY: In the case of a Qualified
Joint and Survivor Annuity as described in Section 8.2, the Plan
Administrator shall provide each Participant no less than thirty (30)
days and no more than ninety (90) days prior to the annuity starting
date a written explanation of: (i) the terms and conditions of a
Qualified Joint and Survivor Annuity; (ii) the Participant's right to
make and the effect of an election to waive the Qualified Joint and
Survivor Annuity form of benefit; (iii) the rights of a Participant's
Spouse; and (iv) the right to make, and the effect of, a revocation of
a previous election to waive the Qualified Joint and Survivor Annuity;
and (v) the relative values of the various optional forms of benefits
under the Plan.
(b) QUALIFIED PRERETIREMENT SURVIVOR ANNUITY: In the case of a Qualified
Preretirement Survivor Annuity as described in Section 8.3 of this
Article, the Plan Administrator shall provide each Participant within
the applicable period for that Participant, a written explanation of
the Qualified Preretirement Survivor Annuity in terms and in a manner
as would be comparable to the explanation provided for meeting the
requirements of Subsection (a) above applicable to a Qualified Joint
and Survivor Annuity.
The applicable period for a Participant is whichever of the following
periods ends last: (1) 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; (2) a reasonable period ending after the
individual becomes a Participant; (3) a reasonable period ending after
Subsection (c) below ceases to apply to the Participant; (4) a
reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation of service in case
of a Participant who separates from service before attaining age 35.
For purposes of the preceding paragraph, a reasonable period ending
after the enumerated events described in (2), (3) and (4) is the end
of the two (2) year period beginning one year prior to the date the
applicable event occurs and ending one (1) year after that date. In
the case of a Participant who separates from service before the Plan
Year in which age 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 that Participant thereafter returns to
employment with the Employer, the applicable period for that
Participant shall be redetermined.
(c) Notwithstanding the other requirements of this Section 8.5 the
respective notices prescribed by this Section need not be given to a
Participant if
(1) the Plan "fully subsidizes" the costs of a Qualified Joint and
Survivor Annuity or Qualified Preretirement Survivor Annuity, and
(2) the Plan does not allow the Participant to waive the Qualified
Joint and Survivor Annuity or Qualified Preretirement Survivor
Annuity and does not allow a married Participant to designate a
nonspouse Beneficiary.
For purposes of this Subsection (c), a plan fully subsidizes the cost
of a benefit if under the Plan no increase in cost or decrease in
benefits to the Participant may result from the Participant's failure
to elect another benefit. Prior to the time the Plan allows the
Participant to waive the Qualified Preretirement Survivor Annuity, the
Plan may not charge the Participant for the cost of this benefit by
reducing the Participant's benefits under the Plan or by any other
method.
8.6 - TRANSITIONAL RULES:
(a) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous
sections of this Article must be given the opportunity to elect to have
the prior sections of this Article apply if that 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 that
Participant had at least 10 years of vesting service when he or she
separated from service.
(b) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one 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 8.6(d).
(c) The respective opportunities to elect (as described in Subsections
(a) and (b) above) must be afforded to the appropriate Participants
during the period commencing on August 23, 1984, and ending on the
date benefits would otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to Subsection (b) above and
any Participant who does not elect under Subsection (a) above or who
meets the requirements of Subsection (a) except that that Participant
does not have at least ten (10) years of vesting service when he or
she separates from service, shall have his or her benefits distributed
in accordance with the following requirements if benefits would have
been payable in the form of a life annuity:
(1) AUTOMATIC JOINT AND SURVIVOR ANNUITY: If benefits in the form of
a life annuity become payable to a married Participant who:
(i) begins to receive payments under the Plan on or after Normal
Retirement Age; or
(ii) dies on or after Normal Retirement Age while still working
for the Employer; or
(iii) begins to receive payments on or after the qualified early
retirement age; or
(iv) separates from service on or after attaining Normal Retirement
Age (or the qualified early retirement age) and after
satisfying the eligibility requirements for the payment of
benefits under the Plan thereafter dies before beginning to
receive these benefits;
then these benefits will be received under this Plan in the form of a
Qualified Joint and Survivor annuity, unless the Participant has
elected otherwise during the election period. The election period
must begin at least six (6) months before the Participant attains
qualified early retirement age and end not more than ninety (90) days
before the commencement of benefits. Any election hereunder will be
in writing and may be changed by the Participant at any time.
(2) 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 this 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 ninetieth (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.
(3) For purposes of this Subsection (d):
(i) 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.
(ii) QUALIFIED JOINT AND SURVIVOR ANNUITY is an annuity for the
life of the Participant with a survivor annuity for the life of
the Spouse as described in Section 8.2 of this Article.
ARTICLE IX
BENEFITS UPON TERMINATION - VESTING
9.1 - TERMINATION OF PARTICIPATION: If a Participant ceases to be an
Employee by reason of resignation or discharge, participation in the Plan
shall terminate and his or her interest and rights under the Plan shall be
limited to those contained in this Article. The Employer shall promptly
notify the Plan Administrator of the termination. No further contributions
shall be made or be due on behalf of the Participant after the date of
termination of employment unless the Participant had more than 500 hours of
service during the Plan Year or further contributions need to be made to
fully fund the Participant's vested Accrued Benefits. All vested benefits,
and their distribution, shall be subject to any limitations contained in the
Plan, including those contained in Article VII, Distribution of Retirement
Benefits, Article VIII, Joint and Survivor Annuity Requirements and Section
16.6, Limitation of Benefits on Early Plan Termination.
9.2 - APPLICATION OF FORFEITURES: Any and all money, Contracts or other
assets forfeited by reason of termination of employment or under any other
provisions of this Plan shall be used by the Trustee to reduce the amount of
the Employer's premiums and Trust Fund contribution payments next coming due
under this Plan. If more than one Employer has adopted this Plan as
provided in the Adoption Agreement, those forfeitures resulting from
contributions of one adopting Employer may not be reallocated for the
benefit of any other adopting Employer. No forfeitures arising for any
reason under this Plan shall be applied to increase the benefits any
Participant would otherwise receive under this Plan at any time prior to its
termination.
9.3 - VESTING: The vested interest of the Participant shall be determined in
accordance with the schedule elected in the Adoption Agreement. The
Participant's Accrued Benefit, including the values of any Contract(s),
which is attributable to the Employer's contributions shall be multiplied by
the percentage obtained from that schedule to determine the amount due to
the Participant. On attainment of Normal Retirement Age, early retirement,
if elected in the Adoption Agreement, or full or partial termination of the
Plan (to the extent funded as of that date), the Participant shall be one
hundred percent (100%) vested in his or her Accrued Benefit.
Any portion of the Participant's Accrued Benefit that is not vested shall be
treated as a Forfeiture and applied as provided in Section 9.2.
Any portion of a Participant's Accrued Benefit, including any Contract
values which are attributable to the Participant's contributions, shall at
all times be nonforfeitable and one hundred percent (100%) vested in the
Participant.
9.4 - TIME AND MANNER OF PAYMENT OF VESTED BENEFITS: Benefits will be paid
only on death, disability, termination of employment, plan termination, or
at Normal Retirement Age. Benefits from the Plan are payable to the
Participant pursuant to the provisions of Article VII, Distribution of
Retirement Benefits, Article VIII, Joint and Survivor Annuity Requirements
and Section 16.6, Limitation of Benefits on Early Plan Termination.
9.5 - CASH OUT PROCEDURE: If an Employee terminates service, and the present
value of the Employee's vested Accrued Benefit derived from Employer and
Employee contributions is not greater than $3,500, the Employee will receive
a distribution of the present value of the entire vested portion of the
Accrued Benefit and the nonvested portion will be treated as a Forfeiture.
For purposes of this Section, if the present value of an Employee's vested
Accrued Benefit is zero, the Employee shall be deemed to have received a
distribution of that vested Accrued Benefit.
If an Employee terminates service, and the present value of the Employee's
vested Accrued Benefit derived from Employer and Employee contributions
exceeds $3,500, the Employee may elect, in accordance with Section 9.6 of
the Plan, to receive a distribution of the present value of the entire
vested portion of the Accrued Benefit and the nonvested portion will be
treated as a Forfeiture.
A Participant's vested Accrued Benefit 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.
For the purpose of the foregoing provisions, present value shall be
calculated using the interest rate specified in the Adoption Agreement.
9.6 - RESTRICTIONS ON IMMEDIATE DISTRIBUTION; CONSENT:
(a) If the present value of a Participant's vested Accrued Benefit
derived from Employer and Employee contributions exceeds (or at the
time of any prior distribution exceeded) $3,500, and the Accrued
Benefit is immediately distributable, the Participant and the
Participant's Spouse (or where either the Participant or the Spouse
has died, the survivor) must consent to any distribution of the
Accrued Benefit. 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 Accrued Benefit is no longer immediately
distributable. Notification shall include a general description of
the material features of the Plan, and an explanation of the relative
values of the optional forms of benefit available under the Plan, in a
manner that would satisfy the notice requirements of section
417(a)(3), and shall be provided no less than 30 days and no more than
90 days prior to the annuity starting date.
Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a Qualified Joint
and Survivor Annuity while the Accrued Benefit 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.
Present value shall be determined in accordance with the interest
rate(s) specified in the Adoption Agreement.
An Accrued Benefit is immediately distributable if any part of the
Accrued Benefit could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained if not
deceased) the later of Normal Retirement Age or age 62.
(b) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan year beginning after December 31, 1988, the Participant's
vested Accrued Benefit shall not include amounts attributable to
accumulated deductible Employee contributions within the meaning of
section 72(o)(5)(B) of the Code.
9.7 - EFFECT ON VESTING OF A BREAK IN SERVICE:
(a) NONVESTED EMPLOYEES: In the case of an Employee who has five (5) or
more consecutive one (1) year Breaks in Service and who does not have
any vested interest in his or her Accrued Benefit at the time of the
Break in Service, all Years of Service prior to the break shall be
taken into account in determining an Employee's vested percentage,
provided he or she meets the following conditions:
(1) He or she must complete a Year of Service after the Break and
(2) The number of one (1) year Breaks in Service is less than the
aggregate number of Years of Service before the break.
(b) VESTED PARTICIPANTS: In the case of an Employee who has a vested
interest in his or her Accrued Benefit at the time of the Break in
Service subject to the following condition:
The Participant must complete one (1) Year of Service after the
Break in Service before the prior service will be counted in those
cases where the prior Break extended for a period of one (1) or
more years.
(c) If a terminating Participant's Accrued Benefit was not distributed at
the earlier termination of employment, the Participant upon reaching
what would have been Normal Retirement Date shall receive his or her
retirement benefits at that time based upon Compensation, Years of
Service and Years of Participation to the date of termination of
employment. The benefit shall be subject to all the limitations and
conditions contained in this Plan. The settlement form shall be a
Qualified Joint and Survivor Annuity in accordance with Article VIII,
unless a different election is made. It shall be the responsibility
of each Participant entitled to receive deferred benefits to keep the
Plan Administrator informed as to his or her address.
9.8 - PLAN REPAYMENT PROVISION: If an Employee receives a distribution
pursuant to Section 9.5 and the Employee resumes covered employment under
the Plan, he or she shall have the right to restore his or her Employer-
derived Accrued Benefit (including all optional forms of benefits and
subsidies relating to these benefits) to the extent forfeited upon the
repayment to the Plan of the full amount of the distribution plus interest,
compounded annually from the date of distribution at the rate determined for
purposes of Section 41l(c)(2)(C) of the Code. Repayment must be made before
the earlier of five (5) years after the first date on which the Participant
is subsequently reemployed by the Employer, or the date the Participant
incurs five (5) consecutive 1-year Breaks in Service following the date of
distribution.
If an Employee is deemed to receive a distribution pursuant to Section 9.5,
and the Employee resumes employment covered under this Plan before the date
the Participant incurs five (5) consecutive 1-year Breaks in Service, upon
the reemployment of this Employee, the Employer-derived Accrued Benefit will
be restored to the amount of the Accrued Benefit on the date of the deemed
distribution. If the Participant fails to make the repayment, his or her
Accrued Benefit shall be reduced by the Amount of the Accrued Benefit
represented by the prior distribution. It is the express intention that
there shall be no duplication of benefits for any reason in connection with
the Plan.
9.9 - INELIGIBLE PARTICIPANT: If a Participant ceases to meet the
eligibility requirements of this Plan although still in the employment of
the Employer, the Participant shall become an ineligible Participant. The
Employer shall promptly notify the Plan Administrator and contributions on
his or her behalf shall cease as of that date. The Trustee shall preserve
the equities created in any life Contract(s) of the ineligible Participant.
Any life or annuity Contract(s) and allocable portion of the Trust Fund, if
any, shall be held for the benefit of the ineligible Participant until the
satisfaction of the necessary condition(s) for a distribution to occur in
accordance with the Plan's provisions.
If an ineligible Participant again meets the requirements for eligibility,
the Employer shall promptly notify the Plan Administrator who shall notify
the Trustee and the ineligible Participant shall again become a Participant
under this Plan.
For purposes of determining Years of Service and Breaks in Service in order
to compute an Employee's nonforfeitable right to his or her Accrued Benefit
derived from Employer's contributions, Years of Service completed while an
ineligible Participant shall be computed as though he or she were a
Participant.
9.10 - PLAN AMENDMENTS AFFECTING VESTED AND/OR ACCRUED BENEFIT: No amendment
to the Plan (including a change in the actuarial basis for determining
optional or early retirement benefits) shall be effective to the extent that
it decreases a Participant's Accrued Benefit. Notwithstanding the preceding
sentence, a Participant's Accrued Benefit 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 (a) eliminating or
reducing an early retirement benefit or a retirement-type subsidy, or (b)
eliminating an optional form of benefit, with respect to benefits
attributable to service before the amendment shall be treated as reducing
Accrued Benefits. In the case of a retirement-type subsidy, the preceding
sentence shall apply only with respect to a Participant who satisfies
(either before or after the amendment) the preamendment conditions for the
subsidy. In general, a retirement-type subsidy is a subsidy that continues
after retirement, but does not include a qualified disability benefit, a
medical benefit, a social security supplement, or a death benefit (including
life insurance). 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
the amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of that date) of the Employee's
Employer-derived Accrued Benefit will not be less than the percentage
computed under the Plan without regard to the amendment.
9.11 - 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 a Participant's nonforfeitable percentage, or if
the Plan is deemed amended by an automatic change to or from a top-heavy
vesting schedule, each Participant with at least three (3) Years of Service
with the Employer may elect within a reasonable period after the adoption of
the amendment or change, to have his or her nonforfeitable percentage
computed under the Plan without regard to the amendment or change. For
Participants who do not have at least one (1) Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting "5 Years of Service" for "3 Years of Service" where
that language appears.
The period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end on the
latest of:
(1) The date which is sixty (60) days after the date the amendment
is adopted.
(2) The date which is sixty (60) days after the date the Plan amendment
became effective; or
(3) The date which is sixty (60) days after the date the Participant
is issued written notice of the amendment by the Employer or Plan
Administrator.
9.12 - BENEFITS PROTECTED ON MERGER, CONSOLIDATION OR TRANSFER: In the event
of a merger or consolidation with, or transfer of assets to any other plan,
each Participant will be entitled to a benefit immediately after the merger,
etc. (if the Plan then terminated) which is at least equal to the benefit
the Participant was entitled to immediately before the merger, etc. (if the
Plan had terminated). A certification to this effect may be required by the
Insurer from the successor, sponsor, or administrator prior to any merger,
consolidation or transfer of assets.
9.13 - VESTING UPON TERMINATION OF PLAN: In the event of the termination or
partial termination of this Plan, the rights of all affected employees to
benefits accrued to the date of the termination or partial termination (to
the extent funded as of that date) shall be nonforfeitable.
9.14 - VESTING OF PARTICIPANT'S VOLUNTARY, ROLLOVER AND PREDECESSOR PLAN
CONTRIBUTIONS: Each Participant shall at all times have a fully vested
interest in any amounts attributable to his or her Voluntary Contributions,
rollover Contributions and any predecessor plan assets which have been
deposited into the current Plan Trust and in which he or she had a
nonforfeitable right at the time of transfer. No part of the Accrued
Benefit attributable to the Employee contributions shall be forfeited.
9.15 - DISABILITY RETIREMENT: A Participant whose employment is terminated
at any time prior to his or her Normal Retirement Date because of Disability
shall be considered a terminated Participant entitled to the present value
of his or her Accrued Benefit as selected in the Adoption Agreement.
Benefits shall be distributed in the manner set forth in Article VII.
ARTICLE X
LOANS TO PARTICIPANTS
10.1 - GENERAL RULES: The Trustee may in the Trustee's sole discretion, make
loans to Participants and Beneficiaries in a uniform and nondiscriminatory
manner under the following circumstances:
(a) Loans shall be made available to all Participants and Beneficiaries
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
Participant's vested Accrued Benefit.
10.2 - SPOUSAL CONSENT: A Participant must obtain the consent of his or her
Spouse, if any, to use of the Accrued Benefit as security for the loan.
Spousal consent shall be obtained no earlier than the beginning of the
ninety (90)-day period that ends on the date on which the loan is to be so
secured. The consent must be in writing, must acknowledge the effect of the
loan, and must be witnessed by a plan representative or notary public. The
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 Accrued Benefit is used for renegotiation, extension,
renewal, or other revision of the loan.
10.3 - COLLATERAL: Each loan shall be secured by collateral. Collateral
shall consist of the Participant's entire right, title and interest in and
to (a) the present value of an amount not exceeding fifty percent (50%) of
the nonforfeitable Accrued Benefit of the Participant under the Plan, and
(b) if necessary, other property, acceptable to the Trustee, of sufficient
value to adequately secure the repayment of the loan.
10.4 - INTEREST RATE: The rate of interest on a promissory note must be
reasonable and shall be comparable to the prevailing rate which is then
being charged by institutional lenders. Every loan applicant shall receive
a clear statement of the charges involved in each loan transaction including
the dollar amount and the annual interest rate of the finance charge.
10.5 - LIMITATIONS ON LOANS:
(a) AMOUNT OF LOAN: Loans made pursuant to this Article (when added to
the outstanding balance of all other loans to the Participant or
Beneficiary) may not exceed the lesser of:
(1) $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
(2) the greater of
(i) one-half the present value of the nonforfeitable Accrued
Benefit of the Participant, or
(ii) the total Accrued Benefit up to $ 10,000.
For the purpose of the above limitations, all loans from all plans of
the Employer and other members of a group of Employers described in
sections 414(b), 414(c), 414(m), and 414(o) of the Code are
aggregated.
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.
(b) LOANS TO SHAREHOLDER-EMPLOYEES OR OWNER-EMPLOYEES: 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 the corporation, more
than five percent (5%) of the outstanding stock of the corporation.
10.6 - REPAYMENT OF LOAN: Any loan shall by its terms require that repayment
(principal and interest) be amortized in level payments, not less frequently
than quarterly, over a period not extending beyond five (5) years from the
date of the loan, unless the 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.
10.7 - DEFAULT IN REPAYMENT: In the event of default, foreclosure on the
note and attachment of security will not occur until a distributable event
occurs in the Plan.
10.8 - EFFECT OF LOAN ON DEATH BENEFIT: If a valid spousal consent has been
obtained in accordance with Section 10.2, then, notwithstanding any other
provision of this Plan, the portion of the Participant's vested Accrued
Benefit used as a security interest held by the Plan by reason of a loan
outstanding to the Participant shall be taken into account for purposes of
determining the amount of the Accrued Benefit payable at the time of death
or distribution, but only if the reduction is used as repayment of the loan.
If less than 100% of the Participant's vested Accrued Benefit (determined
without regard to the preceding sentence) is payable to the Surviving
Spouse, then the Accrued Benefit shall be adjusted by first reducing the
vested Accrued Benefit by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the Surviving Spouse.
ARTICLE XI
TOP HEAVY PLAN
11.1 - APPLICATION OF PROVISIONS: If the Plan is or becomes Top-Heavy in any
Plan Year beginning after December 31, 1983, the provisions of this Article
will supersede any conflicting provisions in the Plan or Adoption Agreement.
11.2 - DEFINITIONS APPLICABLE TO TOP-HEAVY PLANS:
(a) KEY EMPLOYEE: Any Employee or former Employee (and the Beneficiaries
of the Employee) who at any time during the determination period was:
(1) an officer of the Employer if that individual's annual
Compensation exceeds fifty percent (50%) of the dollar limitation
under section 415(b)(1)(A) of the Code, (2) an owner (or considered an
owner under section 318 of the Code) of one of the ten (10) largest
interests in the Employer if that individual's Compensation exceeds
one hundred percent (100%) of the dollar limitation under section
415(c)(1)(A) of the Code, (3) a five percent (5%) owner of the
Employer, or (4) a one percent (1%) owner of the Employer who has an
annual Compensation of more than one hundred fifty thousand dollars
($150,000). Annual Compensation means Compensation as defined in
section 415(c)(3) of the Code, but including amounts contributed by
the Employer pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under section 125, section
402(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 four (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.
(b) TOP HEAVY PLAN: For any Plan Year beginning after December 31, 1983,
this Plan is top-heavy if any of the following conditions exist:
(1) If the top-heavy ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any required aggregation group or
permissive aggregation group of plans.
(2) If this Plan is a 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 sixty percent (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 sixty percent (60%).
(c) TOP HEAVY RATIO:
(1) If the Employer maintains one or more defined benefit plans and
the Employer has not maintained any defined contribution plans
(including any Simplified Employee Pension Plan) which during the
five (5) year period ending on the determination date(s) has or has
had account balances, 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 present values
of Accrued Benefits of all key Employees as of the determination
date(s) (including any part of any accrued benefit distributed in
the five (5) year period ending on the determination date(s)), and
the denominator of which is the sum of all Accrued Benefits
(including any part of any Accrued Benefit distributed in the five
(5) year period ending on the determination date(s)), determined in
accordance with section 416 of the Code and the regulations
thereunder.
(2) If the Employer maintains one or more defined benefit plans and
the Employer maintains or has maintained one or more defined
contribution plans (including any Simplified Employee Pension Plan)
which during the five (5) year period ending on the determination
date(s) has or has had any account balances, the top-heavy ratio
for any required or permissive aggregation group as appropriate is
a fraction, the numerator of which is the sum of the present value
of Accrued Benefits under the aggregate defined benefit plan or
plans for all key Employees, determined in accordance with
(1) above and the sum of the account balances under the aggregated
defined contribution plan or plans for all key Employees as of the
determination date(s), and the denominator of which is the sum of
the present values of Accrued Benefits under the aggregated defined
benefit plan or plans, determined in accordance with (1) above, for
all Participants and the sum of the account balances under the
aggregated defined contribution 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
account balances under a defined contribution plan in both the
numerator and denominator of the top-heavy ratio are adjusted for
any distribution of an account balance made in the five (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
twelve (12) month period ending on the determination date, except
as provided in section 416 of the Code and the regulations
thereunder for the first and second plan years of a defined benefit
plan. The account balances and Accrued Benefits of a Participant
(a) who is not a key Employee but who was a key Employee in a prior
year or (b) who has not been credited with at least one (1) hour of
service with any Employer maintaining the Plan at any time during
the five (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 the benefit accrued
not more rapidly than the slowest accrual rate permitted under the
fractional rule of section 411(b)(1)(C) of the Code.
(d) 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.
(e) REQUIRED AGGREGATION GROUP: (1) Each qualified plan of the Employer
in which at least one key Employee participates or participated at any
time during the determination period (regardless of whether the plan
terminated), and (2) any other qualified plan of the Employer which
enables a plan to meet the requirements of sections 401(a)(4) or 410
of the Code.
(f) 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.
(g) VALUATION DATE: Plan Valuation Date.
(h) PRESENT VALUE: Present value shall be based only on the current plan
actuarial assumptions.
11.3 - MINIMUM ACCRUED BENEFIT:
(a) Notwithstanding any other provision in this Plan except (c), (d), and
(e) below, for any Plan Year in which this Plan is Top-Heavy, each
Participant who is not a key Employee and has completed 1,000 Hours of
Service will accrue a benefit (to be provided solely by Employer
contributions and expressed as a life annuity commencing at Normal
Retirement Age) of not less than two percent (2%) of his or her
highest average Compensation for the five (5) consecutive years for
which the Participant had the highest Compensation. The aggregate
Compensation for the years during this five (5) year period in which
the Participant was credited with a Year of Service will be divided
by the number of such years in order to determine Average Annual
Compensation. The minimum accrual is determined without regard to any
Social Security contribution. The minimum accrual applies even though
under other Plan provisions the Participant would not otherwise be
entitled to receive an accrual, or would have received a lesser
accrual for the year because (1) the non-key Employee fails to make
mandatory contributions to the Plan, (2) the non-key Employee's
Compensation is less than a stated amount, (3) the non-key Employee is
not employed on the last day of the accrual computation period, or (4)
the Plan is integrated with Social Security.
(b) For purposes of computing the minimum Accrued Benefit, Compensation
shall mean Compensation as defined in Section 5.6(d)(3) of the Plan.
(c) No additional benefit accruals shall be provided pursuant to (a)
above to the extent that the total accruals on behalf of the
Participant attributable to Employer contributions will provide a
benefit expressed as a life annuity commencing at Normal Retirement
Age that equals or exceeds 20 percent (20%) of the Participant's
highest average Compensation for the five (5) consecutive years for
which the Participant had the highest Compensation.
(d) The provisions in (a) above shall not apply to any Participant to the
extent that 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 this Top-Heavy Plan will be met in the other plan or
plans.
(e) All accruals of Employer derived benefit, whether or not attributable
to years for which the Plan is Top-Heavy, may be used in computing
whether the minimum accrual requirements of paragraph (c) above are
satisfied.
11.4 - ADJUSTMENT FOR BENEFIT FORM OTHER THAN LIFE ANNUITY AT NORMAL
RETIREMENT AGE: If the form of benefit is other than a single life annuity,
the Participant must receive an amount that is the Actuarial Equivalent of
the minimum single life annuity benefit. If the benefit commences at a date
other than at Normal Retirement Age, the Participant must receive at least
an amount that is the Actuarial Equivalent of the minimum single life
annuity benefit commencing at Normal Retirement Age.
11.5 - NONFORFEITABILITY OF MINIMUM ACCRUED BENEFIT: The minimum Accrued
Benefit required (to the extent required to be nonforfeitable under section
416(b)) may not be suspended or forfeited under sections 411(a)(3)(B) or
411(a)(3)(D) of the Code.
11.6 - MINIMUM VESTING SCHEDULE: For any Plan Year in which this Plan is
Top-Heavy, the minimum vesting schedule as set forth below will
automatically apply to the Plan. The minimum vesting schedule applies to
all benefits within the meaning of section 411(a)(7) of the Code except
those attributable to Employee contributions, including benefits accrued
before the effective date of section 416 and benefits accrued before the
Plan became Top-Heavy. Further, no decrease in a Participant's
nonforfeitable percentage may occur in the event the Plan's status as Top-
Heavy changes for any Plan Year. However, this Section does not apply to
the Accrued Benefits of any Employee who does not have an Hour of Service
after the Plan has initially become Top-Heavy and that Employee's Accrued
Benefits attributable to Employer contributions and forfeitures will be
determined without regard to this Section.
The nonforfeitable interest of each Employee in his or her Accrued Benefits
attributable to Employer contributions shall be determined on the basis of
the following minimum vesting schedule:
Twenty percent (20%) vesting after two (2) years of service.
Forty percent (40%) vesting after three (3) years of service.
Sixty percent (60%) vesting after four (4) years of service.
Eighty percent (80%) vesting after five (5) years of service.
One hundred percent (100%) vesting after six (6) years of service.
If the vesting schedule under the Plan shifts in or out of the above
schedule for any Plan Year because of the Plan's Top-Heavy status, that
shift is an amendment to the vesting schedule and the election in section
9.11 of the Plan applies.
ARTICLE XII
CLAIMS PROCEDURE
12.1 - FILING A CLAIM FOR BENEFITS: A Participant or Beneficiary or Employer
acting on his or her behalf shall make a claim for Plan benefits by filing a
written request with the Plan Administrator. The request shall set forth
the basis of the claim and shall authorize the Plan Administrator to conduct
any examinations necessary to determine the validity of the claim and to
take any necessary steps to facilitate the payment of any benefits to which
the Participant or Beneficiary may be entitled under the terms of the Plan.
12.2 - DENIAL OF CLAIM: Whenever a claim for benefits by any Participant or
Beneficiary has been wholly or partially denied, the Plan Administrator must
furnish the Participant or Beneficiary a written notice of the denial within
sixty (60) days of the date the original claim was filed. This notice shall
set forth the specific reason for the denial, specific reference to
pertinent Plan provisions on which the denial is based, a description of any
additional information needed to perfect the claim and an explanation of why
it is necessary, and an explanation of the procedure for appeal.
12.3 - REMEDIES AVAILABLE: The Participant or Beneficiary shall have sixty
(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 the review within sixty
(60) days after receipt of an application for review as provided for in this
Section. Upon a decision unfavorable to the Participant or Beneficiary, the
Participant or Beneficiary shall be entitled to bring any necessary or
appropriate actions in law or equity to protect or clarify his or her right
to benefits under this Plan.
ARTICLE XIII
THE PLAN ADMINISTRATOR
13.1 - DESIGNATION AND ACCEPTANCE: The Employer shall designate the person
to serve as Plan Administrator. The person so designated shall signify in
writing his or her acceptance of this responsibility. If more than one (1)
person is designated, these persons shall be known as the Administrative
Committee and, where applicable, references in the Plan to the Plan
Administrator shall be deemed to refer to the Administrative Committee. The
original Plan Administrator shall be designated in the Adoption Agreement
and shall continue to serve until resignation or discharge.
13.2 - RESIGNATION AND REMOVAL - APPOINTMENT OF SUCCESSOR: The Plan
Administrator or members of the Administrative Committee may resign at any
time by delivering to the Employer a written notice of resignation, to take
effect at a specified date, which shall not be less than thirty (30) days
after delivery thereof, unless the notice is waived.
The Plan Administrator or member(s) of the Administrative Committee may be
removed with or without cause by the Employer. Removal shall be by delivery
of a written notice of removal to take effect at a specified date which
shall not be less than thirty (30) days after delivery thereof, unless the
notice is waived.
The Employer, upon receipt of notice of resignation or upon giving notice of
removal of the Plan Administrator or member(s) of the Administrative
Committee, shall promptly designate a successor Plan Administrator or
Administrative Committee member(s) who shall signify acceptance of this
position in writing. In the event no successor is appointed, the Employer
will function in that capacity until a new Plan Administrator or Committee
member has been appointed and has accepted the appointment.
13.3 - ALLOCATION AND DELEGATION OF RESPONSIBILITIES: In the absence of an
appointment of specific individuals by the Employer, the Plan Administrator
may engage or consult with specialists such as legal counsel, actuaries,
accountants and other persons to assist in the performance of the duties of
this position.
The Plan Administrator or Administrative Committee may allocate fiduciary
responsibilities, other than Trustee responsibilities, to named persons or
parties provided the allocation or delegation is in writing.
In the absence of an appointment of a specific individual by the Employer,
the Plan Administrator or Administrative Committee may appoint, in writing,
an Investment Manager, to whom may be delegated the authority to manage,
acquire, invest or dispose of all or any part of the trust assets. With
regard to the assets entrusted to his or her care, the Investment Manager
shall provide written instructions and directions to the Trustee who, in
turn, shall be entitled to rely upon these written directions.
13.4 - DUTY AND RESPONSIBILITY OF PLAN ADMINISTRATOR: The primary
responsibility of the Plan Administrator is to administer the Plan for the
exclusive benefit of the Participants and their Beneficiaries in accordance
with the specific terms of the Plan. The Plan Administrator may correct any
defect, supply any omission or reconcile any inconsistency deemed necessary
or advisable to carry out the purpose of this Plan. Any interpretation or
construction shall be done in a manner that is nondiscriminatory, consistent
with the intent that the Plan shall continue to be a qualified plan under
section 401(a) of the Code and in compliance with the terms of ERISA. Any
construction or determination in good faith shall be conclusive and binding
on all persons except as otherwise provided herein or by law. The Plan
Administrator shall have all powers necessary or appropriate to accomplish
his or her duties under this Plan.
The Plan Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
a) To determine all questions of interpretation or policy in a manner not
inconsistent with this Plan;
b) To establish, subject to the limitations in the Plan, rules for the
administration of the Plan and the transaction of its business;
c) To accept as conclusive, the records of the Employer as certified to
the Plan Administrator with respect to any and all factual matters
about the employment of an Employee and/or Participant and all other
information required to be furnished by the Employer;
d) To determine all questions relating to an Employee's eligibility to
participate in or remain a Participant in the Plan;
e) To compute, certify and direct the Trustee with respect to the amount
and kind of benefits to which a Participant is entitled;
f) To authorize and direct the Trustee with respect to all disbursements
under the Plan and, when requested by the Trustee, to furnish the
Trustee with written instructions on matters pertaining to the Plan
and Trust upon which the Trustee may rely and act;
g) To maintain all necessary records needed for the administration of
the Plan;
h) To make and publish rules and regulations for Plan administration that
are not inconsistent with the provisions of the Plan;
i) To advise the Trustee regarding the short and long term liquidity
needs of the Plan in order that the Trustee might direct investments
accordingly and to advise, counsel and direct the Trustee with regard
to investments and other matters involving the trust assets;
j) To be responsible for preparing and filing disclosure and tax forms
required by the Secretary of Labor or the Secretary of the Treasury;
k) To furnish information and reports as required by law to each
Employee, Participant, or Beneficiary;
l) To request variances, deferrals, extensions or exemptions to make
elections for the Plan as permitted under the law when determined to
be in the best interests of the Plan and its Participants and/or
Beneficiaries; and
m) To secure the exact figures representing that portion of each
insurance premium payment which is the value of the annual
term insurance (term costs) for the preceding year for each insured
Participant and to see that the term cost is properly reported to the
individual Participant for personal income tax purposes.
13.5 - EXPENSES AND COMPENSATION: All expenses of administration, including
but not limited to those involved in retaining necessary professional
assistance, shall be borne by the Employer who shall reimburse the Plan for
these expenditures. The Employer shall furnish the Plan Administrator with
clerical and other assistance necessary for the performance of
administrative duties. The Plan Administrator shall receive reasonable
compensation for services rendered in administration of this Plan, unless
the Plan Administrator is a full-time Employee of any Employer establishing
this Plan.
13.6 - INFORMATION FROM EMPLOYER: To enable the Plan Administrator to
perform his or her functions, the Employer shall supply full and timely
information to the Plan Administrator (or designated agents) on all matters
relating to the Compensation of all Participants, their regular employment,
retirement, death, disability or termination of employment, and other
pertinent facts as required by the Plan Administrator (or agents). The Plan
Administrator (or agents) is entitled to rely on information supplied by the
Employer and shall have no duty or responsibility to verify that
information. The Plan Administrator shall advise the Trustees of facts
pertinent to the Trustee's duties under the Plan.
13.7 - ADMINISTRATIVE COMMITTEE -- MULTIPLE SIGNATURES: If an Administrative
Committee is established and its members have signified in writing their
acceptance, the signature of any one Committee member may be accepted by any
interested party as conclusive evidence that the Administrative Committee
has duly authorized the action and that it represents the will of and is
binding upon the whole Committee. Any person receiving documents or written
instructions and acting in good faith and in reliance thereon shall not be
obliged to ascertain the validity of action taken under the terms of this
Plan. The Committee shall act by a majority of its members and action may
be taken either by a vote at a meeting or in writing without a meeting.
13.8 - NOTICE OF CHANGE IN PLAN ADMINISTRATOR: If a new Plan Administrator
is appointed in accordance with Section 13.2, any Insurer or any other party
which has previously had dealings with the Plan Administrator shall be fully
protected in relying on any action taken or signature presented which would
have been proper in accordance with the information previously received
until notice of the appointment is received. Notice shall be given at the
home office of the Insurer or the principal office of any other party.
13.9 - INVESTMENT MANAGER: An Investment Manager appointed by either the
Plan Administrator or Employer is required to acknowledge in writing that he
or she has undertaken a fiduciary responsibility with respect to the Plan.
If an Investment Manager is appointed to manage the Plan assets, the Trustee
will not be liable for any act or omission of the Investment Manager within
the Investment Manager's delegated authority, or be under any obligation to
invest or otherwise manage any assets of the Trust Fund. In order to serve
as an Investment Manager, a person must qualify under one (1) of the
following categories:
a) A registered investment advisor under the Investment Advisory Act
of 1940, or
b) A bank, as defined under the Investment Advisers Act of 1940, or
c) An insurance company duly authorized to perform these services under
the laws of more than one (1) state, or
d) In any other manner determined by any regulation or ruling issued
pursuant to authority granted by ERISA.
ARTICLE XIV
TRUST FUND AND ITS ADMINISTRATION
--TRUSTEE'S POWER AND RESPONSIBILITIES--
14.1 - TRUST FUND: All contributions of money or property made by the
Employer under the provisions of this Plan and all investments and
reinvestments made with those contributions, and all income and profits less
any losses thereon, shall constitute the Trust Fund. The Trustee shall not
be responsible for the collection of any contributions to the Plan. The
Trustee shall, however, hold all contributions and investments thereof
pursuant to the terms of the Plan and Trust for the exclusive benefit of
Participants and their Beneficiaries.
14.2 - VALUATION OF TRUST FUND: At least once each year on the Valuation
Date specified in Section 2.42, and at any other times required by the Plan,
the Trustee shall determine the value of the Trust Fund. Assets of the
Trust Fund shall be valued at their fair market value at the close of
business on the Valuation Date. If the Valuation Date falls on a Saturday,
Sunday or legal holiday, the assets shall be valued on the first business
day immediately preceding that date, or, in the absence of readily
ascertainable market values, at the values that the Trustee shall determine,
in accordance with methods consistently followed and uniformly applied. Any
interest of the Plan Trust Fund invested in any common trust fund, combined
investment trust, collective or commingled trust fund shall be valued on the
basis of the valuation of the assets of that common, combined, collective or
commingled trust fund that coincides with or most recently precedes the
Valuation Date of this Trust.
On the basis of this valuation, each Participant's Individual Account shall
be adjusted in the ratio that that Participant's Account Balance bears to
all Account Balances to reflect the effect of income, realized and
unrealized profits and losses, expenses and all other transactions of the
preceding valuation period where applicable. These valuations and
adjustments to the Participants' Individual Accounts shall be made so as to
preserve for each Participant's Individual Account its beneficial interest
in the Trust Fund determined on the basis of the contributions made by and
on behalf of each Participant.
14.3 - INVESTMENT FUNCTIONS: Subject to any conditions or limitations
contained in the Plan, the Trustee is authorized and empowered to invest and
reinvest the Trust Fund. The Trustee shall have full power and authority to
perform this function, in any manner he or she deems advisable and which is
clearly not inconsistent with the funding contract(s) and method of the
Plan. The Trustee shall not be bound as to the character of any investment
by a statute or rule of law or custom governing the investment of Trust
Funds except as provided in this Plan and the requirements of ERISA. The
power and authorities of the Trustee include but are not limited to the
following:
(a) To hold, manage, invest and reinvest contributions to the Plan and
resulting income without distinction between principal and income as a
single Trust Fund, unless otherwise provided in the Plan;
(b) To invest and reinvest all or part of the Trust Fund in common trust
funds, combined investment trusts, collective or commingled funds of a
corporate trustee maintained exclusively for qualified plans under
section 401(a) of the Code, savings accounts in the savings department
(including certificates of deposit and time certificates) of a
corporate trustee, any type of security, including but not necessarily
limited to common stocks or preferred stocks; open end or closed end
mutual funds, corporate bonds, debentures, convertible debentures;
commercial paper, U.S. Treasury bills, notes and bonds; improved or
unimproved real estate located in the United States, loans to others
(except as prohibited by ERISA or the provisions of the Plan), at a
reasonable rate of interest and upon receipt of adequate security,
including chattel mortgages, first and second loan deeds or mortgages;
individual or group annuities, fixed or variable, including deposit
administration or investment type Contracts, individual or group life
insurance Contracts, or in other appropriate investments;
(c) To hold in the form of cash for distribution or investment a portion
of the Trust Fund that the Trustee deems prudent without liability to
account for interest thereon;
(d) To retain as the Trustee deems prudent any and all securities and
other property, real or personal, which at any time become a part of
the Trust Fund, as well as any property into which these securities or
other property may be converted by reason of any reorganization,
recapitalization, consolidation, merger, liquidation, exchange, or
other transaction;
(e) To sell, convert, assign, convey, exchange, transfer or otherwise
dispose of, or grant options with respect to, any and all securities
or other property, real or personal, constituting part of the Trust
Fund, at public or private sale, for such consideration and upon the
terms and conditions that the Trustee deems advisable, but without
liability on the part of the purchaser to see to the application of
the purchase money or to inquire into the validity or propriety of the
sale; and to execute and deliver good and sufficient deeds for any
real estate, conveying title free and clear of all defects;
(f) To manage and operate all real estate held in the Trust; to lease all
or any part of the real estate for the terms and rentals and upon the
conditions that the Trustee deems advisable even though the terms of
the lease may extend beyond the life of the Trust; to release,
mortgage, partition, vacate or abandon real estate; to grant and
acquire licenses and easements with respect to the real estate; to
make improvements to or upon the real estate; to construct, demolish,
alter, repair, maintain and rebuild buildings and other improvements;
and to use other assets of the Trust Fund for any of these purposes;
(g) To carry the securities and other property held by the Trust either
in the name of the Trust, or in the name of the nominee or in bearer
form;
(h) To vote, in person or by proxy, all securities held by the Trust; to
consent to or oppose the reorganization, recapitalization,
consolidation, merger, liquidation or sale of corporations or
properties; to exchange securities for other securities issued in
connection with or resulting from any such transaction; to pay any
assessment or expense which the Trustee deems advisable for the
protection of the Trust Fund as holder of any securities; to deposit
securities in any voting trust or with any protective or like
committee or with a Trustee or depository; to exercise any options
appurtenant to any securities for conversion into other securities;
and to exercise or sell any rights issued upon terms that the Trustee
deems prudent;
(i) To prosecute, defend, compromise, arbitrate or otherwise adjust or
settle claims in favor of or against the Trustee or the Trust Fund;
(j) To foreclose any obligation by judicial proceedings or otherwise;
(k) To borrow money, with or without giving security;
(l) To exchange any Trust property for other property and to grant
options to purchase or acquire any Trust property;
(m) To engage in any litigation, either for the collection of monies or
other properties due the Trust Fund, or in defense of any claim
against the Trust Fund, provided, however, that the Trustee shall not
be required to engage in or participate in any litigation unless the
Trustee shall have been indemnified to his or her satisfaction against
all expenses and liabilities to which the Trustee may become subject;
(n) To purchase and pay premiums on Contracts as required by the Adoption
Agreement and as directed by the Plan Administrator, provided funds
for these payments are then available from the Trust;
(o) To invest in and pay premiums on Contracts on the lives of key
Employees of the Employer, payable on death to the Trustee as
Beneficiary. These Contracts shall be vested exclusively in the
Trustee for the benefit of the Trust as a whole and shall not be
distributed in kind to a Participant in satisfaction of any interest
he or she may have in the Trust Fund.
14.4 - RECORDS AND REPORTS: The Trustee shall maintain accurate records and
detailed accounts of all investments, receipts, disbursements, and other
transactions hereunder. These records shall be available at all reasonable
times for inspection by the Plan Administrator, the Employer or any
Fiduciary, Participant or Beneficiary or authorized representative of these
persons. The Trustee shall submit or cause to be submitted in a timely
manner to the Plan Administrator only information reasonably required by the
Plan Administrator in connection with the preparation of the various reports
required to be made to regulatory agencies and to Plan Participants and
Beneficiaries.
14.5 - ANNUAL ACCOUNTING: Within sixty (60) days (or any other time mutually
agreed upon) following the close of each Plan Year, the Trustee shall file
with the Plan Administrator a written account setting forth a description of
all property purchased and sold and all receipts, disbursements and other
transactions effected by the Trustee during the Plan Year. The written
account shall include a list of property held by the Trustee at the end of
the period and the list shall include a valuation of each asset at its fair
market value as determined at the end of the Plan Year. The Plan
Administrator may approve the accounting by written notice of approval
delivered to the Trustee or by failure to object in writing to the Trustee
within sixty (60) days from the date upon which the account was delivered to
the Plan Administrator. If the Plan Administrator approves the accounting
either by written notice or by failure to object in writing within sixty
(60) days, the accounting by the Trustee shall be deemed approved. If the
accounting is deemed approved, then to the extent permitted by law, the
Trustee shall be released and discharged as to all items and matters set
forth in the accounting as if the accounting had been settled and allowed by
a decree of a court of competent jurisdiction. Nothing contained in this
Section will be construed or interpreted to deny the Trustee the right to
have his or her account judicially determined.
14.6 - COMPENSATION AND EXPENSES: The Trustee shall receive reasonable
compensation as agreed upon by the Trustee and the Employer. However, any
Trustee who is a full-time Employee of the Employer shall receive no
compensation for services as Trustee under this Plan, but the Employer shall
supply the Trustee with clerical help and assistance as deemed necessary in
the performance of duties under the Plan. The Trustee shall be entitled to
reimbursement by the Employer for all proper expenses incurred in carrying
out duties under this Plan, including reasonable legal, accounting and
actuarial expenses. The Trustee may charge the Trust Fund for these
expenses until paid by the Employer. All taxes of any and all kinds that
may be levied or assessed under existing or future laws upon, or in respect
of, the Trust Fund or the income thereof shall be paid from the Trust Fund.
14.7 - ELIGIBILITY OF TRUSTEE TO PARTICIPATE IN THE PLAN: No Trustee shall
be precluded from becoming a Participant under this Plan provided the
Trustee has satisfied the conditions for eligibility.
14.8 - MEETINGS - MAJORITY TO GOVERN - DELEGATION: If more than one Trustee
is appointed, the acts and decisions of the Trustees shall be by majority
vote. Any one of the Trustees may sign on behalf of all Trustees any
applications for Contracts or any papers which may be required by the
Insurer, stock exchange, mutual fund, banking institution, investment
advisory service or any other papers or documents which may be required for
the Trustees to carry out their duties under this Plan. The Trustees need
not call or hold meetings to make any decision or to take any action, but
any decision and any action may be taken by written documents signed by a
majority of the Trustees.
When two or more persons are appointed as Trustees, they are specifically
authorized, by written agreement between themselves, to allocate specific
responsibilities, obligations or duties among themselves. An original
written copy of the agreement is to be delivered to the Plan Administrator
and retained with the other Plan documents.
14.9 - NOT OBLIGATED TO QUESTION DATA: Each Employer shall furnish the
Trustee, Plan Administrator or Insurer with information necessary for the
administration of the Plan, including but not limited to changes in a
Participant's status, eligibility, mailing addresses and other data as
required. The Trustee, Plan Administrator and Insurer shall be entitled
to act on the information supplied them and shall have no duty or
responsibility to further verify or question this information.
14.10 - LIABILITY FOR APPLICATION OF FUNDS: All persons dealing with the
Trustee are released from inquiring into the decision or authority of the
Trustee and from seeing to the application of any monies, securities or
other property paid or delivered to the Trustee.
14.11 - MANNER OF PAYMENT: The Trustee may make any payment that he or she
is required to make under the Plan, by mailing to the person or entity a
check or delivering the annuity or other property directed to be distributed
by the Plan Administrator, at the last known address furnished to the
Trustee.
14.12 - UNCLAIMED BENEFITS: Any benefits payable to, or on behalf of, a
Participant or former Participant which are not claimed shall not bear
interest, but shall be deemed abandoned and relinquished only if the
Beneficiary or Participant cannot be located after reasonable efforts at the
time of termination of the Plan or an earlier time designated by the Plan
Administrator as permitted under any applicable law, ruling or regulation.
If a benefit is forfeited because the Participant or Beneficiary cannot be
found, the benefit will be reinstated if a claim is made by the Participant
or Beneficiary.
14.13 - CERTIFICATION AS TO TRUSTEES: A certificate signed by an officer of
the Employer or the Plan Administrator certifying the name and signature of
the Trustee on the date thereof shall be conclusive evidence for all
purposes that the designated entity or person is the Trustee at the date of
the certification and on any date thereafter until a new certificate is
received.
14.14 - DENIAL OF LIABILITY BY INSURER: In the event of a denial by the
Insurer of liability under its Contracts, the Trustee or Plan Administrator
shall be under no duty to bring action unless they have been first
indemnified to their satisfaction by the Participant or his or her
Beneficiaries for all anticipated costs, expenses and attorney fees. Nor
shall the Employer, Trustee, or Plan Administrator be responsible for the
validity of any Contract, for the failure on the part of the Insurer to make
any payments or provide any benefit under any Contract, for the action of
any person or persons which may render any Contract invalid or
unenforceable, for any delay or any act occasioned by any restriction or
provision of any Contract imposed by the Insurer.
14.15 - DEGREE OF CARE - LIMITATIONS ON LIABILITY: The Trustee shall
discharge his or her duties, obligations and responsibilities in conformance
with the care, skill, prudence and diligence under the circumstances then
prevailing, that a prudent person acting in a like capacity and familiar
with like matters would use in the conduct of an enterprise of a like
character with like aims.
If the Plan or any written rule or direction of the Plan Administrator or
Employer shall, by agreement, allocate responsibilities among Co-Trustees,
only the Trustee to whom the responsibilities are delegated will be
responsible for any breach unless the other Trustee or Trustees knowingly
participate therein.
In the event that an Investment Manager is appointed pursuant to Section
13.9, no Trustee shall be liable for the acts or omissions of the Investment
Manager or be under any obligation to invest or manage the assets of the
Plan which are subject to management by an Investment Manager.
The Trustee shall not be liable for any losses incurred by the Trust by any
lawful direction to invest communicated by the Plan Administrator. The
Trustee shall be under no liability for distributions made or other action
taken or not taken at the written direction of the Plan Administrator, other
than to the extent required of a prudent Co-Fiduciary under ERISA. It is
specifically understood that the Trustee 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 under the Plan, the amount of benefit to which the Participant
or Beneficiary shall be entitled to receive from the Plan or the size and
type of any Contract to be purchased from any Insurer for any Participant or
similar matters; it being understood that all these responsibilities under
the Plan are vested in the Plan Administrator. Nor shall the Trustee be
responsible for the adequacy of the Trust to meet and discharge any and all
payments and liabilities under the Plan.
Nothing contained in this Plan shall be deemed to enlarge the
responsibilities or liabilities of any Trustee or Co-Trustee or any other
Fiduciary with respect to the Plan beyond those imposed by ERISA and all
rulings and regulations promulgated thereunder. However, nothing herein
shall exculpate or relieve the Trustee from liability for any losses to the
Plan incurred by negligence, bad faith or knowing participation in a breach
of trust nor shall the Trustee be relieved from the duty to conduct a
periodic review to assure that delegated duties and responsibilities are
being properly carried out by all persons acting as Fiduciaries with respect
to the Plan and by all persons to whom these duties and responsibilities
have been delegated.
14.16 - PROHIBITED TRANSACTIONS: Notwithstanding any other provisions of
this Plan to the contrary, neither the Trustee nor any other Fiduciary shall
engage in a transaction known to be a "Prohibited Transaction" under ERISA
at the time of the proposed transaction. If there is any uncertainty or
dispute respecting the proposed transaction, neither the Trustee nor any
other Fiduciary is required to act or be liable for failure to act, unless
and until a final administrative or judicial determination is obtained by
any person interested in the transaction or an exemption is obtained from
the proper regulatory authorities and the information transmitted to the
Trustee or other Fiduciary together with an opinion of counsel that it is
lawful under the Plan and ERISA. Subject to any future changes in the law,
rulings or regulations, the following constitute prohibited transactions:
a. Sale or exchange or leasing of any property between the Plan and a
party-in-interest;
b. Lending of money or extension of credit between the Plan and a
party-in-interest;
c. Furnishing of goods, services or facilities between the Plan and a
party-in-interest; or
d. Transfer to, or use by or for the benefit of, a party-in-interest of
any assets of the Plan.
14.17 - RESIGNATION OR REMOVAL OF TRUSTEE: The Trustee may resign at any
time by giving thirty (30) days advance written notice to the Employer. The
resignation shall become effective thirty (30) days after receipt of the
notice unless a shorter period is agreed upon.
The Employer may remove any Trustee at any time by giving written notice to
the Trustee and the removal shall be effective thirty (30) days after
receipt of this notice unless a shorter period is agreed upon.
If the resigning or removed Trustee is the sole Trustee, he or she shall
transfer all of the assets of the Trust then held by the Trustee as
expeditiously as possible to the successor Trustee or Trustees after paying
or reserving a reasonable amount as deemed necessary to provide for the
expense in the settlement of the accounts and the amount of any compensation
due him or her and any sums chargeable against the Trust for which he or she
may be liable. If the reserved funds are not sufficient, then the Trustee
shall be entitled to reimbursement from the successor Trustee out of the
assets in the successor Trustee's hands under this Plan. If the amount
reserved is in excess of the amount actually needed, the former Trustee
shall return the excess to the successor Trustee.
Upon receipt of these assets, the successor Trustee shall thereupon succeed
to all of the powers and duties given to the Trustee by this Plan.
The resigning or removed Trustee shall render an accounting to the Employer
and unless objected to by the Employer, the accounting shall be deemed
approved and the resigning or released Trustee shall be released and
discharged as to all matters set forth in the accounting.
In the alternative, there may be a judicial settlement of the account
instituted by either the Trustee or Employer in a Court of competent
jurisdiction.
14.18 - APPOINTMENT OF SUCCESSOR TRUSTEE: The Employer shall have the power
to appoint a successor or Co-Trustee to replace or join the named Trustee of
the Plan. The appointment of a successor Trustee or Co-Trustee shall become
effective upon acceptance in writing of the appointment. Successor or
Co-Trustees may be individual or corporate and shall have no liability for
acts or omissions of the former Trustee.
ARTICLE XV
AMENDMENT OF PLAN AND ADOPTION AGREEMENT
15.1 - RIGHT OF EMPLOYER TO AMEND THE PLAN: The Employer reserves the right
to amend this Plan in any and all respects without the consent of any
Participant or Beneficiary as follows:
(a) OPTIONAL PROVISIONS: The Employer may amend the Plan by
(1) Changing the choice of options in the Adoption Agreement,
(2) Adding overriding plan language to the Adoption Agreement where
such language is necessary to satisfy section 415 of the Code or to
avoid duplication of minimums under section 416 of the Code because
of the required aggregation of multiple plans, and
(3) Adding certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not
cause the Plan to be treated as individually designed.
(b) NONOPTIONAL PROVISIONS: The Employer may amend any nonoptional
portions of the text of both the Adoption Agreement and the Plan
document. However, an Employer who amends any nonoptional portion of
the Plan for any reason will no longer participate in this Prototype
Plan. If changes of this nature are made and the Plan is adopted as
changed, it shall become an individually designed Plan and shall be
administered as an individually designed Plan.
In all situations described under this Subsection (b), the Plan shall
be submitted to the Internal Revenue Service as an individually
designed Plan for qualification under Section 401(a) of the Code.
15.2 - RIGHT OF LUTHERAN BROTHERHOOD (LB) TO AMEND THE PLAN: Each Employer,
by adopting this Plan, expressly delegates to Lutheran Brotherhood (LB) the
authority, but not the duty, to amend this Plan, to comply with state or
federal laws, rules or regulations relating to qualified plans without any
further action or consent of the Employer. LB shall be under no obligation
to take any action whatsoever and the Employer waives any rights or claims
against LB for any actions taken or actions not taken by LB with respect to
this power of amendment. If LB amends the Plan, the Employer is deemed to
have consented to any amendments made by LB. Copies of any amendments shall
be forwarded to any Employer who has adopted and maintained this Plan as a
Prototype Plan. Any amendment made by LB under this paragraph shall be
limited as provided in Section 15.3, below.
15.3 - LIMITATIONS ON POWER TO AMEND: No amendment by either the Employer or
LB shall reduce or otherwise affect any rights or benefits of a Participant
or Beneficiary acquired prior to an amendment, including the protection of
any vested interests as set forth in Article IX, except as required to
qualify the Plan under the Code; nor shall any amendment increase the duties
or responsibilities of the Trustee or Plan Administrator without their
consent, attempt to deprive the Insurer of any of its exemptions or
immunities with respect to Contracts it has issued, provide for the use of
Contracts or assets held under this Plan other than for the exclusive
benefit of the Participants or their Beneficiaries, or permit any Contracts
or assets of this Plan to revert to or be used by the Employer prior to the
satisfaction of all liabilities under the Plan to the Participants or their
Beneficiaries.
No amendment to the Plan (including a change in the actuarial basis for
determining optional or early retirement benefits) shall be effective to the
extent that it has the effect of decreasing a Participant's Accrued Benefit.
Notwithstanding the preceding sentence, a Participant's Accrued Benefit may
be reduced to the extent permitted under section 412(c)(8) of the Code. For
purposes of this paragraph, a plan amendment which has the effect of (a)
eliminating or reducing an early retirement benefit or a retirement-type
subsidy, or (b) eliminating an optional form of benefit, with respect to
benefits attributable to service before the amendment, shall be treated as
reducing Accrued Benefits. In the case of a retirement-type subsidy, the
preceding sentence shall apply only with respect to a Participant who
satisfies (either before or after the amendment) the preamendment conditions
for the subsidy. In general, a retirement-type subsidy is a subsidy that
continues after retirement, but does not include a qualified disability
benefit, a medical benefit, a social security supplement, or a death benefit
(including life insurance).
ARTICLE XVI
TERMINATION AND DISCONTINUANCE
16.1 - PERMANENCY: The Employer adopting this Plan hopes and expects to
continue this Plan and make the necessary contributions indefinitely, but
continuance and payment are not assumed contractual obligations. Neither
the Adoption Agreement, nor this Plan and Trust, nor any amendment or
modification thereof, nor the making of contributions, nor the purchase of
any Contract, nor the creation of any fund or account, nor the payment of
any benefit shall be construed as giving any Participant or any person
whomsoever any legal or equitable right against the Employer, the Trustee,
the Plan Administrator, or the Trust Fund except as specifically provided
herein, or as provided by law, nor as giving any Participant the right to be
continued in the service of the Employer. All Participants shall remain
subject to discharge to the same extent as if this Plan had never been
adopted.
16.2 - TERMINATION OF PLAN BY EMPLOYER: The Plan may be terminated by the
Employer at any time. Plan termination shall be effective on the date
specified by the Employer. Upon termination the liability of the Employer
to make contributions shall cease unless required by any applicable
statutory requirement.
Notice of the termination and the effective date shall be given to the
Trustee, Plan Administrator, Insurer, Participants, and their Beneficiaries,
and the required filings must be made with the Internal Revenue Service and
any other regulatory body as required by current rules and regulations.
16.3 - INVOLUNTARY TERMINATION: This Plan shall terminate if the Employer is
dissolved, deemed bankrupt, insolvent, or merged or consolidated with
another company, except that in the event of the dissolution, merger, or
consolidation of the Employer, provisions may be made, subject to the
condition set forth in Section 9.12, by a successor for the continuance of
the Plan. The successor shall in that event be substituted for the present
Employer by an instrument authorizing the substitution by the amendment of
the name of the Employer in the Adoption Agreement.
16.4 - EFFECT OF TERMINATION AND PARTIAL TERMINATION:
(a) VESTING: Upon termination of the Plan or upon a partial termination
of the Plan as determined by ERISA or any other regulations that may
be issued by the Secretary of the Treasury, a Participant shall be one
hundred percent (100%) vested in his or her Accrued Benefit to the
extent then funded.
(b) PRELIMINARY PROCEDURES: The Plan Administrator shall give notice of
termination and file any necessary applications in connection with the
formal termination which are required under any law and/or rules and
regulations which have been or may be issued in the future by the
appropriate governmental regulatory agencies. The Trustee shall
collect and preserve all Trust assets pending review and any releases
or determinations which may be a part of the procedures of the
applicable agency, including any notice of sufficiency that may be
issued by the Pension Benefit Guaranty Corporation (PBGC).
(c) ALLOCATION AND DISTRIBUTION: Upon approval by the PBGC that the Plan
is sufficient for "benefit liabilities" or for "guaranteed
liabilities" in the case of a distress termination, or a letter of
noncompliance has not been issued within the sixty (60) day period (as
extended) following the receipt by the PBGC of the follow-up notice in
the case of a standard termination, the Plan Administrator shall
allocate the assets of the Plan in accordance with Section 4044 of
ERISA, or to any other applicable statute and any applicable rules or
regulations issued by any regulatory body. The Plan Administrator
shall then allocate the assets of the Plan, to the extent the assets
are available, among those having an interest therein in accordance
with the following order of categories:
(1) The portion of the Participant's Accrued Benefit attributable to
his or her Voluntary Contributions.
(2) The Portion of the Participant's Accrued Benefit attributable to
his or her mandatory contributions, if any.
(3) Accrued Benefits which were paid as an annuity or which could have
been paid at date of termination of the Plan as follows:
(i) To each of the Participants or Beneficiaries who were receiving
annuity payments as of the beginning of the three (3) year
period ending on the termination date of the Plan, a benefit
based on the provisions of the Plan (as in effect during the
five (5) year period ending on that date) which would produce
the smallest benefit.
(ii) To each of those Participants or Beneficiaries who would have
been receiving annuity payments (other than those described in
subparagraph (c)(3)(i) immediately above) as of the beginning of
the three (3) year period described in subparagraph (c)(3)(i)
immediately above, had the Participant retired prior to the
beginning of that three (3) year period and his or her benefits
had commenced (in the Normal Annuity Form of settlement under
the Plan) as of the beginning of that period and were based
on the provisions of the Plan (as in effect during the five (5)
year period ending on that date) which would produce the
smallest benefit.
For the purpose of subparagraph (c)(3)(i) above, the lowest
benefits paid during a three (3) year period shall be considered
the benefit payable for that period.
(4) To each of those Participants or Beneficiaries who are entitled to
any other benefits under the Plan which are guaranteed under the
termination insurance provisions of ERISA.
(5) To each of those Participants or Beneficiaries who are entitled
to any other nonforfeitable benefits under the Plan.
(6) To each of those Participants or Beneficiaries who are entitled to
any other benefits under the Plan.
If the assets available for allocation under any priority category
(other than the fifth and sixth priority categories) above are
insufficient to satisfy in full the benefits of all individuals
entitled thereto, the assets shall be allocated prorata among those
individuals on the basis of their Actuarial Equivalent value (as of
the termination date) of their respective benefits.
If any assets of the Plan attributable to Employee contributions
remain after all liability of the Plan to Participants and their
Beneficiaries have been satisfied, such assets shall be equitably
distributed to the Employees who made those contributions (or their
Beneficiaries) in accordance with their rate of contributions.
Any residual assets of the Plan remaining after distribution in
accordance with this subsection shall be allocated to the eligible
Participants under a formula that neither causes the
disqualification of the Plan nor is discriminatory.
(7) To the extent that there are any residual assets of the Plan
remaining after liabilities to Participant and their Beneficiaries
have been allocated, the balance shall be returned to the Employer.
16.5 - FORM OF DISTRIBUTION: Distribution of the respective interests on
termination of the Plan shall be in the form of a Nontransferable Annuity on
the normal annuity form commencing on the Normal Retirement Date or the
distribution may be made under one of the optional forms set forth in
Section 7.6 at the request of the Participant or Beneficiary and with the
approval of the Plan Administrator. The Plan's obligation may also be
satisfied to the extent of the cash values of any Contract(s) on the life of
the Participant by the Trustee endorsing those Contracts so as to vest all
the right, title and interest therein to the Participant in whose name the
Contract was issued and delivering the Contract(s) to the Participant. No
option can be made available to any Participant or Beneficiary unless it is
made available to all Participants and Beneficiaries on a uniform and
nondiscriminatory basis.
Any distribution under this Article shall also be subject to all applicable
limitations, conditions, and requirements, including Article VII,
Distribution of Retirement Benefits, Article VIII, Joint and Survivor
Annuity Requirements, and Section 16.6, Limitations of Benefits on Early
Plan Termination.
16.6 - LIMITATION OF BENEFITS ON EARLY PLAN TERMINATION FOR PLAN YEARS
BEGINNING BEFORE JANUARY 1, 1991:
(a) LIMITATION ON BENEFITS: If the Plan is (i) terminated within ten (10)
years after its initial effective date or (ii) benefits become payable
within that ten (10) year period or (iii) benefits become payable
after that ten (10) year period but before the full current costs for
the first ten (10) years have been met, then the amount of the
Employer contributions which may be used for the benefit of any
Employee, former Employee, retired Employee, or the Beneficiary of
any Employee who was among the twenty five (25) highest paid Employees
of the Employer at the time the Plan was established and whose
anticipated annual benefit exceeds one thousand five hundred dollars
($1,500) shall not at any time within the above periods exceed the
larger of the following:
(1) Twenty thousand dollars ($20,000) or
(2) Twenty percent (20%) of the first fifty thousand dollars ($50,000)
of that Employee's annual average Compensation over the immediately
preceding five (5) years (or the number of years since the initial
effective date of the Plan, if less) multiplied by his or her
number of years from the Plan's initial effective date to the
earliest of (i) termination of the Plan, or (ii) the date that
benefit of the Employee becomes payable, or (iii) the date of
the failure to meet the full current costs of the Plan.
Similar limitations are applicable to the current payment of
disability income benefits, if any, provided in the Plan.
(b) APPLICATION OF ABOVE RULE TO SPECIFIC SITUATIONS: The application of
the above rule shall be governed by the following:
(1) PAYMENT OF DEATH BENEFITS: The rule stated in Section 16.6(a)
shall not restrict or limit the current payment of any death
benefit called for by the Plan while the Plan is in full effect and
its full current costs have been met.
(2) PAYMENT OF RETIREMENT ANNUITY: The rule stated in Section 16.6(a)
shall not restrict or limit the payment of the full basic
retirement annuity payments to any retired Participant when due if
the Plan is not terminated and the full current costs are met.
(3) PAYMENT OF TERMINATION BENEFITS: If a Participant to whom Section
16.6(a) applies leaves the employment of the Employer or withdraws
from participation under the Plan prior to his or her Normal
Retirement Date when the full current costs have been met, the
benefits which he or she may receive from the Employer's
contributions shall not at any time, within the first ten (10)
years after the Effective Date, exceed the benefits set forth in
Section 16.6(a).
(c) TREATMENT OF EXCESS RESERVES ON TERMINATION OF PLAN: Any excess
reserves arising because of application of the foregoing provisions of
this Section upon termination of the Plan shall be used and applied
pro rata for the benefit of unrestricted Participants on the basis of
their respective Accrued Benefits at the date of the termination of
the Plan. After satisfaction of the Accrued Benefit liabilities
to the unrestricted Participants, allocation of any remaining excess
reserves shall be used and applied pro rata for the benefit of the
restricted Participants not to exceed their Accrued Benefits at date
of Plan termination. If there are any excess reserves still
remaining, they will be disposed of as provided for in Section 16.4.
(d) EFFECT OF PLAN AMENDMENT: In the event the Plan is hereafter amended
so as to increase substantially the extent of possible discrimination
as to contributions and as to benefits actually payable in the event
of the subsequent termination of the Plan or the subsequent
discontinuance of contributions thereunder, then the provisions of
this Article shall be applicable to the additional benefits as if
those benefits were provided under a new Plan established on the date
of the amendment. The original group of twenty-five (25) employees
(as described in Section 16.6(a) above) will continue to have the
limitations therein stated apply as if the Plan had not been changed.
The restrictions relating to the change of Plan should apply to
benefits or funds for each of the twenty-five (25) highest paid
Employees on the effective date of the change except that these
restrictions need not apply with respect to any Employee in this group
for whom the normal annual pension or annuity provided by Employer
contributions prior to that date and during the ensuing ten (10)
years, based on his or her rate of Compensation on that date, could
not exceed $1,500.
The Employer contributions which may be used for the benefit of the
new group of twenty-five (25) Employees will be limited to the
greater of:
(1) The Employer contributions (or funds attributable thereto) which
would have been applied to provide the benefits for the Employee if
the previous plan had been continued without change;
(2) $20,000; or
(3) The sum of (i) the Employer contributions (or funds attributable
thereto) which would have been applied to provide benefits for the
Employee under the previous plan if it had been terminated the day
before the effective date of change, and (ii) an amount computed by
multiplying the number of years for which the current costs of the
plan after that date are met by (A) 20 percent of his or her annual
Compensation, or (B) $10,000, whichever is smaller.
(e) ALTERNATIVE LIMITATION: Notwithstanding the above limitations, the
following limitations will apply if they would result in a greater
amount of Employer contributions to be used for the benefit of the
restricted Employee:
(1) In the case of a substantial owner (as defined in section
4022(b)(5) of ERISA), a dollar amount which equals the present
value of the benefit guaranteed for that Employee under section
4022 of ERISA, or if the plan has not terminated, the present value
of the benefit that would be guaranteed if the plan terminated on
the date the benefit commences, determined in accordance with
regulations of the Pension Benefit Guaranty Corporation (PBGC); and
(2) In the case of the other restricted Employees, a dollar amount
which equals the present value of the maximum benefit described in
section 4022(b)(3)(B) of ERISA (determined on the earlier of the
date the Plan terminates or the date benefits commence, and
determined in accordance with regulations of PBGC) without regard
to any other limitations in section 4022 of ERISA.
(f) CASH DISTRIBUTIONS - ESCROW REQUIREMENT: The conditions of this
Section shall not restrict the payment in one lump sum of the entire
amount to which the retired Participant is entitled while the Plan is
in full effect and while its full current costs have been met,
provided the following conditions are met: The Participant described
in this Section must enter into a written agreement with the Trustee,
binding upon the Participant's estate, in which the Participant agrees
to repay to the Trust, a sum equal to the Actuarial Equivalent of the
amounts by which his or her monthly retirement benefits herein would
have been decreased during his or her then remaining lifetime pursuant
to the provisions set forth in Section 16.6(a) and Section 16.6(b)
above, in the event the Plan is terminated within the first ten (10)
years after its establishment, or in the event a default occurs in the
payment of full current costs of the Plan for any year ending within
the first ten (10) years after its establishment. The Participant
must also guarantee payment of any amount required to be repaid under
the agreement by delivering a suitable bond to the Trustee or by
depositing with a depository acceptable to the Trustee, simultaneously
with the lump sum payment, property having a fair market value equal
to one hundred twenty-five percent (125%) of the amount repayable if
the Plan had been terminated on the date of payment of the entire
amount in one lump sum. This property is to be held by the depository
until receipt of a certification from the Trustee that the Participant
described in this Section (or the estate) is no longer obligated to
repay any amount under the agreement. The Participant must further
agree that if the market value of the property held by the depository
falls below one hundred ten percent (110%) of the amount which would
then be repayable if the Plan were to be terminated, he or she will
deposit additional property necessary to bring the value of the
property held by the depository up to one hundred twenty-five percent
(125%) of that amount.
(g) FUTURE REVOCATION OF ARTICLE XVI: In the event that Congress should
provide by statute, or the Treasury Department or the Internal Revenue
Service should provide by regulation or ruling, that the limitations
provided for in this Section are no longer necessary in order to meet
the requirements for a qualified pension plan under the Internal
Revenue Code as then in effect, the limitations in this Section shall
become void and shall no longer apply without the necessity of
amendment to this Plan.
16.7 - LIMITATION OF BENEFITS ON EARLY PLAN TERMINATION FOR PLAN YEARS
BEGINNING ON OR AFTER JANUARY 1. 1991:
In the event of plan termination, the benefit of any highly
compensated active or former Employee is limited to a benefit that is
nondiscriminatory under section 401(a)(4) of the Code.
For Plan Years beginning on or after January 1, 1991, benefits
distributed to any of the twenty-five (25) most highly compensated
active and former highly compensated Employees are restricted such
that the annual payments are no greater than an amount equal to the
payment that would be made on behalf of the Employee under a single
life annuity that is the actuarial equivalent of the sum of the
Employee's Accrued Benefit and the Employee's other benefits under
the Plan.
The preceding paragraph shall not apply if: (a) after payment of the
benefit to an Employee described in the preceding paragraph, the value
of plan assets equals or exceeds 110% of the value of current
liabilities, as defined in section 412(l)(7) of the Code, or (b) the
value of the benefits for an Employee described above is less than one
percent (1%) of the value of current liabilities.
For purposes of this Section, benefit includes loans in excess of the
amount set forth in section 72(p)(2)(A) of the Code, any periodic
income, any withdrawal values payable to a living Employee, and any
death benefits not provided for by insurance on the Employee's life.
ARTICLE XVII
MISCELLANEOUS
17.1 - STANDARD OF CONDUCT - CO-FIDUCIARIES: For purposes of ERISA, all
Fiduciaries, including the Employer, the Plan Administrator or
Administrative Committee, the Trustee, and any others shall each discharge
their respective duties under the Plan with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with like matters would use in the
conduct of an enterprise of like character and with like aims. These duties
include the appointment and retention of Fiduciaries and agents by those
having appointive authority under the Plan.
All Fiduciaries by accepting appointment are responsible for carrying out
their own duties in accordance with the standards required under ERISA and
all regulations and rulings promulgated thereunder. All Fiduciaries shall
be responsible (except in case there is an Investment Manager as provided
for under Section 13.9) for the actions or failure to act of all other
Fiduciaries with respect to the Plan if he or she participates, approves,
acquiesces in or conceals a breach committed by another Fiduciary, or if the
Fiduciary's failure to exercise reasonable care in the administration of his
or her own duties enables the breach to be committed. Each Fiduciary is
required to act prudently in the delegation or allocation of the
responsibilities to other persons and to use reasonable care to prevent
others from committing a breach.
If duties are properly delegated or allocated among Fiduciaries, only the
Fiduciary to whom they are delegated shall be responsible for a breach
unless other Fiduciaries knowingly participate in the breach or the other
Fiduciaries fail to conduct a periodic review to assure that delegated
duties and responsibilities are being carried out by all persons acting as
Fiduciaries with respect to the Plan and by all persons to whom any of these
duties and responsibilities have been delegated.
17.2 - PROHIBITION AGAINST DIVERSION - CORRECTION OF ERRORS: There shall be
no diversion of any portion of the assets of the Plan other than for the
exclusive benefit of the Participants and their Beneficiaries. No amount
contributed shall revert to the Employer until all obligations of the Plan
are satisfied, except for the following limited reasons:
(a) Any contribution made to this Plan by the Employer because of a
mistake of fact may be returned to that Employer within one (1) year
of the contribution.
(b) Any contribution made by the Employer which is conditioned on the
deductibility of that contribution may be refunded to the Employer, to
the extent the deduction is disallowed under section 404 of the Code,
within one (1) year after the disallowance.
(c) Any contribution made by the Employer prior to initial qualification
of the Plan by the Internal Revenue Service as provided for in Section
1.3 which does not receive a favorable letter of determination may be
returned to the Employer within one (1) year after the date the
initial qualification is denied, but only if the application for the
qualification is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan is adopted,
or such later date as the Secretary or the Treasury may prescribe.
(d) Upon a Plan termination where residual assets remain, those assets
will be treated as provided for in the last paragraph of Section 16.4
of this Plan.
17.3 - GENERAL UNDERTAKING OF ALL PARTIES: All parties to this Plan and all
persons claiming any interest whatsoever under the Plan agree to perform any
and all acts and execute any and all documents which may be necessary or
desirable for the carrying out of this Plan and Trust and any of its
provisions.
17.4 - AGREEMENT BINDS HEIRS, ETC.: This Plan shall be binding upon all
parties to the Plan, present and future, and upon their heirs, executors,
administrators, successors and assigns.
17.5 - INALIENABILITY OF BENEFITS: No benefit or interest available
hereunder will be subject to assignment or alienation, either voluntarily or
involuntarily. The prohibition against assignment and alienation of
benefits 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 the order is determined to be a qualified
domestic relations order, as defined in section 414(p) of the Code, or any
domestic relations order entered before January 1, 1985.
17.6 - DURATION OF TRUST - RULE AGAINST PERPETUITIES: If the indefinite
continuance of this Plan would be in violation of any law, then this Plan
shall continue for the maximum period permitted by law and shall then
terminate, whereupon distribution of its assets shall be made as provided
for in Article XVI.
17.7 - RESPONSIBILITY OF INSURER UNDER THIS PLAN:
(a) The Insurer shall not be considered a party to this Plan or have any
responsibility for the validity of this Plan and Trust or for any
action taken by the Trustee. The Insurer shall be fully protected in
dealing with the Trustee as sole owner of the Contracts held under
this Plan and Trust and of the Trust Fund, if any. The Insurer shall
be fully protected in accepting premium payments from the Trustee and
in making payment of any amounts to the Trustee or in accordance with
the Trustee's directions, or the directions of the Plan Administrator,
without liability as to the application of these payments.
(b) The Insurer shall be fully protected from any liability in dealing
with the person who is the Trustee according to the latest
notification received by the Insurer at its home office or in assuming
that this document has not been amended or terminated until notice of
any amendment or termination has been received at its home office.
(c) The Insurer shall be entitled to assume that any person on whose life
an application is made for a Contract is eligible under the terms of
this Plan to have such a Contract issued, and in the form, benefits
and amounts requested.
17.8 - INDEMNIFICATION: The Employer may agree to indemnify the Plan
Administrator, or any other Employee, Fiduciary or agent, fully or
partially, for any expenses, penalties, damages or other pecuniary loss the
Employee, Fiduciary or agent may suffer as a result of his or her
responsibilities, obligations or duties in connection with the Plan or
Fiduciary activities actually performed in connection with the Plan.
Indemnification may be paid in whole or in part by Fiduciary liability
insurance paid for by the Employer, but in no event shall these items be
paid out of Plan assets.
17.9 - OVERPAYMENTS, RECOUPMENT: If a Participant or Beneficiary receives an
erroneous payment or payments to which the Participant or Beneficiary is not
entitled under the terms and provisions of the Plan, repayment of the amount
of the erroneous payment shall be made by the person receiving the payment.
In the event the Participant or Beneficiary fails to return the overpayment,
the Plan Administrator and/or Trustees shall exercise the care, skill and
diligence that a prudent person acting in a like capacity in a similar
enterprise would exercise in an attempt to collect money owed the Plan. If
other efforts fail to recover the excess payments and if prudent under the
circumstances, legal action may be instituted or payments to the Participant
or Beneficiary may be offset against the money owed the Plan.
17.10 - INVALIDITY OF CERTAIN PROVISIONS: If any provision of this Plan is
held invalid or unenforceable, the invalidity or unenforceability shall not
affect any other provision of the Plan and this Plan and Trust shall be
construed and enforced as if the provision had not been included.
17.11 - DISQUALIFICATION FROM USE OF PROTOTYPE PLAN: If the Employer's plan
fails to attain or retain qualification, that plan will no longer
participate in this prototype Plan and will be considered an individually
designed plan.
17.12 - SAVINGS CLAUSE: If, upon the initial submission of the Plan as
adopted by an Employer for approval under the Code, the Employer receives
notice in writing from the Internal Revenue Service that its participation
in the Plan does not qualify under the Code, its participation shall
terminate. The assets allocable to the Employer's account, less any amounts
required to pay taxes or administrative fees or other charges shall be
returned to the Employer and by the Employer to the Participants to the
extent those assets are attributable to the Employees' contribution. The
Plan as to the Employer shall be considered to be void and of no force and
effect and the Trustee shall be discharged from all obligations. Until the
Internal Revenue Service determines that the Plan qualifies under section
401(a) of the Code, no Participant or Beneficiary shall have any right or
claim to any asset of the Trust, except for proceeds payable under any
Contracts on the life of any Participant as a result of death. Under no
circumstances shall any values applicable to a prior Plan of an Employer
revert to that Employer if the Internal Revenue Service fails to rule
favorably upon this Plan.
17.13 - NOTIFICATION OF INTERESTED PARTIES: No person or entity shall bring
an action under section 7476 of the Internal Revenue Code, as amended, until
the Petitioner has given notice to the Secretary or his delegate and to
interested parties, as defined by Internal Revenue Regulations now or
hereafter issued, of the filing of the request for determination in the
manner prescribed by regulations issued or to be issued by the Secretary or
his delegate.
17.14 - 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 of this Plan.
17.15 - GENDER, CONSTRUCTION: Whenever the context shall require, the
masculine shall be read in the feminine, the singular shall be read in the
plural and the plural shall be read in the singular, and these terms shall
be used interchangeably.
<PAGE>
STANDARDIZED NONINTEGRATED DEFINED BENEFIT PLAN
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Defined Benefit
Pension Plan and Trust, to be effective as of the date specified below, for
the exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
---------------------------------------
Employees' Defined Benefit Pension Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Name, Address & Phone
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-------------------------------------------------------------------
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Predecessor Employer if prior service is to be counted
-------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
2. Form of Business (check one):
a. Regular Corporation
-----
b. S Corporation (electing Small Business Corporation)
-----
c. Professional Corporation or Association
-----
d. Partnership
-----
e. Sole Proprietor
-----
f. Non-Profit Corporation
-----
3. IRS Employer Identification Number: --
-- -- -- -- -- -- -- -- --
4. Incorporation date or date business commenced:
---------------------
Date predecessor business commenced:
-------------------------------
5. Employer's Federal income tax year: to
------------- --------------
month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
-----
b. An amendment and restatement
-----
This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date of
this Adoption Agreement; but Participants who retired or
who terminated their employment with the Employer prior
to the effective date of this agreement shall look solely
to the Plan as it existed prior to the adoption of this
amendment for their benefit if any, provided under the
Plan (except as provided in the Joint and Survivor
Annuity requirements of Article VIII of this Plan).
1. An amendment and restatement of an existing plan
-----
under this prototype to conform Plan to changes in
the law.
2. A substitution for or conversion of an existing
-----
plan.
Information about an existing plan:
Name of Plan
-------------------------------------
Effective date of plan
---------------------------
Letter serial no. of IRS
determination letter
-----------------------------
Date of IRS determination
letter
-------------------------------------------
3. An amendment of this Adoption Agreement which was
-----
previously adopted by the Employer to make changes
in optional provisions.
7. The Effective Date of this Adoption Agreement or
amendment shall be
------------------------------------------------
(The General Effective Date for an amendment and restatement after
the Tax Reform Act of 1986, will be the first day of the Plan Year
beginning in 1989.)
8. The Plan Year, as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve (12)
month period corresponding to the Employer's business year for
income tax purposes) ending on and each
--------------------
anniversary thereof. The first Plan Year shall begin
on , 19 .
--------------------- ---
9. The Limitation Year as defined in Section 2.24 of the Plan shall be
a. the same as the Plan Year
-----
b. the twelve (12) consecutive month period
-----
commencing on
----------------------------------------------
C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of legal
process.)
1. Employer appoints the following persons as Trustees (name two or
more):
----------------------------------------------------------------
(Name and Address)
----------------------------------------------------------------
(Name and Address)
----------------------------------------------------------------
(Name and Address)
2. Plan Administrator (select one):
a. Employer, or
-----
b. Administrator designated by Employer
-----
i. Individual
-----
Identification No.
-------------------------------
--------------------------------------------------
(Name and Address)
ii. Administrative Committee
----
Identification No.
-------------------------------
--------------------------------------------------
(Name and Address)
--------------------------------------------------
(Name and Address)
--------------------------------------------------
(Name and Address)
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
-----
ii. Trustee
----
iii. Plan Administrator
---
iv. Other
---- ---------------------------------------------
(Name)
b. Address
i. use Employer's address
-----
ii. use Address below:
----
---------------------------------------------------
(street address)
---------------------------------------------------
(city, state, zip)
II. DEFINITIONS
A. ACTUARIAL EQUIVALENT:
Except as provided in Section 2.2 of the Plan, the Actuarial Equivalent
to another benefit shall be determined on the basis of the mortality
table and the interest rate(s) specified below:
1. PRE-NORMAL RETIREMENT DATE MORTALITY: mortality table.
-------------
2. POST-NORMAL RETIREMENT DATE MORTALITY: mortality table.
-------------
3. PRE-NORMAL RETIREMENT DATE INTEREST: % per annum.
--------------
4. POST-NORMAL RETIREMENT DATE INTEREST: % per annum.
-------------
5. FACTORS AND ASSUMPTIONS: For purposes of determining certain
Actuarial Equivalents as indicated below, the following factors and
assumptions shall be used (describe the factors and assumptions and
the benefits and benefit forms to which they are applicable below
or on an exhibit referenced below:
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-------------------------------------------------------------------
(Note: The assumptions or factors must be specified in a manner
which precludes Employer discretion.):
B. COMPENSATION:
1. Compensation will mean all of each Participant's (select one):
a. Section 3121(a) wages (W-2 earnings - wages as defined
-----
for purposes of calculating social security taxes)
b. Section 3401(a) wages (wages as defined for purposes of
-----
income tax withholding)
c. Compensation as that term is defined in section
-----
415 of the Code
2. Which is actually paid to the Participant during (select one):
a. the Plan Year
-----
b. the calendar year ending with or within the Plan Year
-----
c. the Limitation Year ending with or within the Plan Year
-----
d. other (please specify)
----- -----------------------------------
(must be determined on the basis of any consecutive
period ending within the Plan Year which is at least 12
months in duration and applied uniformly to all Employees
in the Plan)
3. Employer contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code (select one):
a. shall be included in Compensation
-----
b. shall not be included in Compensation
-----
C. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the
age and service requirement of Section III except (select none, one
or both):
1. Union Employees who are included in a unit of employees
-----
covered by a collective bargaining agreement between the
Employer and the employee representatives, if retirement
benefits were the subject of good faith bargaining and if
two percent or less of the Employees of the Employer who
are covered pursuant to that agreement are professionals
as defined in section 1.410(b)-9(g) of the proposed
regulations. For this purpose, the term "employee
representatives" does not include any organization more
than half of whose members are employees who are owners,
officers, or executives of the Employer.
2. Nonresident aliens who receive no earned income from the
-----
Employer which constitutes income from sources within
the United States.
D. ENTRY DATE
Entry Date shall mean (select one):
1. Dual Entry Date (the first day of the Plan Year and six (6)
-----
months later).
2. the first day of the Plan Year (select one):
-----
a. Nearest to the date an Employee first meets the age and
-----
service requirements in the Plan.
b. In which an Employee first meets age and service
-----
requirements
c. After the Plan Year in which an Employee first meets the
-----
age and service requirements in the Plan (eligibility
must be age 20 1/2 and/or 6 months service or less
without regard to the 1,000 Hours of Service requirement)
E. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service may be credited in a number of different ways.
Select one of the methods listed below. The method selected will be
applied to all Employees covered under the Plan.
1. On the basis of actual hours for which an Employee is
-----
paid or entitled to be paid.
2. On the basis of days worked:
-----
An Employee shall be credited with ten (10) Hours of
Service if under Section 2.19 of the Plan the Employee
would be credited with at least one (1) Hour of Service
during the day.
3. On the basis of weeks worked:
-----
An Employee shall be credited with forty-five (45) Hours
of Service if under Section 2.19 of the Plan the Employee
would be credited with at least one (1) Hour of Service
during the week.
4. On the basis of semi-monthly payroll periods:
-----
An Employee shall be credited with ninety-five (95) Hours
of Service if under Section 2.19 of the Plan the Employee
would be credited with at least one (1) Hour of Service
during the semi-monthly payroll period.
5. On the basis of months worked:
-----
An Employee shall be credited with one hundred ninety
(190) Hours of Service if under Section 2.19 of the Plan
the Employee would be credited with at least one (1) Hour
of Service during the month.
F. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the
-----
Years of Service requirements. (Check this option if
predecessor employer maintained a plan.)
2. shall not be taken into account for purposes of meeting
-----
the Years of Service requirements.
G. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
-----
2. the later of (a) the time the Participant attains
-----
age (not to exceed 65) or (b) the completion of
----------
the (5th or less) anniversary of the date upon
------------
which the Participant commenced participation in the Plan.
3. the later of (a) the time the Participant attains age
----- -------
(not to exceed 65), or (b) the completion of the
------------
(5th or less) anniversary of the date upon which the
Participant commenced participation, but in no event later
than the Participant's seventieth (70th) birthday.
If, for Plan Years beginning before January 1, 1988, Normal Retirement
Age was determined with reference to the anniversary of the
participation commencement date (more than 5 but not to exceed
10 years), the anniversary date for Participants who first commenced
participation under the Plan before the first Plan Year beginning on
or after January 1, 1988, shall be the earlier of (A) the tenth
anniversary of the date the Participant commenced participation in the
Plan (or such anniversary as had been elected by the Employer, if less
than 10) or (B) the fifth anniversary of the first day of the first
plan year beginning on or after January 1, 1988. The participation
commencement date is the first day of the first Plan Year in which the
Participant commenced participation in the Plan.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
-----
2. Minimum age (Not more than 21; or if Entry Date in
----- -----
Section II.D.2.c is selected, not more than 20.5.)
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
-----
2. years and months of Service required.
----- -------- ---------
(Service cannot exceed one (1) year an zero (0) months if
graded vesting is selected or two (2) years and zero (0)
months if full and immediate vesting is selected. If Entry
Date in Section II.D.2.c is selected, service cannot exceed
six (6) months if graded vesting is selected or one (1)
year and six (6) months if full and immediate vesting is
selected.)
IV. NORMAL RETIREMENT BENEFIT
A. The amount of monthly pension shall be:
percent (%) of the Participant's Average
-----
Monthly Compensation.
B. Credited Years of Service shall be (select one):
1. All of an Employee's Years of Service with the Employer.
-----
2. Years of Service during which an Employee is a Participant
-----
in the Plan.
C. Benefit Reduction (select one):
l. No reduction
-----
2. Reduction for short service. Reduce benefit by
----- --------------
(e.g., 1/15) for each year of Service less than
-------------
(e.g., 15). [Reduce benefit in proportion to Years of
Service.]
D. Normal form of Retirement Benefit (select one):
1. Monthly life income.
-----
2. Monthly life income with 60 installments certain.
-----
3. Monthly life income with 120 installments certain.
-----
E. Compensation shall be averaged over (select one):
1. Career average (average of all years of participation).
-----
2. Average of highest consecutive years of
----- ---------
participation prior to the date the benefit is determined
(not less than three (3) nor more than ten (10)).
3. Average of highest consecutive years of
----- ---------
participation (not less than three (3)) out of year
----------
period prior to Normal Retirement Date (not less than three
(3) nor more than ten (10)).
F. PERIOD OF COMPENSATION (select one):
For purposes of determining Average Annual Compensation, a Year of
Participation shall be based on (select one):
1. The Plan Year.
-----
2. The calendar year ending with or within the Plan Year.
-----
3. The Employer's fiscal year.
-----
4. Other
----- -------------------------------------------------------
Options 3 and 4 must be determined on the basis of any
consecutive period ending within the Plan Year which is at
least twelve (12) months in duration and applied uniformly.
G. The minimum monthly retirement benefit shall be $ (not less
------------
than ten dollars ($10)).
H. In the event a Participant's monthly Compensation changes by an amount
that would adjust the monthly pension by $ (not less than
-------------
ten dollars ($10)), the projected pension shall then be adjusted as
provided in Sections 5.4 and 5.5 of the Plan.
I. ADJUSTMENT FACTORS FOR DISTRIBUTION PRIOR TO NORMAL RETIREMENT
Distribution of the Participant's Accrued Benefit may commence prior
to the Normal Retirement Date; provided, however, that the benefits to
be made available to the Participant terminating employment prior to
his/her Normal Retirement Date shall in no event exceed the following:
1. Maximum Where Distribution is Postponed to Normal Retirement
Date:
The benefits shall not exceed the amount of the Normal
Retirement Benefit that could be provided on his or her
Normal Retirement Date on the Normal Annuity Form multiplied by
a fraction, the numerator of which is the actual number of Years
of Service with the Employer at the date of termination of
employment and the denominator is the total number of Years of
service he or she would have had assuming that he or she had
remained in service until the Normal Retirement Date.
For the purpose of this calculation, it shall be assumed that
the Participant's Compensation at date of termination continued
to what would have been his or her Normal Retirement Date.
2. Maximum Where Distribution Commences Prior to Normal Retirement
Date and After Termination of Employment:
If distribution is to commence prior to the Participant's Normal
Retirement Date and after termination of employment, the
maximums computed above shall be reduced by one-fifteenth
(1/15th) for each of the first five (5) Years and one-thirtieth
(1/30th) for each of the next five (5) years by which the
starting date of the annuity precedes the Normal Retirement
Date, and reduced actuarially for each additional year
thereafter.
3. In no event shall the distribution of benefits under this
Section commence later than what would have been the
Participant's Normal Retirement Date.
4. Early Retirement Benefit for Certain Terminated Participants:
If a Participant who satisfies the service requirements for
Early Retirement terminates employment prior to satisfying the
age requirements for Early Retirement, the Participant shall be
entitled upon satisfying the age requirement, to receive his or
her benefit in accordance with Plan provisions.
J. MINIMUM ACCRUED BENEFIT FOR TOP HEAVY PLANS
For purposes of minimum Top-Heavy accruals, each non-key Employee will
accrue a minimum benefit of % (not less than two percent
----------
(2%)) of Compensation for each year the Plan is Top-Heavy.
K. TRANSITIONAL RULE
1. The following transitional rule shall apply to all Participants
who have accrued a benefit under the Plan as of the close of the
last Plan Year beginning before January 1, 1989 (freeze year),
and who have at least one Hour of Service in a Plan Year
beginning after the freeze year.
Each Participant's Accrued Benefit under the Plan shall be equal
to the sum of:
a. the Participant's frozen Accrued Benefit, and
b. the Participant's Accrued Benefit with respect to years of
credited service for Plan Years beginning after the freeze
year, determined in accordance with the provisions of the
Plan, in effect for Plan Years beginning after the freeze
year.
2. Benefit Adjustments
a. If, as of the close of the freeze year, and without regard
to any plan amendments made after May 9, 1990 (or an
earlier date selected by the Employer in the Adoption
Agreement, but not before December 13, 1988), the Plan
contained a benefit formula under which the Participant's
frozen Accrued Benefit could be determined with reference
to Compensation earned by the Participant in Plan Years
beginning after the freeze year, then, with respect to
each Participant who has at least one Hour of Service in
any Plan Year beginning after the freeze year, the
Participant's Accrued Benefit above shall be adjusted in
accordance with the following method (select one):
i. The Participant's frozen Accrued Benefit shall
-----
be multiplied by a fraction (not less than 1),
the numerator of which is the Participant's
Compensation, determined as of the current Plan
Year, using the same definition and Compensation
formula used in determining the Participant's
frozen Accrued Benefit, and the denominator of
which is the Participant's actual Compensation
used in determining the Participant's frozen
Accrued Benefit.
ii. The Participant's frozen Accrued Benefit shall
-----
be multiplied by a fraction (not less than 1),
the numerator of which is the Participant's
Compensation, for the current year, and the
denominator is the Participant's Compensation
for the freeze year. For purposes of this
paragraph, Compensation shall mean Compensation
determined under the Compensation formula in
Section IV.E of the Adoption Agreement, using
the definition of Compensation in effect
under the Plan for the relevant year.
iii. The participant's frozen Accrued Benefit
-----
shall be multiplied by a fraction (not less
than 1), the numerator of which is the
Participant's Compensation for the current year,
determined under the Compensation formula in
Section IV.E of the Adoption Agreement, and the
denominator is the Participant's reconstructed
compensation for the freeze year.
3. Definitions for purposes of this Section:
a. FROZEN ACCRUED BENEFIT: A Participant's Accrued Benefit
determined as if the Participant terminated employment
with the Employer at the end of the freeze year, without
regard to any amendment made to the Plan after the freeze
year.
b. FREEZE YEAR: The last Plan Year beginning before
January 1, 1989.
c. RECONSTRUCTED COMPENSATION: Shall be equal to the
Compensation for the Plan Year elected by the Employer in
the Adoption Agreement (post-freeze year), using the
definition of Compensation in effect under the Plan for
the year selected, determined under the Compensation
formula in Section IV.E of the Adoption Agreement,
multiplied by a fraction, the numerator of which
is the Participant's actual Compensation used in
determining the Participant's frozen Accrued Benefit,
and the denominator of which is the Participant's
compensation for the post freeze year using
the Compensation definition and Compensation formula used
in the numerator.
For purposes of calculating a Participant's
"reconstructed Compensation", the post-freeze year
shall be the Plan Year beginning in (select one):
i. 1989
-----
ii. 1990
-----
iii. 1991
-----
4. Minimum Benefit Adjustment
If a Participant's Accrued Benefit is adjusted in accordance
with Section IV.J of the Adoption Agreement, then with respect
to benefits accruing during Plan Years beginning after
December 31, 1988, each Participant will accrue a benefit of not
less than 25% of the Participant's total Compensation. If an
Employee has less than 50 years of credited service under the
Plan, then, such minimum percentage will be reduced by
multiplying it by the following factor:
PARTICILPANT'S YEARS OF CREDITED SERVICE
50
V. VESTING
A. Subject to the provisions of Article IX of the Plan, the
nonforfeitable percentage of a Participant's Accrued Benefits derived
from Employer contributions prior to attainment of Normal Retirement
Age shall be (select one):
1. 100% immediate vesting
-----
2. 100% vesting after three (3) Years of Service (if entry date
-----
is before one (1) year and zero (0) months.)
3. 100% vesting after rive (5) Years of Service.
-----
4. Six-Year Graded Vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5. Three to seven year graded vesting
-----
YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 0%
3 20%
4 50%
5 60%
6 80%
7 100%
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be % (not less than 50 nor greater than 100) of the
--------
amount of the annuity payable during the joint lives of the
Participants and his/her spouse.
B. EARLY RETIREMENT (select one):
1. Early Retirement not permitted.
-----
2. A Participant may retire within the ten (10) year period
-----
immediately preceding his Normal Retirement Date, provided
he has completed at least Years of Service (not to
---------
exceed ten (10) and years of participation (not
---------
to exceed ten (10)) in the Plan.
C. DISABILITY RETIREMENT BENEFITS
The disability retirement benefit shall be equal to (select one):
1. 100% of the Participant's Accrued Benefit
-----
2. The Participant's vested Accrued Benefit.
-----
D. DEFERRED RETIREMENT
1. If a Participant remains in employment after his or her Normal
Retirement Date, the Participant's Accrued Benefit shall be
payable (select one):
a. At the Normal Retirement Date.
-----
b. On the first day of the month on or after the earlier
-----
of the actual retirement date or the required
beginning date.
2. A Participant's Deferred Retirement benefit payable at the
Deferred Retirement Date shall be as follows (select one):
a. The Actuarial Equivalent of the benefit to which the
-----
Participant would have received at the Normal
Retirement Date.
b. The Actuarial Equivalent of a separate fund
-----
established at the Participant's Normal Retirement
Date.
VII. PRE-RETIREMENT DEATH BENEFIT
The pre-retirement death benefit for a married Participant shall be a
pre-retirement survivor annuity. The present value of any benefit
hereunder shall be based on the same interest rate assumption and
mortality table as is used to compute the Actuarial Equivalence of
optional forms of benefits under the plan. The pre-retirement death
benefit payable under this plan is (select one of the following
options):
A. None, other than the qualified pre-retirement
-----
survivor annuity.
B. The qualified pre-retirement survivor annuity plus
-----
the proceeds of insurance policies purchased on the
Participant's life; provided that any death benefit
in addition to the qualified pre-retirement survivor
annuity shall be reduced to the extent necessary so
that the sum of the additional benefit and the
actuarial value of the qualified pre-retirement
survivor annuity does not exceed 100 times the
Participant's anticipated monthly benefit. For
purpose of this requirement, the total face amount of
policies purchased will be (fill in the
--------------
amount but not in excess of 100) times the
Participant's anticipated monthly benefit.
C. The qualified pre-retirement survivor annuity plus the
-----
excess, if any, of the present value of the
Participant's Accrued Benefit minus the actuarial
value of the qualified pre-retirement survivor
annuity.
D. The qualified pre-retirement survivor annuity plus, if
-----
a positive amount, the incidental reserve. The
incidental reserve equals the proceeds of insurance
policies purchased on a Participant's life plus the
theoretical ILP reserve minus the sum of the actuarial
value of the qualified pre-retirement survivor annuity
and the cash value of the policies purchased. For
purpose of this requirement, the face amount of
the insurance policies will be that purchasable
by (fill in the amount but not greater
-----------------
than 66 if whole life and not greater than 33 if term
and/or universal life) percent of the Theoretical
Contribution.
For purposes of D. above, the theoretical ILP reserve is the reserve
that would be available at the time of death if for each year of plan
participation a contribution had been made on behalf of the Participant
in an amount equal to the Theoretical Contribution.
For purposes of B., C. and D. above, the calculations for present value
and actuarial value of any benefit shall be based on the following
assumptions:
Interest rate: %
---------
Mortality table:
------------------------------------------------
VIII. LIFE INSURANCE CONTRACT LIMITATIONS
Where Contracts have been selected for a portion of the funding, the
initial death benefit under the Contract and any increases in case of
death prior to Normal Retirement Date shall be up to one hundred (100)
times the amount of the anticipated Normal Monthly Retirement Benefit in
the case of a Participant insurable at standard rates.
1. If the funding media is a Contract which includes an insurance
risk and the Participant is not insurable at standard rates or
does to have life insurance purchased on his or her behalf, the
following action shall be taken by the Trustee. A deferred
annuity Contract may be purchased for the Participant in lieu
of the rated Contract. In absence of directions to the
contrary, the premium shall be an amount equal to the premium
that would have been expended for the whole life insurance
Contract.
In the case of those individuals who are only insurable at a
substandard rate (select one):
a. The Employer elects by written notice filed with the
-----
Trustee to pay the additional premium for Participants
insurable at substandard rates. The Employer shall
treat all Participants alike with respect to the
payment of rated premiums.
b. For a Participant insurable only at substandard rates
-----
the whole life level annual premium Contracts shall
provide a death benefit in the event of death prior to
Normal Retirement Date graded or reduced from the face
amount that would have been issued on standard rates.
The amount of the death benefit shall be that which
can be purchased by a premium equal to the premium for
standard issue, determined by the Insurer in
accordance with the amount of the rating. (This option
not available where elective income endowment
Contracts are used.)
2. Maximum Issue Ages (please complete):
No Contract shall be issued to or additional Contract purchased
in the case of a Participant who has attained his or
her birthday. The amounts that would have been used to
----------
pay these premiums shall be applied to one of the other forms of
investments as the Plan Administrator deems appropriate, which
may include a different type of Contract.
3. Minimum Amounts of Whole Life Level Annual Premium Additions
permitted:
No policy shall be applied for unless the amount of premium to
be applied will purchase a Contract providing a face amount of
insurance in the amount of $2,500 or more.
In the above cases, if the Contract is not purchased, the amount of the
contribution that would have been used to pay for the premium shall be
applied to one of the other forms of investments permitted which the
Plan Administrator deems appropriate which may include a different type
of Contract.
4. The Contracts shall contain an option either upon payment of a
special premium or upon payment of the guaranteed conversion
cost, to convert or exchange the Contract on Normal Retirement
Date into one providing a monthly retirement income beginning at
the Normal Retirement Date.
Each Contract or any agreement with the Insurer relating thereto
shall specifically provide that the Contract may be converted at
the Normal Retirement Date of the Participant. On or before the
reaching of Normal Retirement Date by each Participant, the
Trustee shall use the funds in the Trust Fund to convert the
Contract(s) on the life of the Participant into a Contract(s)
providing a monthly retirement income for the Participant in the
amount to which the Participant is entitled under the provisions
of this Plan or shall convert the Contract to cash, or shall
distribute the Contract(s) to the Participant all in accordance
with the provisions of this Plan.
IX. LOANS TO PARTICIPANTS (SELECT ONE):
A. Loans to self-employed individuals and to more than 5% owners are
prohibited transactions unless an exemption is obtained from the
Department of Labor (select one):
1. Loans shall not be allowed.
-----
2. Loans shall be allowed.
-----
B. If loans are permitted, they must be made in accordance with the
provision of Article X of the Plan and in accordance with the
following provisions or in accordance with a separate document
containing these provisions as referenced below:
1. Person or position authorized to administer the Participant
loan program
----------------------------------------------------
----------------------------------------------------------------
2. Procedure for applying for loans
--------------------------------
----------------------------------------------------------------
3. Basis on which loans will be approved or denied
-----------------
----------------------------------------------------------------
4. Limitations (if any) on the types and amounts of loans
offered
---------------------------------------------------------
----------------------------------------------------------------
5. Procedure for determining a reasonable rate of interest
---------
----------------------------------------------------------------
6. Types of collateral which may secure a Participant loan
---------
----------------------------------------------------------------
7. Events constituting default and the steps that will be taken to
preserve plan assets in the event of default
--------------------
----------------------------------------------------------------
X. SPECIAL LIMITATIONS ON ALLOCATIONS
(The wording of the following provision should be read in connection
with Section 5.6 where the Employer maintains certain other qualified
defined contribution plans):
Complete this Section only if you maintain or have ever maintained
another qualified plan in which any Participant in this Plan is (or was)
a Participant or could possibly become a Participant. 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. If you maintain(ed) such a Plan, failure to complete this Section
may adversely affect the qualification of the Plans you maintain.
Do you now or have you ever maintained one of the above described plans?
No
-----
Yes (if yes, please complete the following):
-----
Provide the method under which the plans will
limit total Annual Additions to the maximum
permissible amount and the method under which the
Plan involved will satisfy the 1.0 limitation of
section 415(e) of the Code in a manner that
precludes Employer discretion.
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
XI. WAIVER OF MINIMUM FUNDING STANDARDS
The Employer, if unable to satisfy the minimum funding standard for a
given Plan Year, may apply to the Internal Revenue Service for a waiver
of the minimum funding standard. If the waiver is granted, the adopting
Employer may amend the Plan by adding overriding Plan provisions in the
Adoption Agreement in the event of a waiver of the minimum funding
deficiency. If the Employer amends the Plan to allow for a waiver of
the minimum funding requirement of section 412(d) of the Code, the
Employer will no longer participate in the prototype plan and the plan
will be considered an individually designed plan. The Employer must
apply for a determination letter from the appropriate Key District
Director of Internal Revenue.
XII. RELIANCE ON OPINION LETTER
The Internal Revenue Service has approved this Plan as a prototype. 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 may not rely on the opinion letter issued by
the National office of the Internal Revenue Service as evidence that
this Plan is qualified under section 401 of the Internal Revenue Code.
If the Employer who adopts or maintains multiple plans wishes to obtain
reliance that his or her plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District
Director of Internal Revenue.
In addition, the Employer may rely upon the opinion letter issued by the
National Office of the Internal Revenue Service only if the plan adopted
by the Employer satisfies one of the safe-harbors provided in
regulations under section 401(a)(26) of the Code with respect to its
prior benefit structure or is deemed to satisfy section 401(a)(26) under
those regulations.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Benefit Plan and Trust, document #02.
XIII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual
fund which it has selected for investment of contributions to
the Trust;
2. Agrees to provide any Participant who contributes under the
Trust a prospectus of any mutual fund in which his or her
contributions may be invested;
3. Agrees that any direction to the Trustee to invest
a contribution in a particular mutual fund shall be a
representation to the Trustee that the appropriate prospectus
has been received and examined by the party making such
contribution;
4. Acknowledges receipt of the appropriate life insurance
commission disclosure statements required for investment of
Trust funds in life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the
Department of Labor all information as to any taxable or Plan
Year which is required of the Employer to be filed with said
agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the
Sponsor nor the representative of the Sponsor can assume
responsibility. The Sponsor urges the Employer to consult with its own
attorney with regard to the adoption of this Plan and its suitability
to the Employer. It is understood and agreed that neither the Trustees
nor the Sponsor shall be responsible for the tax and legal aspects of
the Trust, full responsibility for which is assumed by the undersigned
Employer, which hereby states that it has consulted legal and tax
counsel to the extent considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the
Plan. Lutheran Brotherhood will inform the adopting Employer of any
amendments made to the Plan or of discontinuance or abandonment of
the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
(Name of Employer)
By
---------------------------------------------------------
(Signature of authorized officer)
---------------------------------------------------------
(Title of authorized officer)
Appointment as Trustee accepted:
By
---------------------------------------------------------
(Trustee Signature)
By
---------------------------------------------------------
(Trustee Signature)
By
---------------------------------------------------------
(Trustee Signature)
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
- ----------------------------------------------------------------------------
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STANDARDIZED INTEGRATED DEFINED BENEFIT PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer and Trustees hereby establish the Pension Trust
named below and the Employer hereby adopts this Prototype Defined Benefit
Pension Plan and Trust, to be effective as of the date specified below, for
the exclusive benefit of its Employees who qualify under the terms and
conditions thereof. The Employer hereby selects the following
specifications.
Instructions: Please complete every applicable item. Failure to properly
fill out this Adoption Agreement may result in disqualification of the Plan.
I. GENERAL INFORMATION
A. NAME OF PLAN
This Plan shall be known as the
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Employees' Defined Benefit Pension Plan and Trust.
B. EMPLOYER(S) AND RELATED INFORMATION (If more than one, list
separately.)
1. Name, Address & Phone
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Predecessor Employer if prior service is to be counted
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2. Form of Business (check one):
a. Regular Corporation
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b. S Corporation (electing Small Business Corporation)
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c. Professional Corporation or Association
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d. Partnership
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e. Sole Proprietor
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f. Non-Profit Corporation
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3. IRS Employer Identification Number: --
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4. Incorporation date or date business commenced:
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Date predecessor business commenced:
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5. Employer's Federal income tax year: to
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month/day month/day
6. Execution of this Adoption Agreement constitutes (Indicate
appropriate paragraph):
a. A new plan (the initial adoption by the Employer).
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b. An amendment and restatement
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This amendment, restatement or substitution shall not
reduce the nonforfeitable interest of any Participant
determined as of the day preceding the effective date
of this Adoption Agreement; but Participants who
retired or who terminated their employment with the
Employer prior to the effective date of this agreement
shall look solely to the Plan as it existed prior to
the adoption of this amendment for their benefits, if
any, provided under the Plan (except as provided in
the Joint and Survivor Annuity requirements of
Article VIII of this Plan).
1. An amendment and restatement of an existing
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plan under this prototype to conform Plan to
changes in the law.
2. A substitution for or conversion of an
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existing plan.
Information about an existing plan:
Name of Plan
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Effective date of plan
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Letter serial no. of IRS
determination letter
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Date of IRS determination letter
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3. An amendment of this Adoption Agreement which
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was previously adopted by the Employer to make
changes in optional provisions.
7. The Effective Date of this Adoption Agreement or amendment
shall be
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(The General Effective Date for an amendment and restatement
after the Tax Reform Act of 1986 will be the first day of the
Plan Year beginning in 1989.)
8. The Plan Year, as defined in Section 2.32 of the Plan shall be:
The twelve (12) consecutive month period (normally the twelve
(12) month period corresponding to the Employer's business year
for income tax purposes) ending on and
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each anniversary thereof. The first Plan Year shall
begin on , 19 .
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9. The Limitation Year as defined in Section 2.24 of the Plan
shall be
a. the same as the Plan Year
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b. the twelve (12) consecutive month period
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commencing on
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C. FIDUCIARIES: (Lutheran Brotherhood may not be named as a Plan
Administrator, Trustee, Fiduciary or as an agent for service of
legal process.)
1. Employer appoints the following persons as Trustees (name
two or more):
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(Name and Address)
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(Name and Address)
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(Name and Address)
2. Plan Administrator (select one):
a. Employer, or
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b. Administrator designated by Employer
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i. Individual
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Identification No.
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(Name and Address)
ii. Administrative Committee
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Identification No.
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(Name and Address)
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(Name and Address)
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(Name and Address)
3. Agent for Service of Legal Process
a. Agent (select one):
i. Employer
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ii. Trustee
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iii. Plan Administrator
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iv. Other
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(Name)
b. Address
i. use Employer's address
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ii. use Addresss below:
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(street address)
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(city, state, zip)
II. DEFINITIONS
A. ACTUARIAL EQUIVALENT:
Except as provided in Section 2.2 of the Plan, the Actuarial Equivalent
to another benefit shall be determined on the basis of the mortality
table and the interest rate(s) specified below:
1. PRE-NORMAL RETIREMENT DATE MORTALITY: mortality table.
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2. POST-NORMAL RETIREMENT DATE MORTALITY: mortality table.
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3. PRE-NORMAL RETIREMENT DATE INTEREST: % per annum.
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4. POST-NORMAL RETIREMENT DATE INTEREST: % per annum.
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5. Section 417 Interest Rates applicable as follows:
Notwithstanding the above, if a benefit is distributed in a form
other than a nondecreasing annuity payable for a period not less
than the life of a Participant (or in the case of a qualified
pre-retirement survivor annuity, the life of the Surviving
Spouse), the interest rate used in determining the Actuarial
Equivalence of the portion of the excess benefit percentage that
exceeds the base benefit percentage shall be the section 417
interest rate(s).
6. FACTORS AND ASSUMPTIONS: For purposes of determining certain
Actuarial Equivalents as indicated below, the following factors
and assumptions shall be used (describe the factors and
assumptions and the benefits and benefit forms to which they are
applicable below or on an exhibit referenced below:
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(Note: The assumptions or factors must be specified in a manner
which precludes Employer discretion.):
B. COMPENSATION:
1. Compensation will mean all of each Participant's (select one):
a. Section 3121(a) wages (W-2 earnings - wages as defined
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for purposes of calculating social security taxes)
b. Section 3401(a) wages (wages as defined for purposes
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of income tax withholding)
c. Compensation as that term is defined in section 415 of
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the Code
2. Which is actually paid to the Participant during (select one):
a. the Plan Year
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b. the calendar year ending with or within the Plan Year
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c. the Limitation Year ending with or within the
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Plan Year
d. other (please specify)
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(must be determined on the basis of any consecutive
period ending within the Plan Year which is at least
12 months in duration and applied uniformly to all
Employees in the Plan)
3. Employer contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code (select one):
a. shall be included in Compensation
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b. shall not be included in Compensation
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C. COVERED EMPLOYEES:
The Plan is extended to all Employees of the Employer who meet the age
and service requirement of Section III except (select none, one or
both):
1. Union Employees who are included in a unit of employees
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covered by a collective bargaining agreement between the
Employer and the employee representatives, if retirement
benefits were the subject of good faith bargaining and if
pursuant to that agreement are professionals as defined in
section 1.410(b)-9(g) of the proposed regulations.. For
this purpose, the term "employee representatives" does not
include any organization more than half of whose members are
employees who are owners, officers, or executives of the
Employer.
2. Nonresident aliens who receive no earned income from the
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Employer which constitutes income from sources within the
United States.
D. ENTRY DATE
Entry Date shall mean (select one):
1. Dual Entry Date (the first day of the Plan Year and six (6)
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months later).
2. the first day of the Plan Year (select one):
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a. Nearest to the date an Employee first meets the
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age and service requirements in the Plan.
b. In which an Employee first meets age and service
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requirements
c. After the Plan Year in which an Employee first
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meets the age and service requirements in the Plan
(eligibility must be age 20 1/2 and/or 6 months
service or less without regard to the 1,000 Hours
of Service requirement)
E. HOURS OF SERVICE
A Year of Service is ordinarily defined as 1000 Hours of Service.
Hours of Service may be credited in a number of different ways. Select
one of the methods listed below. The method selected will be applied
to all Employees covered under the Plan.
1. On the basis of actual hours for which an Employee is paid
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or entitled to be paid.
2. On the basis of days worked:
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An Employee shall be credited with ten (10) Hours of Service
if under Section 2.19 of the Plan the Employee would be
credited with at least one (1) Hour of Service during the
day.
3. On the basis of weeks worked:
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An Employee shall be credited with forty-five (45) Hours of
Service if under Section 2.19 of the Plan the Employee would
be credited with at least one (1) Hour of Service during the
week.
4. On the basis of semi-monthly payroll periods:
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An Employee shall be credited with ninety-five (95) Hours of
Service if under Section 2.19 of the Plan the Employee would
be credited with at least one (1) Hour of Service during the
semi-monthly payroll period.
5. On the basis of months worked:
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An Employee shall be credited with one hundred ninety (190)
Hours of Service if under Section 2.19 of the Plan the
Employee would be credited with at least one (1) Hour of
Service during the month.
F. SERVICE WITH A PREDECESSOR EMPLOYER
Service for a predecessor employer, including service as a sole
proprietor or partner (select one):
1. shall be taken into account for purposes of meeting the
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Years of Service requirements. (Check this option if
predecessor employer maintained a plan.)
2. shall not be taken into account for purposes of meeting
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the Years of Service requirements.
G. NORMAL RETIREMENT AGE
Normal Retirement Age shall mean (select one):
1. age (not to exceed age 65).
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2. the later of (a) the time the Participant attains
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age (not to exceed 65) or (b) the completion
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of the (5th or less) Anniversary of the date
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upon which the Participant commenced participation in
the Plan.
3. the later of (a) the time the Participant attains
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age (not to exceed 65), or (b) the completion
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of the (5th or less) Anniversary of the date upon
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which the Participant commenced participation, but in no
event later than the Participant's seventieth (70th)
birthday.
If, for Plan Years beginning before January 1, 1988, Normal Retirement
Age was determined with reference to the anniversary of the
participation commencement date (more than 5 but not to exceed
10 years), the anniversary date for Participants who first commenced
participation under the Plan before the first Plan Year beginning on or
after January 1, 1988, shall be the earlier of (A) the tenth
anniversary of the date the Participant commenced participation in the
Plan (or such anniversary as had been elected by the Employer, if less
than 10) or (B) the fifth anniversary of the first day of the first
plan year beginning on or after January 1, 1988. The participation
commencement date is the first day of the first Plan Year in which the
Participant commenced participation in the Plan.
If a plan or the Employer sponsoring the Plan imposes a requirement
that a Participant retire upon reaching a certain age, the Normal
Retirement Age may not exceed the mandatory retirement age.
H. PERMITTED DISPARITY (Integration with Social Security)
The benefits under this plan are integrated with Social Security. The
retirement benefit is determined in accordance with the formula elected
by the Employer in Section VI of this Adoption Agreement.
For purposes of determining the retirement benefit the following
definitions apply:
1. BASE BENEFIT PERCENTAGE: The rate, expressed as a percentage of
Compensation, at which Employer derived benefits are accrued
with respect to Compensation of Participants at or below the
integration level for the Plan Year.
2. COVERED COMPENSATION: A Participant's covered Compensation for a
plan year is the average (without indexing) of the taxable wage
bases in effect for each calendar year during the 35-year period
ending with the last day of the calendar year in which the
participant attains (or will attain) social security retirement
age. No increases in covered Compensation shall decrease a
Participant's Accrued Benefit under the Plan
In determining a Participant's covered Compensation for a Plan
Year, the Taxable Wage Base in effect for the current Plan Year
and any subsequent Plan Year will be assumed to be the same as
the Taxable Wage Base in effect as of the beginning of the Plan
Year for which the determination is being made.
A Participant's covered Compensation for a Plan Year before the
35-year period ending with the last day of the calendar year in
which the Participant attains social security retirement age is
the Taxable Wage Base in effect as of the beginning of the Plan
year. A Participant's covered compensation for a Plan Year
after that 35-year period is the Participant's covered
Compensation for the Plan Year during which the Participant
attained social security retirement age.
3. EXCESS BENEFIT PERCENTAGE: The rate, expressed as a percentage
of Compensation, at which Employer derived benefits are accrued
with respect to Compensation of Participants above the
integration level for the plan year.
4. SOCIAL SECURITY RETIREMENT AGE: Age 65 if the participant
attains age 62 before January 1, 2000 (i.e., born before
January 1, 1938), age 66 if the participant attains age 62 after
December 31, 1999, but before January 1, 2017 (i.e., born after
December 31, 1937, but before January 1, 1955), and age 67 if
the participant attains age 62 after December 31, 2016 (i.e.,
born after December 31, 1954).
5. TAXABLE WAGE BASE: The contribution and benefit base in effect
under section 230 of the Social Security Act at the beginning of
the Plan Year.
6. YEAR OF CREDITED SERVICE: Each year with the Employer with
respect to which benefits are treated as accruing on behalf of
the Participant for that year pursuant to Section 2.46 of the
Plan.
III. ELIGIBILITY AND PARTICIPATION
Each Employee shall be eligible to participate upon meeting the
following requirements:
A. ATTAINED AGE ON ENTRY DATE (select one):
1. No age requirement (only service).
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2. Minimum age (Not more than 21; or if Entry Date
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in Section II.D.2.c is selected, not more than 20.5.)
B. LENGTH OF SERVICE ON ENTRY DATE (select one):
1. No Service requirement (only age).
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2. years and months of Service required.
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(Service cannot exceed one (1) year and zero (0) months if
graded vesting is selected or two (2) years and zero (0)
months if full and immediate vesting is selected. If Entry
Date in Section II.D.2.c is selected, service cannot exceed
six (6) months if graded vesting is selected or one (1) year
and six (6) months if full and immediate vesting is
selected.)
IV. NORMAL RETIREMENT BENEFIT
Except as otherwise provided in Section IV.M of this Adoption
Agreement, the provisions of Sections A. and I. below apply with
respect to Plan Years, and benefits attributable to Plan Years,
beginning after December 31, 1988.
A. RETIREMENT BENEFIT
The amount of the retirement benefit shall be percent (%) of
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the Participant's Average Annual Compensation up to the
integration level for the Plan Year (base benefit percentage),
plus percent (%) (not to exceed the base benefit percentage
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by more than the maximum excess allowance) of the Participant's
Average Annual Compensation in excess of the integration level for the
Plan Year (excess benefit percentage).
For purposes of the preceding paragraph, the maximum excess allowance
is equal to the lesser of: (1) the base benefit percentage or (2) the
applicable factor determined from Tables I or II in Appendix A
multiplied by 35.
If a Participant begins receiving benefits before Normal Retirement
Age or before the Participant has completed thirty-five (35) years of
credited service, the Participant's benefit will be limited in
accordance with Section IV H and K of this Adoption Agreement.
If a Participant's Accrued Benefit is adjusted in accordance with
Section IV.M. of the Adoption Agreement, then, with respect to
benefits accruing during Plan Years beginning after December 31, 1988,
each Participant will accrue a benefit of not less than 25% of the
Participant's total Average Annual Compensation. If an Employee has
less than 50 years of credited service with the Employer, then such
minimum percentage will be reduced by multiplying it by the following
factor:
PARTICIPANT'S YEARS OF CREDITED SERVICE
50
B. Credited Years of Service shall be (select one):
1. All of an Employee's Years of Service with the Employer.
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2. Years of Service during which an Employee is a Participant
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in the Plan.
C. BENEFIT REDUCTION FOR SHORT SERVICE (SELECT ONE):
1. No reduction
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2. Reduce benefit by (e.g., 1/15) for each year of
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Service less than (e.g., 15). [Reduce benefit in
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proportion to Years of Service.]
D. INTEGRATION LEVEL
The integration level for each Plan Year for each Participant shall be
an amount equal to:
1. The Participant's covered Compensation for the Plan Year.
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2. The Participant's covered Compensation under
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the (year) covered Compensation table (can be the
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covered Compensation table for the current Plan Year or a
prior Plan Year which is not earlier than the later of
(a) the Plan Year five (5) years prior to the current Plan
Year and (b) the Plan Year beginning in 1989). If the
Plan Year entered is more than five (5) years prior to the
current Plan Year, the Participant's covered Compensation
will be that determined under the covered Compensation table
for the Plan Year five (5) years prior to the current Plan
Year.
3. The greater of $10,000 or one-half (1/2) of the covered
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Compensation of any person who attains social security
retirement age during the Plan year.
4. $ (a uniform dollar amount not to exceed the
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greater of $10,000 or one-half (1/2) of covered Compensation
of any person who attains Social Security retirement age
during the Plan Year).
5. $ (more than $10,000, but not to exceed the
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greater of $25,450 or 150% of the covered Compensation of an
individual attaining social security retirement age in the
current Plan Year). (Use Table II in Appendix A for maximum
excess allowance.)
6. A uniform percentage equal to % (greater than
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100 percent, but not greater than 150 percent of each
Participant's covered Compensation for the current year, and
in no event in excess of the Taxable Wage Base). (Use
Table II in Appendix A for maximum excess allowance.)
E. NORMAL FORM OF RETIREMENT BENEFIT (SELECT ONE):
1. Monthly life income.
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2. Monthly life income with 60 installments certain.
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3. Monthly life income with 120 installments certain.
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F. COMPENSATION SHALL BE AVERAGED OVER (SELECT ONE):
1. Career average (average of all years of participation).
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2. Average of highest consecutive years of
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participation prior to the date the benefit is determined
(not less than three (3) including the current Plan Year nor
more than the nine (9) years beginning before the current
Plan Year).
3. Average of highest consecutive years of
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participation (not less than three (3)) out
of year period prior to Normal Retirement
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Date (not less than three (3) including the current Plan
Year nor more than the nine (9) years beginning before the
current Plan Year.
G. PERIOD OF COMPENSATION (select one):
For purposes of determining Average Annual Compensation, a Year of
Participation shall be based on (select one):
1. The Plan Year.
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2. The calendar year ending with or within the Plan Year.
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3. The Employer's fiscal year.
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4. Other
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Options 3 and 4 must be determined on the basis of any
consecutive period ending within the Plan Year which is at
least twelve (12) months in duration and applied uniformly
to all Employees in the Plan.
H. The minimum monthly retirement benefit shall be $ (not less
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than ten dollars ($10)).
I. In the event a Participant's monthly Compensation changes by an amount
that would adjust the monthly pension by $ not less than
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ten dollars ($10)), the projected pension shall then be adjusted as
provided in Sections 5.4 and 5.5 of the Plan.
J. REDUCTION FOR BENEFITS COMMENCING BEFORE NORMAL RETIREMENT AGE
If benefits commence before the Participant's Normal Retirement Age,
in no event will the excess benefit percentage exceed the base benefit
percentage by more than the early retirement factor in the applicable
table from Appendix B multiplied by the Participant's years of
credited service (not to exceed 35).
A. BENEFITS BEGINNING ON OR AFTER AGE 55: If benefit payments
commence in a month other than the month in which the
Participant attains the age specified in the applicable table in
Appendix B, the early retirement factor shall be determined by
straight line interpolation in the applicable table above.
B. BENEFITS BEGINNING BEFORE AGE 55: If benefit payments begin
before the first day of the month in which the Participant
attains age 55, the early retirement factor shall be the
Actuarial Equivalent of the early retirement factor contained in
the applicable table in Appendix B for a benefit commencing
in the month in which the Participant attains age 55.
C. DISABILITY BENEFIT: An unreduced disability benefit, other than
a qualified disability benefit, commencing before normal
retirement age will be treated as a benefit subject to the
limitations of this section. A disability benefit is a
qualified disability benefit only if the benefit: (1) is payable
under the plan solely on account of a Participant's disability,
as determined by the Social Security Administration,
(2) terminates no later than the Participant's social security
retirement age, (3) is not in excess of the amount of the
benefit that would be payable if the participant had separated
from service at Normal Retirement Age, and (4) upon attainment
of early or Normal Retirement Age, the Participant receives a
benefit that satisfies the accrual and vesting rules of
section 411 (and the regulations thereunder) without taking into
account the disability benefits made up to that age.
D. NONANNUITY FORM OF BENEFIT: If a benefit is distributed in a
form other than a nondecreasing annuity payable for a period not
less than the life of a Participant (or in the case of a
qualified preretirement survivor annuity the life of the
Surviving Spouse), the amount of the benefit will be determined
in accordance with Section II.A. of the Adoption Agreement.
K. REDUCTIONS FOR PARTICIPANTS WITH LESS THAN 35 YEARS OF
CREDITED SERVICE
For Participants who are projected to have earned less than
thirty-five (35) years of credited service as of the end of the Plan
Year in which they attain Normal Retirement Age, the base benefit
percentage and the excess benefit percentage will be reduced by
multiplying them by a fraction, the numerator of which is the number
of years of credited service the Participant is projected to have
earned as of the end of the Plan Year in which the Participant
attains Normal Retirement Age, and the denominator of which is
thirty-five (35).
The Accrued Benefit will be determined under the fractional method
in Section 2.1 of the Plan.
L. MINIMUM ACCRUED BENEFIT FOR TOP HEAVY PLANS
For purposes of minimum Top-Heavy accruals, each non-key Employee will
accrue a minimum benefit of % (not less than two percent (2%))
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of Compensation for each year the Plan is Top-Heavy.
M. TRANSITIONAL RULE
1. The following transitional rule shall apply to all Participants
with at least one (1) Hour of Service in a Plan Year beginning
after December 31, 1988:
Each Participant's Accrued Benefit under the Plan shall be equal
to the sum of:
a. the Participant's Accrued Benefit, determined under the
Plan as of the close of the last Plan Year beginning
before January 1, 1989, as if the Participant terminated
employment with the Employer, and
b. the Participant's Accrued Benefit with respect to years of
credited service for Plan Years beginning after
December 31, 1988, determined in accordance with the
provisions of this Plan, as amended effective for Plan
Years beginning on or after January 1, 1988, except that
the number of years of credited service taken into account
under the plan shall be limited to 35 minus the number of
years of credited service completed by the Participant as
of the close of the Plan Year beginning before
January 1, 1989.
2. Benefit Adjustments
a. If, as of November 15, 1988, and without regard to any
plan amendments made after that date, the Plan contained a
benefit formula under which the portion of a Participant's
Accrued Benefit at retirement that is attributable to
the Participant's period of service as of the close of the
last Plan Year beginning before January 1, 1989, could be
determined with reference to Compensation earned by the
Participant in years beginning after December 31, 1988,
then, with respect to each Participant who has at least
one Hour of Service in any Plan Year beginning after
December 31, 1988, the Participant's Accrued Benefit above
shall be adjusted in accordance with steps 1 and 2 below:
Step 1:
Each Participant's frozen Accrued Benefit will be
adjusted so that the base benefit percentage,
determined with reference to all Years of Service as of
the close of the freeze year, is not less than 50
percent of the excess benefit percentage, determined
with reference to all Years of Service as of the close
of the freeze year.
Step 2 (select one):
i. The amount determined in step 1 shall be
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multiplied by a fraction (not less than 1),
the numerator of which is the Participant's
Average Annual Compensation, determined as
of the current Plan Year, and using the same
definition and Compensation formula used
in determining the Participant's frozen
Accrued Benefit, and the denominator of
which is the Participant's Average Annual
Compensation determined as if the
Participant terminated employment as of the
close of the last Plan Year beginning before
January 1, 1989, without regard to any
amendment made after that date.
ii. The Participant's frozen Accrued Benefit
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shall be multiplied by a fraction (not less
than 1), the numerator of which is the
Participant's Compensation, for the current
year, and the denominator is the
Participants Compensation for the freeze
year. For purposes of this paragraph,
Compensation shall mean Compensation
determined under the Compensation formula in
Section IV.F of the Adoption Agreement,
using the definition of Compensation in
effect under the Plan for the relevant year.
iii. The Participant's frozen Accrued Benefit
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shall be multiplied by a fraction (not less
than 1), the numerator of which is the
Participant's Compensation for the current
year, determined under the Compensation
formula in Section IV.F of the Adoption
Agreement, and the denominator is the
Participant's reconstructed Compensation for
the freeze year.
3. Definitions for purposes of this Section:
a. FROZEN ACCRUED BENEFIT: A Participant's Accrued Benefit
under the Plan as in effect on November 15, 1988,
determined as of the close of the last Plan Year beginning
before January 1, 1989, as if the Participant terminated
employment with the Employer on that determination date,
and without regard to any amendment made to the Plan after
November 15, 1988.
b. FREEZE YEAR: The last Plan Year beginning before
January 1, 1989.
c. RECONSTRUCTED COMPENSATION: Shall be equal to the
Compensation for the Plan Year elected by the Employer in
the Adoption Agreement (post-freeze year), using the
definition of Compensation in effect under the Plan for
the year selected, determined under the Compensation
formula in Section IV.E of the Adoption Agreement,
multiplied by a fraction, the numerator of which is the
Participant's actual Compensation used in determining
the Participant's frozen Accrued Benefit, and the
denominator of which is the Participant's Compensation for
the post freeze year using the Compensation definition and
Compensation formula used in the numerator.
For purposes of calculating a participant's
"reconstructed Compensation", the post-freeze year
shall be the Plan Year beginning in (select one):
i. 1989
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ii. 1990
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iii. 1991
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V. VESTING
A. Subject to the provisions of Article IX of the Plan, the
nonforfeitable percentage of a Participant's Accrued Benefits derived
from Employer contributions prior to attainment of Normal Retirement
Age shall be (select one):
1. 100% immediate vesting
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2. 100% vesting after three (3) Years of Service (if entry date
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is before one (1) year and zero (0) months.)
3. 100% vesting after five (5) Years of Service.
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4. Six-Year Graded Vesting
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YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5. Three to seven year graded vesting
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YEARS OF SERVICE VESTED PERCENTAGE
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
VI. RETIREMENT BENEFITS
A. JOINT AND SURVIVOR ANNUITY
The percentage of the survivor annuity under Article VIII of the Plan
shall be % (not less than 50 nor greater than 100) of the
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amount of the annuity payable during the joint lives of the
Participants and his/her spouse.
B. EARLY RETIREMENT (select one):
1. Early Retirement not permitted.
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2. A Participant may retire within the ten (10) year period
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immediately preceding his Normal Retirement Date, provided
he has completed at least Years of Service (not to
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exceed ten (10) and years of participation (not
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to exceed ten (10)) in the Plan.
C. DISABILITY RETIREMENT BENEFITS
The disability retirement benefit shall be equal to (select one):
1. 100% of the Participant's Accrued Benefit
-----
2. The Participant's vested Accrued Benefit.
-----
D. DEFERRED RETIREMENT
1. If a Participant remains in employment after his or her Normal
Retirement Date, the Participant's Accrued Benefit shall be
payable (select one):
a. At the Normal Retirement Date.
-----
b. On the first day of the month on or after the earlier
-----
of the actual retirement date or the required
beginning date.
2. A Participant's Deferred Retirement benefit payable at the
Deferred Retirement Date shall be as follows (select one):
a. The Actuarial Equivalent of the benefit to which the
-----
Participant would have received at the Normal
Retirement Date.
b. The Actuarial Equivalent of a separate fund
-----
established at the Participant's Normal
Retirement Date.
VII. PRE-RETIREMENT DEATH BENEFIT
The pre-retirement death benefit for a married Participant shall be a
pre-retirement survivor annuity. The present value of any benefit
hereunder shall be based on the same interest rate assumption and
mortality table as is used to compute the Actuarial Equivalence of
optional forms of benefits under the plan. The pre-retirement
death benefit payable under this plan is (select one of the
following options):
A. None, other than the qualified pre-retirement
-----
survivor annuity.
B. The qualified pre-retirement survivor annuity plus the
-----
proceeds of insurance policies purchased on the
Participant's life; provided that any death benefit in
addition to the qualified pre-retirement survivor
annuity shall be reduced to the extent necessary so
that the sum of the additional benefit and the
actuarial value of the qualified pre-retirement
survivor annuity does not exceed 100 times the
Participant's anticipated monthly benefit. For
purpose of this requirement, the total face amount of
policies purchased will be (fill in the
----------
amount but not in excess of 100) times the
Participant's anticipated monthly benefit.
C. The qualified pre-retirement survivor annuity plus the
-----
excess, if any, of the present value of the
Participant's Accrued Benefit minus the actuarial
value of the qualified pre-retirement survivor
annuity.
D. The qualified pre-retirement survivor annuity plus, if
-----
a positive amount, the incidental reserve. The
incidental reserve equals the proceeds of insurance
policies purchased on a Participant's life plus the
theoretical ILP reserve minus the sum of the actuarial
value of the qualified pre-retirement survivor annuity
and the cash value of the policies purchased. For
purpose of this requirement, the face amount of the
insurance policies will be that purchasable
by (fill in the amount but not greater than
----------
66 if whole life and not greater than 33 if term
and/or universal life) percent of the Theoretical
Contribution.
For purposes of D. above, the theoretical ILP reserve is the reserve
that would be available at the time of death if for each year of plan
participation a contribution had been made on behalf of the
Participant in an amount equal to the Theoretical Contribution.
For purposes of B., C. and D. above, the calculations for present
value and actuarial value of any benefit shall be based on the
following assumptions:
Interest rate: %
----------
Mortality table:
---------------------------------------------------
VIII. LIFE INSURANCE CONTRACT LIMITATIONS
Where Contracts have been selected for a portion of the funding, the
initial death benefit under the Contract and any increases in case of
death prior to Normal Retirement Date shall be up to one hundred (100)
times the amount of the anticipated Normal Monthly Retirement Benefit
in the case of a Participant insurable at standard rates.
1. If the funding media is a Contract which includes an insurance
risk and the Participant is not insurable at standard rates or
declines to have life insurance purchased on his or her behalf,
the following action shall be taken by the Trustee. A deferred
annuity Contract may be purchased for the Participant in
lieu of the rated Contract. In absence of directions to the
contrary, the premium shall be an amount equal to the premium
that would have been expended for the whole life insurance
Contract.
In the case of those individuals who are only insurable at a
substandard rate (select one):
a. The Employer elects by written notice filed with the
-----
Trustee to pay the additional premium for Participants
insurable at substandard rates. The Employer shall
treat all Participants alike with respect to the
payment of rated premiums.
b. For a Participant insurable only at substandard rates
-----
the whole life level annual premium Contracts shall
provide a death benefit in the event of death prior to
Normal Retirement Date graded or reduced from the face
amount that would have been issued on standard rates.
The amount of the death benefit shall be that which
can be purchased by a premium equal to the premium for
standard issue, determined by the Insurer in
accordance with the amount of the rating. (This option
not available where elective income endowment
Contracts are used.)
2. Maximum Issue Ages (please complete):
No Contract shall be issued to or additional Contract purchased
in the case of a Participant who has attained his or
her birthday. The amounts that would have been used to
----------
pay these premiums shall be applied to one of the other forms of
investments as the Plan Administrator deems appropriate, which
may include a different type of Contract.
3. Minimum Amounts of Whole Life Level Annual Premium Additions
permitted:
No policy shall be applied for unless the amount of premium to
be applied will purchase a Contract providing a face amount of
insurance in the amount of $2,500 or more.
4. The Contracts shall contain an option either upon payment of a
special premium or upon payment of the guaranteed conversion
cost, to convert or exchange the Contract on Normal Retirement
Date into one providing a monthly retirement income beginning at
the Normal Retirement Date.
Each Contract or any agreement with the Insurer relating thereto
shall specifically provide that the Contract may be converted at
the Normal Retirement Date of the Participant. On or before the
reaching of Normal Retirement Date by each Participant, the
Trustee shall use the funds in the Trust Fund to convert the
Contract(s) on the life of the Participant into a Contract(s)
providing a monthly retirement income for the Participant in the
amount to which the Participant is entitled under the provisions
of this Plan or shall convert the Contract to cash, or shall
distribute the Contract(s) to the Participant all in accordance
with the provisions of this Plan.
IX. LOANS TO PARTICIPANTS (SELECT ONE):
A. Loans to self-employed individuals and to more than 5% owners are
prohibited transactions unless an exemption is obtained from the
Department of Labor (select one):
1. Loans shall not be allowed.
-----
2. Loans shall be allowed
-----
XII. RELIANCE ON OPINION LETTER
The Internal Revenue Service has approved this Plan as a prototype.
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 may not rely
on the opinion letter issued by the National office of the Internal
Revenue Service as evidence that this Plan is qualified under
section 401 of the Internal Revenue Code. If the Employer who adopts
or maintains multiple plans wishes to obtain reliance that his or her
plan(s) are qualified, application for a determination letter should
be made to the appropriate Key District Director of Internal Revenue.
In addition, the Employer may rely upon the opinion letter issued by
the National Office of the Internal Revenue Service only if the plan
adopted by the Employer satisfies one of the safe-harbors provided in
regulations under section 401(a)(26) of the Code with respect to its
prior benefit structure or is deemed to satisfy section 401(a)(26)
under those regulations.
This Adoption Agreement may be used only in conjunction with Lutheran
Brotherhood's basic Defined Benefit Plan and Trust, document #02.
XIII. DECLARATIONS
To establish the Trust, the initial contribution shall be credited as
specified by the Employer. Future contributions shall be credited in
accordance with the directions of the Employer. The Employer
1. Acknowledges receipt of the current prospectus of any mutual
fund which it has selected for investment of contributions to
the Trust;
2. Agrees to provide any Participant who contributes under the
Trust a prospectus of any mutual fund in which his or her
contributions may be invested;
3. Agrees that any direction to the Trustee to invest a
contribution in a particular mutual fund shall be a
representation to the Trustee that the appropriate prospectus
has been received and examined by the party making such
contribution;
4. Acknowledges receipt of the appropriate life insurance
commission disclosure statements required for investment of
Trust funds in life insurance Contracts;
5. Agrees to file with the Internal Revenue Service and the
Department of Labor all information as to any taxable or Plan
Year which is required of the Employer to be filed with said
agencies.
This Adoption Agreement and related documents are important legal
instruments with legal and tax implications for which neither the
Sponsor nor the representative of the Sponsor can assume
responsibility. The Sponsor urges the Employer to consult with its
own attorney with regard to the adoption of this Plan and its
suitability to the Employer. It is understood and agreed that neither
the Trustees nor the Sponsor shall be responsible for the tax and
legal aspects of the Trust, full responsibility for which is assumed
by the undersigned Employer, which hereby states that it has consulted
legal and tax counsel to the extent considered necessary.
The undersigned Employer and Trustee consent to the exercise by the
Sponsor of the right of amendment set forth in Section 15.2 of the
Plan. Lutheran Brotherhood will inform the adopting Employer of any
amendments made to the Plan or of discontinuance or abandonment of
the Plan.
The Trust is signed this day of , 19 .
-------- ---------------- ----
- ------------------------------------------------------------
(Name of Employer)
By
---------------------------------------------------------
(Signature of authorized officer)
---------------------------------------------------------
(Title of authorized officer)
Appointment as Trustee accepted:
By
---------------------------------------------------------
(Trustee Signature)
By
---------------------------------------------------------
(Trustee Signature)
By
---------------------------------------------------------
(Trustee Signature)
Appointment as Plan Administrator accepted:
- ------------------------------------------------------------
(To be signed by Plan Administrator if other than Employer.)
Sponsoring organization:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
(612) 340-7000
EXHIBIT (14)(b)
LUTHERAN BROTHERHOOD
FAMILY OF MUTUAL FUNDS
INDIVIDUAL RETIREMENT ACCOUNT
* DISCLOSURE STATEMENT
* CUSTODIAL AGREEMENT
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
<PAGE>
DISCLOSURE STATEMENT FOR
LUTHERAN BROTHERHOOD MUTUAL FUNDS
INDIVIDUAL RETIREMENT ACCOUNTS
The following information is being provided to you in accordance with
the requirements of the Internal Revenue Service and should be read together
with the Individual Retirement Plan and the prospectus for the shares of
each Mutual Fund selected by you for the investment of your contributions to
that Plan, copies of which you should have already received from your
Lutheran Brotherhood Securities Corp. representative.
The Individual Retirement Account is a program that may enable you to
plan for your retirement with federally tax-deductible dollars. Individuals
eligible to make tax deductible contributions are those who have income from
employment and are younger than age 70 1/2 for the full taxable year. This
Federal income tax deduction is available even if you do not otherwise
itemize your deductions. In addition, any earnings on the assets held in
your individual retirement account will not be subject to Federal income tax
until you actually begin to receive a distribution from your account. The
state income tax treatment of your account may differ, and details should be
available from your state taxing authority or your own tax adviser.
You have the right to revoke your account and receive the entire amount
of your contribution by notifying Lutheran Brotherhood Securities Corp. in
writing within seven (7) days of the earlier of the date of purchase or
establishment of your plan. If you should decide to revoke your account the
notice should be delivered or mailed to:
Compliance Director
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Telephone: 1-800-328-4552 -- Out of State
1-800-752-4208 -- Minnesota Residents
or
(612) 339-8091
Mailed notice will be deemed given on the date that it is postmarked
(or, if sent by certified or registered mail, on the date of certification
or registration). In the event that you decide to revoke your IRA and do so
within such seven day period, you are entitled to a return of the entire
amount of the consideration paid by you into your IRA, without adjustment
for such items as sales commissions, administrative expenses, or
fluctuations in market values.
As with most other laws that provide special tax treatment, there are
certain restrictions and limitations involved:
1. Only a limited amount of savings can qualify for the preferential tax
treatment -- the lesser of 100% of your compensation or earnings from
self-employment up to an annual maximum of $2,000 or that amount which
qualifies for the maximum income deduction allowable to an individual
under the Code for contribution to an IRA, unless contributions are made
by your employer to a Simplified Employee Pension, in which case the
annual maximum is $30,000 or that amount which qualifies for the maximum
income tax deduction allowable under the Code for contribution to an SEP.
Any amount contributed to the account in excess of the allowable
deduction (if not refunded to you before the due date for filing your
income tax return) will be subject to a nondeductible tax of 6%. Excess
contributions may be corrected at any time by withdrawal without again
being subject to income tax, provided that the total contributions in the
year the excess contribution was made did not exceed $2,250 and that no
deduction was taken for the excess contribution. If the excess
contribution is withdrawn before tax filing time, there is no penalty for
exceeding the $2,250 limit. Excess contributions left in the account
past tax filing time are nondeductible and subject to the 6% tax;
however, the amount may be deducted in a subsequent year to the extent
that the individual contributes less than his/her maximum amount.
2. Contributions must be made to a Trust or Custodial account in which the
Trustee/Custodian is a bank or such other person who has been approved by
the Secretary of the Treasury. No part of your contribution may be
invested in life insurance or be commingled with other property except in
a common trust fund or common investment fund.
3. No deduction is allowed for (a) contributions other than in
cash; (b) contributions made during the taxable year in which you
attained age 70 1/2 or thereafter, unless the contribution is made by
your employer under a Simplified Employee Pension; or (c) for any amount
you contribute which was a distribution from another retirement plan
("rollover" contribution).
4. Your interest in the account must be nonforfeitable at all times.
5. An individual is allowed to transfer (rollover) his investment in one
type of individual retirement plan to another without any tax liability.
Also, he may rollover (tax-free) a distribution received from another
qualified plan. However, strict limitations apply to rollovers, and you
should seek competent tax advice in order to comply with all of the rules
governing rollovers.
6. Since the purpose of the savings plan is to accumulate funds for
retirement, your receipt or use of any portion of this
account (for example, as collateral for a loan) before you attain
age 59 1/2 would be considered as an early distribution unless the
distribution is a result of death or disability. The amount of an early
distribution would be includable in your gross income and would also
subject you to a penalty tax equal to 10% of the distribution. Excess
contributions withdrawn prior to or after tax filing time are not
considered early distributions and are not includable in gross
income, provided the total contributions for the year in which the excess
was made did not exceed $2,250 and no deduction was taken for the excess.
7. If you or your beneficiary were to engage in any prohibited transaction
(such as any sale, exchange, or leasing of any property between you and
the account; or any other interference with the independent status of the
account) then the account would lose its exemption from tax and be
treated as having been distributed to you. The value of the entire
account would be includable in your gross income, and if you were then
under age 59 1/2 you would also be subject to the 10% penalty tax on
early distribution.
8. The entire interest in your account must be distributed to you, or begin
to be distributed to you, no later than April first following the
calendar year in which you attain age 70 1/2. The distribution may be
made at once in a lump-sum, or it may be made in installments. However,
installment payments cannot be scheduled to be made over a period which
extends beyond your life expectancy, or the combined life expectancy of
you and your spouse. If the amount distributed during a taxable year is
less than the minimum amount required to be distributed, the recipient
would be subject to a penalty tax equal to 50% of the difference between
the amount distributed and the amount required to be distributed. If you
die before the entire interest is distributed to you, similar rules
require prompt level payments to your beneficiary.
9. Amounts distributed to you are includable in your gross income in the
taxable year that you receive them and are taxable as ordinary income,
with no special lump-sum distribution treatment available. However,
normal five-year income averaging may be available. Up to $100,000 of
distributions paid to your beneficiary are excludable from Federal
gift taxes.
10. You must file Form 5329 with the Internal Revenue Service for any
taxable year for which a penalty tax is imposed.
11. The Individual Retirement Account Plan has been approved as to form for
use as an account by the Internal Revenue Service. This approval is a
determination only as to the form of the account and does not represent
a determination of the merits of such account.
12. Detailed information about the shares of each Mutual Fund available for
investment by your Individual Retirement Account must be furnished to you
in the form of a prospectus governed by rules of the Securities and
Exchange Commissions. Fees and other expenses of establishing and
maintaining your account will be deducted from your contributions. If
you have made a contribution of $1,000 to any of the Mutual Funds except
the Lutheran Brotherhood Money Market Fund, on the first day of a
calendar year and no further investment during that year, your
contributions would be subject to the following charges:
(a) A maximum sales charge of 5%, see fund prospectus for information
on reduced charges.
(b) Contributions to the Lutheran Brotherhood Money Market Fund are not
subject to a sales charge.
All of the Lutheran Brotherhood Funds' expenses are set forth in
the prospectuses under the sections entitled: "Fund Expenses"
(Lutheran Brotherhood Fund, Inc. Lutheran Brotherhood Income Fund and
Lutheran Brotherhood Money Market Fund prospectuses). A historical
table of per share income, expenses, distributions and other
information is set forth in the "Historical Picture of Fund Shares."
A current itemization of charges is set forth in the STATEMENT OF
ADDITIONAL INFORMATION under the heading "Statement of Operations."
The STATEMENT OF ADDITIONAL INFORMATION is available upon request.
The Custodian's fee schedule is set forth in the IRA booklet and
includes the annual maintenance fee of $10.00, which is not guaranteed
and is subject to change. There is no assurance for growth in the
value of your account or guaranty of investment results.
You may obtain further information from any district office of
the Internal Revenue Service.
<PAGE>
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
1111 CONSTITUTION AVENUE N.W. In reply refer to: 50019417
WASHINGTON, DC 202240000 FEB. 20, 1985 LTR 1233C
25-1183817P
00533
(REFERS TO PAGE 2) -- 00534
LUTHERAN BROTHERHOOD FUND INC
625 FOURTH AVENUE SOUTH
MINNEAPOLIS, MN 55415
District Office Code and
Case Serial Number: 504341082 NP
Name of Plan: Ira Custodial Account
Application Form: 5306
Employer Identification Number: 25-1183817
Plan Number: 001
File Number: 501662800
Dear Applicant:
In our opinion, the form of the prototype trust, custodial account, or
annuity contract identified above is acceptable under section 408 of the
Internal Revenue Code.
Adopters of this approved plan will be considered to have a retirement
savings program that satisfies the requirements of section 408, provided
they follow the terms of the program and do not engage in certain
transactions specified in Code section 408(e). Please provide a copy of
this letter to each person affected.
The Internal Revenue Service has not evaluated the merits of this savings
program and does not guarantee contributions or investments made under the
savings program.
Code section 408(l) and related regulations require that you provide a
disclosure statement to each participant in this program as specified In the
regulations. Publication 590, Individual Retirement Arrangements (IRA'S),
gives information about the items to be disclosed.
The trustee or issuer of a contract is also required to provide to each
adopting individual, annual reports of savings program transactions.
Your program may have to be amended to include or revise provisions to meet
the requirements of regulations adopted after the date of this opinion
letter. This letter does not express any opinion as to the applicability of
Code section 4975, regarding prohibited transactions.
If you have any questions concerning IRS processing of this case and want to
call us at 202-535-4972, Ms. Wiggins will be able to help you. Please refer
to Letter Serial Number A101206a and the Plan Number and File Number shown
in the heading of this letter. Please advise those adopting this plan to
contact you if they have any questions about its operation.
You should keep this letter as a permanent record. Please notify us
if you terminate the form of plan.
Sincerely yours,
/s/
-----------------------------------
Chief, Employee Plans Technical Br.
<PAGE>
LUTHERAN BROTHERHOOD FUND, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
IRS Serial Number 504341082ND
Approval Date February 20, 1985
This Agreement, entered into by and between Depositor and State Street
Bank & Trust Company (hereinafter referred to as "Custodian"), having its
principal place for business at Boston, Massachusetts.
WITNESSETH:
Whereas, the Depositor desires to provide for his retirement and for the
support of his beneficiaries upon his death; and
Whereas, to accomplish this purpose, the Depositor desires to establish
an individual retirement account as described in section 408(a) of the
Internal Revenue Code of 1954, as amended, or any successor statute
(hereinafter referred to as "the Code");
Now, therefore, it is agreed by and between the Depositor and the
Custodian the following:
ARTICLE I
1. The Custodian may accept additional contributions in cash from the
Depositor during a taxable year of the Depositor except as limited by
paragraph 2.
2. Except in the case of a rollover contribution, as that term is defined
in the Code, or an employer contribution to a simplified employee
pension, as defined in the Code, the Custodian will only accept cash
and will not accept contributions on behalf of the Depositor for any
taxable year in excess of $2,000 or that amount which qualifies for
the maximum income tax deduction allowable to an individual under the
Code for a contribution to an individual retirement account.
Contributions on behalf of Depositor shall be made out of
compensation. Compensation means wages, salaries, professional fees,
or other amounts derived from or received for personal services
actually rendered (including, but not limited to commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commission on insurance premiums, tips, and bonuses), and
includes earned income, as defined in section 401(c)(2) (reduced by a
deduction and the self-employed individual takes for contributions
made to a Keogh plan). In addition, all taxable alimony received by a
divorced spouse pursuant to a decree of divorce or separate
maintenance is treated as a compensation for purposes of the IRA
deduction limit. Compensation does not include amounts derived from
or received as earnings or profits from property (including, but not
limited to, interest and dividends) or amounts not includible in gross
income. Compensation also does not include any amount received as a
pension or annuity or as deferred compensation.
ARTICLE II
The interest of the Depositor in the balance in the custodial account
shall at all times be nonforfeitable.
ARTICLE III
No part of the custodial account funds shall be invested in life
insurance contracts; nor may the assets of the custodial account be
commingled with other property except in a common custodial account fund
or a common investment fund (within the meaning of section 408(a)(5) of
the Code).
ARTICLE IV
1. Distribution of the custodial account assets shall be made in
whichever manner set forth in paragraph (3), and at such time as
depositor shall elect by written order to Custodian, which provides
for distribution to commence no later than the first day of April
following the calendar year in which Depositor attains age 701/2, and
no earlier than age 59 1/2 (except for distribution on account of
Depositor's disability or death, return of an "excess contribution"
referred to in paragraph (4) or a "rollover" from this account) if
Depositor wants to avoid an "early distribution additional tax" under
Code section 408(f). For that purpose, Depositor will be considered
disabled if Depositor can prove disability as defined in Code
section 72(m)(7). Custodian assumes no responsibility for the tax
treatment of any distribution from the custodial account; such
responsibility accrues solely to the person ordering the distribution.
2. Custodian assumes (and shall have) no responsibility to make any
distribution unless and until such order specifies the occasion for
such distribution, the elected manner of distribution, and any
declaration required by Article V. Also, before making any such
distribution or before honoring any assignment of the custodial
account, Custodian shall be furnished with any and all applications,
certificates, waivers, signature guarantees, and other documents
(including proof of any legal representative's authority) requested in
its discretion by Custodian, but Custodian shall not be liable for
complying with an order which appears on its face to be genuine, or
for refusing to comply if not satisfied that it is genuine, and
assumes, no duty of further inquiry.
3. (a) If the distribution order is not occasioned by Depositor's death,
then distribution shall be made to Depositor no later than the
first day of April following the calendar year in which depositor
attains age 70 1/2 in one or more of the following ways as
specified in the order:
(A) In a lump-sum.
(B) In installments pursuant to a cash withdrawal plan, provided
that in the Custodian's judgment such a plan is suitable for
pre-arranging the distribution described in this subparagraph(B)
is available under the rules of the Mutual Fund which shares are
held in the custodial account, pursuant to which some of such
shares will be liquidated periodically to yield the cash to pay
each installment, and which as implemented hereunder provides
for distribution in such installments over a period not to
exceed 10 years from the date such distributions commence, or
over a period measured by the life expectancy of Depositor or
the joint life and the last survivor expectancy of Depositor and
Depositor's designated beneficiary. The life expectancy
referred to in this arrangement shall be determined by using
applicable IRS tables, (1) first, when installment payments
commence, and (2) thereafter at least as of when Depositor
attains age 70. The amount of the installment payments shall be
as elected by the Depositor provided, however, that beginning in
the year the Depositor attains age 70 1/2, the amount
distributed each year shall be at least equal to the quotient
obtained by dividing the entire custodial account remaining at
the beginning of such year by the life expectancy of Depositor,
or the joint life and last survivor expectancy of Depositor and
Depositor's designated beneficiary (whichever is applicable),
determined as of when Depositor attains age 70, and recalculated
no more frequently than annually. If Depositor's designated
beneficiary is not Depositor's spouse, the life expectancy of
such beneficiary may not be recalculated. No distribution need
be made in any year, or a lesser amount may be distributed
during such year, if the aggregate amounts distributed through
the end of such year are at least equal to the aggregate of the
minimum amounts required by this subparagraph (B) to have been
so distributed. Moreover, during Depositor's lifetime the
entire custodial account remaining for distribution at any time
under this subparagraph (B) may, pursuant to a proper
supplementary written order as specified above, be distributed
to Depositor.
(C) By the purchase and distribution of a single-premium contract
meeting the requirements of section 408(b) applicable to
an "individual retirement annuity" but Custodian shall not be
required to distribute in this manner unless such premium is at
least $1,000.00.
(b) If Depositor dies before distribution of Depositor's custodial
account has commenced or before such distribution has been
completed, the following distribution provisions shall apply:
(A) If Depositor dies after distribution of Depositor's Custodial
Account has commenced -- upon receipt of a proper written
order -- the Custodian shall distribute the entire amount of the
remaining undistributed interest in the manner described in
subparagraph 3(a)(A) of this Article or in the manner described
in subparagraphs 3(a)(B) or 3(a)(C) of this Article provided
such installments distribute the entire custodial account
remaining at least as rapidly as the method of distribution in
effect prior to Depositor's death and provided that, in
Custodian's judgment, such installments are suitable for
pre-arranging the distribution in this subparagraph (A) and are
available under the Mutual Fund which shares are held in the
custodial account.
(B) If Depositor dies before distributions of Depositor's custodial
account commences, Depositor's entire interest shall be
distributed in one or more of the following ways:
(i) Depositor's entire interest shall be distributed within
five (5) years after the date of Depositor's death.
(ii) Depositor's entire interest shall be distributed in
installments pursuant to a cash withdrawal plan, provided
that in the Custodian's judgment such a plan is suitable for
pre-arranging the distribution described in this
subparagraph (B), is available under the Mutual Fund which
shares are held in the custodial account and which provides
for distribution in such installments over a period measured
by the life or life expectancy of Depositor's designated
beneficiary commencing no later than one (1) year after the
date of Depositor's death. The life expectancy referred to
in this agreement shall be determined by using applicable IRS
tables calculated when such installments commence and reduced
by one for each 12-consecutive month period commencing
thereafer. If Depositor's designated beneficiary is
Depositor's surviving spouse, the life expectancy may be
recalculated annually. If Depositor's designated beneficiary
is Depositor's surviving spouse, such distribution may be
elected within a period commencing with the date of
Depositor's death and ending on the date Depositor would have
attained age 70 1/2, not to exceed five (5) years from
Depositor's death. The entire custodial account remaining
for distribution may, at any time during beneficiary's
lifetime, be distributed to beneficiary pursuant to a proper
supplementary written order.
(iii) If Depositor's designated beneficiary is Depositor's
surviving spouse, the spouse may elect to treat the custodial
account as his or her own individual retirement account.
This election will be deemed to have been made if such
surviving spouse makes a regular IRA contribution to the
account, makes a rollover to or from the account, or fails to
elect distribution in a manner described in
paragraphs 3(b)(B)(i) or 3(b)(B)(ii) of this Article.
(iv) For the purpose of subparagraph (3)(b)(B) of this Article,
any distributions paid to a child of Depositor, shall be
treated as if such distributions were paid to Depositor's
surviving spouse if the remainder of Depositor's interest
becomes payable to such spouse when the child reaches the age
of majority.
If Depositor dies before distribution has commenced, or
before such distribution has been completed, the beneficiary
is other than Depositor's surviving spouse, no additional
cash contributions or rollover contributions may be accepted
by the custodial account. The beneficiary shall be the
estate of the Depositor or the Depositor's surviving spouse
(whichever is applicable), except to the extent that the
Depositor or the Depositor's surviving spouse (whichever is
applicable) is survived at least forty-eight hours by a
person or persons effectively designated to receive the same
on a beneficiary form acceptable to the Custodian for use
under this agreement, signed by the designated person and
filed with Custodian before the designating person's death in
which case such person or persons designated shall be the
beneficiary to whom distribution shall be made after the
Depositor's death or the death of the surviving spouse
(whichever is applicable). The form if any, last filed with
Custodian within that time limit shall be controlling and
whether or not fully dispositive of the custodial account,
shall revoke all such forms previously filed by that person.
The Custodian shall accept all such specifications of
beneficiary only in the Commonwealth of Massachusetts, and
they shall be considered part of this agreement for purposes
of this Article IV. No beneficiary of this custodial account
shall have the right to anticipate any part of the custodial
account fund or to sell, assign, transfer, pledge or
hypothecate any part thereof, nor shall the same be liable
for the debts of any beneficiary or subject to any seizure,
attachment, execution or any other legal process.
4. If during a taxable year Depositor contributes under Article I total
amounts which exceed the amount deductible by Depositor for that year,
or because Depositor loses Depositor's status as an eligible
individual, or because Depositor attained age 70 1/2 in that year,
then -- upon receiving written notice specifying the year in question,
the amount of the excess, the reason it is an excess, and the amount
of net income in the custodial account attributable to such
excess -- Custodian shall distribute cash to Depositor in an amount
equal to the sum of such excess and earnings. If the excess
contributions did not arise because Depositor lost eligible status or
attained age 70 1/2, then (in Custodian's discretion unless otherwise
instructed by Depositor) in lieu of being distributed, said sum
(without deduction for any sales or administrative charge attributable
thereto) shall be treated by Depositor as a contribution in the then
current or a succeeding taxable year.
5. When and after distributions of the custodial account to a beneficiary
commence, all rights and obligations assigned to Depositor by
provisions of this Agreement shall inure to, and be enjoyed and
exercised by, beneficiary, instead of Depositor. Until such
distributions commence to such a person, the Custodian shall not be
responsible for treating such person's predecessor to such rights and
obligations as still possessing the same.
ARTICLE V
Except in the case of the Depostor's death or disability (as defined in
section 72(m) of the Code) or attainment of age 59 1/2, before distributing
an amount from the account, the Depositor shall furnish the Custodian with a
declaration of the Depositor's intention as to the disposition of the amount
distributed.
ARTICLE VI
1. The Depositor agrees to provide information to the Custodian at such
time and in such manner and containing such information as may be
necessary for the Custodian to prepare any reports required pursuant
to section 408(i) of the Code and the regulations thereunder.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor at such time and in such manner and containing such
information as is prescribed by the Internal Revenue Service.
ARTICLE VII
The amendment procedure for this Agreement shall be as follows:
1. The Custodian and the Depositor authorize Lutheran Brotherhood
Fund, Inc. to amend this Agreement in any respect at any time,
effective on a stated date, in order to meet the requirements of
section 408(a) of the Code or successor provision of law, to obtain
expediently an Internal Revenue Service determination, opinion or
ruling that such requirements are necessary or to conform with other
applicable laws. Lutheran Brotherhood Fund, Inc. will give prompt
written notice to the Depositor and the Custodian of any such
amendment.
Any amendment to this Agreement other than one made for the purpose
set forth in the preceding paragraph shall be effective unless
objected to by the Depositor. No amendment shall place greater burden
on the Custodian without its written consent.
2. This Article VII shall not be construed to reduce Custodian's freedom
to agree with distributors of Mutual Fund shares, or others, upon the
terms by which shares of additional Mutual Funds may be chosen for
investment as contemplated in Article VIII, paragraph 4, or
Custodian's freedom to substitute fee schedules in the manner provided
by Article VIII, paragraph 3(b), and no such agreement or substitution
shall be deemed to be an amendment of agreement.
ARTICLE VIII
1. Depositor's Selection of Mutual Fund
Depositor directs Custodian to invest all custodial account funds in
investment shares issued by the Mutual Fund, or Funds, selected by
the Depositor on the IRA Application completed on even date herewith,
until Depositor hereafter gives Custodian contrary instructions
pursuant to Article VIII, paragraph 4 before, which governs investment
of the custodial account in "Mutual Fund" shares.
2. Initial Deposit
(a) Initial Periodic Contribution. Depositor herewith deposits the
amount specified on the IRA Application in cash to be invested
under this Agreement. Depositor contemplates future contributions
within the limits specified in Article I, paragraph 2. All future
contributions shall be sent to Custodian by Depositor and not by
Depositor's employer, except as otherwise agreed to by
the Custodian.
(b) Rollover Contribution. Depositor herewith makes a deposit of the
amount specified on the IRA Application in cash, except as
otherwise agreed to by the Custodian, to be invested under this
Agreement, and WARRANTS (1) that the entire such amount is a
"rollover contribution" received within sixty (60) days as a
qualifying distribution from an employees' trust, or an employee
annuity, or a distribution from an individual retirement account or
individual retirement annuity, or a U.S. retirement bond, as
described in Internal Revenue Code sections 402(a)(5), 402(a)(7),
403(a)(4), 403(b)(8), 405(d)(3), 408(d)(3), or 409(b)(3)(C); (2)
that in the case of a rollover from an employees' trust or employee
annuity, the entire excess of the distribution, or a portion
thereof, over amounts considered contributed thereto by Depositor
(and no more) makes up this rollover contribution; (3) that in the
case of a rollover from another individual retirement account or
individual retirement annuity, or a U.S. retirement bond, Depositor
did not receive another distribution from such account, annuity or
bond within one year prior to receiving this rollover contribution;
(4) except as provided in (2), the property being contributed is
the same property or the proceeds attributable to the sale of that
property received by the Depositor, and (5) that in the case of a
rollover from an employee's trust or employee annuity, Depositor
agrees to make no additional contributions, unless such additional
contributions are part of a qualifying distribution, as described
in Internal Revenue Code sections 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8), 405(d)(3), 408(d)(3), or 409(b)(3)(c).)
3. Custodian's Fees
(a) For establishing this Agreement, Depositor agrees to pay Custodian
the fees specified in its current fee schedule.
(b) Upon thirty (30) days prior written notice, Custodian may
substitute a new fee schedule. Custodian's fees, any income, gift,
estate and inheritance taxes and other taxes of any kind
whatsoever, including transfer taxes incurred in connection with
the investment or reinvestment of the assets of the custodial
account, that may be levied or assessed in respect to such assets;
and all other administrative expenses incurred by Custodian in the
performance of its duties including fees for legal services
rendered to Custodian, may be charged to the custodial account,
with the right to liquidate Mutual Fund shares for this purpose,
or (at Custodian's options) to the Depositor.
4. Custodian Account
(a) This Agreement shall take effect only when accepted and signed by
Custodian. As directed, Custodian shall then open and maintain a
separate custodial account for Depositor and invest the initial
contribution hereunder in shares of the Mutual Fund designated by
Depositor in the IRA Application. "Mutual Fund" means a regulated
investment company as defined in Internal Revenue Code
section 851(a).
(b) Every subsequent contribution shall be accompanied by written
instructions from Depositor stating Depositor's choice of the
Mutual Fund named in the applicable list available from the
distributor of the shares of any Mutual Fund invested in hereunder,
either originally or thereafter. Depositor agrees that the listing
shall not be construed as an endorsement by Custodian of the Mutual
Funds in which contributions may be invested, final choice of which
is in the sole discretion of Depositor. The Custodian does not
undertake to render any investment advice whatsoever to
Depositor; its sole duties are those prescribed in Article VIII,
paragraph 5(b).
(c) The Custodian shall invest subsequent contributions as directed.
However, if any such written instructions are not received as
required, or if received, are in the opinion of Custodian unclear,
or if the accompanying contribution exceeds $2,000, Custodian may
hold or return all or a portion of the contribution uninvested
without liability for loss of income or appreciation, and without
liability for interest, pending receipt or written instructions
or clarification.
(d) All dividends and capital gain distributions received on shares of
a Mutual Fund held in the custodial account shall (unless received
in additional such shares) be reinvested in shares of that Mutual
Fund, if available, which shall be reinvested in shares of that
Mutual Fund, if available, which shall be credited to the account.
If any distribution on such shares may be received at the election
of the shareholder in additional such shares or in cash or other
property, Custodian shall elect to receive it in additional
such shares.
(e) All Mutual Fund shares acquired by Custodian hereunder shall be
registered in the name of Custodian (with or without identifying
Depositor) or of its nominee. Custodian shall deliver, or cause to
be executed and delivered, to Depositor all notices, prospectuses,
financial statements, proxies and proxy soliciting materials
relating to such Mutual Fund shares held in the custodial account.
Custodian shall not vote any such Mutual Fund shares except in
accordance with any written instructions received from Depositor.
5. Additional Provisions Regarding the Custodian
(a) Custodian shall keep adequate records of transactions it is
required to perform hereunder. Not later than sixty (60) days
after the close of each calendar year or after the Custodian's
resignation or removal pursuant to Article VIII, paragraph 6(a),
Custodian shall render to Depositor or Depositor's legal
representative a written report or reports reflecting the
transactions effected by it during such period and the assets and
liabilities of the custodial account at the close of the period.
Sixty (60) days after rendering such report(s), Custodian shall (to
the extent permitted by law) be forever released and discharge from
all liability and accountability to anyone with respect to its acts
and transactions shown in or reflected by such report(s), except
with respect to those as to which Depositor or Depositor's legal
representative shall have filed written objections with the
Custodian within the latter such sixty-day period.
(b) Custodian shall receive and invest contributions as directed by
Depositor, hold and distribute such investments, and keep adequate
records and report thereon, all in accordance with this Agreement.
The parties do not intend to confer any other fiduciary duties on
Custodian, and none shall be implied. Custodian shall not be
liable (and assumes no responsibility) for the collection of
contributions, the deductibility of any contribution or its
propriety under this Agreement, or the purpose or propriety of any
distribution ordered in accordance with Article IV, which matters
are the responsibility of Depositor or Depositor's legal
representative.
(c) Depositor, to the extent permitted by law, shall always fully
indemnify Custodian and save it harmless from any and all liability
whatsoever which may arise in connection with this Agreement and
matters which it contemplates, except that which arises due to
Custodian's negligence and willful misconduct. Custodian shall not
be obligated or expected to commence or defend any legal action or
proceeding in connection with this Agreement or such matters unless
agreed upon by Custodian and Depositor or said legal
representative, and unless fully indemnified for so doing to
Custodian's satisfaction.
(d) Custodian may conclusively rely upon and shall be protected in
acting upon any written order from Depositor or Depositor's legal
representative or any other notice, request, consent, certificate
or other instrument or paper believed by it to be genuine and to
have been properly executed, and, so long as it acts in good faith,
in taking or omitting to take any other action in reliance thereon.
6. Resignation or Removal of Custodian
(a) Custodian may resign at any time upon thirty (30) days notice in
writing to Depositor, and may be removed by Depositor at any time
upon thirty (30) days notice in writing to Custodian. Upon such
resignation or removal, Depositor shall appoint a successor
Custodian to serve under this Agreement. Upon receipt by Custodian
of written acceptance of such successor the assets of the custodial
account and all necessary records (or copies thereof) pertaining
thereto, provided that (at Custodian's request) any successor
Custodian shall agree not to dispose of any such records without
Custodian's consent. Custodian is authorized, however, to reserve
such a portion of such assets as it may deem advisable for payment
of all its fees, compensation, costs, and expenses, or for payment
of any other liabilities constituting a charge on or against the
assets of the custodial account or on or against Custodian, with
any balance of such reserve remaining after the payment of all such
items to be paid over to the successor Custodian.
(b) Custodian shall not be liable for the acts or omissions of such
successor Custodian.
(c) The Custodian, and every successor Custodian appointed to serve
under this agreement, must be a bank as defined in Code section
401(d)(1) or such other person who qualifies to serve in the manner
prescribed by Code section 408(a)(2) and satisfies the Custodian,
upon request, as to such qualifications.
(d) After Custodian has transferred the Custodian account assets
(including any reserve balance as contemplated above) to the
successor Custodian, Custodian shall be relieved of all further
liability with respect to this Agreement, the custodial account,
and the asserts thereof.
7. Termination of Account
(a) Custodian shall terminate the custodial account if within
thirty (30) days after its resignation or removal pursuant
to Article VIII, paragraph 6, Depositor has not appointed a
successor Custodian which has accepted such appointment.
Termination of the custodial account shall be affected by
distributing all assets thereof in cash or in kind to Depositor in
a lump-sum, subject to Custodian's right to reserve funds as
provided in said paragraph 6.
(b) Upon termination of the custodial account in any manner provided
for in this paragraph 7, this Agreement shall terminate and have no
further force and effect, and Custodian shall be relieved from
all further liability with respect to this Agreement, the custodial
account, and all assets thereof so distributed.
8. Miscellaneous
(a) Any notice from Custodian to Depositor provided for in this
Agreement shall be effective if sent by first-class mail to
Depositor at Depositor's last address on Custodian's records.
(b) This Agreement is accepted by Custodian in and shall be construed
and administered in accordance with the laws of the Commonwealth of
Massachusetts. This Agreement is intended to qualify under section
408 of the Code as an Individual Retirement Account and to entitle
Depositor to the Retirement Savings deduction under section 219 or
220 of the Code, and, if any provision hereof is subject to more
than one interpretation or any term used herein is subject to
more than one construction, such ambiguity shall be resolved in
favor of that interpretation or construction which is consistent
with that intent.
<PAGE>
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
625 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55415
Sole distributor of the Lutheran Brotherhood Family of Funds
THIS LITERATURE MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS
OF THE FUNDS.
EXHIBIT 14(c)
LUTHERAN BROTHERHOOD SECURITIES CORP.
SELF-DIRECTED
INDIVIDUAL RETIREMENT ACCOUNT
* SUPPLEMENTAL DISCLOSURE STATEMENT
* DISCLOSURE STATEMENT
* CUSTODIAL AGREEMENT
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
<PAGE>
SUPPLEMENTAL IRA DISCLOSURE
SELF-DIRECTED BROKERAGE OPTION
This is a special supplement to the IRA Disclosure. It provides additional
information for persons who have established a Self-Directed IRA through
Lutheran Brotherhood Securities Corp. I should read both the IRA Disclosure
and this supplement carefully.
Norwest Bank Minnesota, N.A. (the "Custodian") is an affiliate bank of
Norwest Corporation. My account is serviced by Lutheran Brotherhood
Securities Corp. (LBSC), a registered broker dealer and member SIPC
(Securities Investor Protection Corporation). Certain transactions may be
handled by Wall Street Investor Services, a registered broker dealer and a
member of the New York Stock Exchange and SIPC where applicable. Pursuant
to a Custodial Services Agreement the Custodian has delegated certain
administrative responsibilities to LBSC.
1. RIGHT OF CANCELLATION
As explained in the IRA Disclosure, I can cancel my IRA within the first
seven days after it is established. Because of this, contributions I make
to it may be held uninvested during the first seven days after I made my
first contribution. If I cancel a Self-Directed IRA, the entire
contribution (or the actual property contributed if I did not contribute
cash) will be returned to me. There will be no adjustment for fees,
penalties, administrative expenses, or changes in market value.
To cancel a Self-Directed IRA, I must mail or deliver a written notice
following the instructions in the IRA Disclosure. However, the notice in
this case must be addressed to:
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, MN 55415
I can obtain more information about cancelling my Self-Directed IRA by
calling:
Local -- 612/339-8091
Toll Free -- 800/328-4552
2. ADDITIONAL FINANCIAL INFORMATION
The value of my Self-Directed IRA will depend on the investment options I
select and on the contributions, distributions, account earnings (including
net investment gains and losses, interest and dividends), fees, penalties,
and administrative and other expenses charged to my IRA. To compare the
performance of my IRA from year to year, it is important to take into
consideration year-end market values plus net income earnings during the
year. Because my IRA can be invested in a wide range of possible
investments, the growth in value of the investments I select can neither be
guaranteed nor projected.
Neither LBSC nor the Custodian will make any investment decisions with
respect to my IRA. I must direct LBSC with respect to the investment of all
contributions and earnings in my IRA. I may give investment instructions by
telephone, but Wall Street Investor Services and LBSC reserve the right to
require written instructions at their discretion.
3. INVESTMENT OPTIONS
Investments may be made in one or more of the investment options which are
offered by Wall Street Investor Services in conjunction with LBSC and the
Custodian. These options include publicly traded securities, shares of
stock of the Custodian or its affiliates, mutual fund shares, money market
instruments and other investment alternatives obtainable through Wall Street
Investor Services in its regular course of business. No portion of my
contributions to my IRA may be used to purchase life insurance or any
"collectible" as defined in the Internal Revenue Code. The investments of
my IRA may not be commingled with any of my personal investments.
The investment options currently available for my Self-Directed IRA are:
* Stocks
* Bonds
* Government Securities
* Lutheran Brotherhood Family of Funds
* Other selected mutual funds
* Limited Partnerships
Liquid asset balances will be held in the Lutheran Brotherhood Money Market
Fund. I can get the complete list of available mutual funds and information
about the Lutheran Brotherhood Family of Funds by calling LBSC.
4. FEES AND COMMISSIONS
The fees that may be charged to my Self-Directed IRA are set out either in
the Commission Schedule in the applicable Prospectus or in the attached Fee
Schedule which LBSC has provided to me with this Disclosure Statement or
will provide at the time I establish my Self-Directed IRA. I understand
these fees and commissions may change from time to time. LBSC will notify
me of any changes in these fees and in the Commission schedule set forth in
the Lutheran Brotherhood Family of Funds prospectus.
The fee for maintaining a Self-Directed IRA through Norwest Bank Minnesota,
N.A., is set forth in the Fee Schedule.. I understand that LBSC will debit
the annual fee from my Self-Directed IRA on the last business day of each
year for the annual maintenance fee unless prior to that date I elect to pay
the fee by that December date in another manner agreeable to LBSC. LBSC
will notify me at least annually of the fees charged to my IRA. To the
extent I do not pay those fees, they will be deducted from my IRA. LBSC
will also charge my IRA for any other fees, taxes, expenses or liabilities
(including legal fees and the cost of any fiduciary insurance) incurred in
connection with my IRA. The charges against my IRA will also include
brokerage and placement fees to the extent I do not pay those fees
separately. The IRA Disclosure describes other types of charges that may be
made against my IRA.
5. PAYMENT OF BENEFITS
As explained in the IRA Disclosure, the Internal Revenue Code requires
certain minimum distributions for each year beginning with the year that I
reach age 70-1/2. I understand that I must notify LBSC when I want
distributions from my Self-Directed IRA to begin. I must elect the method
in which I want benefits distributed and I must notify LBSC annually of the
amount of the distribution desired. LBSC will not automatically calculate
and distribute the required minimum amount.
6. FURTHER INFORMATION
Before establishing my LBSC Self-Directed IRA for which Norwest Bank is the
custodian, I should compare its fees and commissions with those charged
by other plans. I should also compare the terms and conditions of this
Self-Directed IRA with those of other plans.
<PAGE>
IRA DISCLOSURE AND
INDIVIDUAL RETIREMENT PLAN
IRA DISCLOSURE
In this disclosure, I, ME and MY refer to the depositor opening an
Individual Retirement Account (IRA). YOU and YOUR refer to the Bank named
below.
This disclosure statement is only a brief summary of the Bank's IRA program.
If there is any inconsistency between this summary and the plan documents,
the plan documents control.
MY RIGHT TO CANCEL MY IRA
- ----------------------------------------------------------------------------
I have the right to cancel my IRA within seven calendar days after I make my
first contribution. To cancel my IRA, I must give or send you WRITTEN
notice at this address before the seven-day period expires:
Norwest Bank MN, N.A.
as IRA Custodian
c/o Lutheran Brotherhood Securities Corp.
625 - 4th Avenue South
Minneapolis, Minnesota 55415
Attention: IRA Officer
Telephone: (800) 328-4552
- ----------------------------------------------------------------------------
Notice sent by mail must be postmarked within the seven-day period. It will
be considered to have been mailed on the postmarked date if it is:
* properly addressed;
* mailed by U.S. mail;
* sent postage paid (first class); and
* enclosed in an envelope or other appropriate wrapper.
If I cancel my IRA, you will refund to me the entire amount of the
contributions I made before my revocation. I will not earn interest on the
contribution if I revoke. There are no penalties for revocation.
HOW MY IRA WORKS
- ----------------------------------------------------------------------------
I may be able to claim all or part of any regular contributions I make to my
IRA as deductions from my gross income on my federal income tax return. I
can do this even if I do not itemize other deductions.
When I establish an IRA, I appoint you as the custodian or trustee of my
account. (Your status is determined by the type of IRA Application I sign.)
You agree to accept my contributions and hold them as described here. You
will invest them in the manner that I choose. The income earned on my
regular contributions is not subject to federal income tax until it is
distributed (paid) to me.
ESTABLISHING AN IRA
ESTABLISHING AN IRA FOR MYSELF
- ----------------------------------------------------------------------------
I can establish an IRA for myself if I have earned any compensation during
the year. Compensation includes:
* wages;
* salary;
* taxable bonuses;
* net earnings from self-employment derived from personal services; and
* certain alimony or separate maintenance payments that are taxable income
to me.
Compensation does not include:
* income from investments, such as interest or dividends;
* pensions or annuities;
* deferred compensation; or
* self-employment earnings contributed to a Keogh (HR-10) plan.
ESTABLISHING A SPOUSAL IRA
- ----------------------------------------------------------------------------
If my spouse and I file a joint federal income tax return, and if my spouse
earned no compensation during the year or elects to be treated as having
earned no compensation, I can make contributions to a separate IRA (called a
spousal IRA) established by my spouse. (In most cases, my spouse would elect
to be treated as having no compensation for the year only if he or she
actually earned less than $250 that year.)
Once I have contributed to an IRA for my spouse, my spouse will have control
over that contribution. For example, my spouse will be the only person who
can authorize distributions from the account.
MAKING CONTRIBUTIONS
AMOUNT OF CONTRIBUTIONS
- ----------------------------------------------------------------------------
PERSONAL IRAs
I may make contributions annually of up to $2,000 or 100% of my compensation
for the year, whichever is less. Rollover contributions (explained below)
are not subject to this limit.
SPOUSAL IRAs
If I also contribute to an IRA for my spouse, I may contribute a combined
total of up to $2,250 per year to both our IRAs. I may divide my
contributions between the two accounts in any way I choose as long as no
more than $2,000 is deposited in any one account. If my spouse earns any
compensation at all in a given year, I cannot contribute to a spousal IRA
for that year, unless my spouse elects to be treated as having earned no
compensation. However, my spouse may contribute from his or her
compensation to a spousal IRA already established.
SEP - IRAs
My employer may contribute up to $30,000 per year, or 15% of my annual
compensation, whichever is less, to a Simplified Employee Pension plan, or
SEP. This limit may be reduced if the SEP is integrated with Social
Security. Certain types of SEP programs also allow me to have my employer
make "elective" contributions from my pay. If I am self-employed and a SEP
has been established for my business, I may make the contribution. I may
have a personal IRA in addition to SEP.
I will not be taxed on contributions made by my employer until they are
distributed to me.
ROLLOVER AND TRANSFER CONTRIBUTIONS
Rollover and transfer contributions may be in any amount.
INVESTING MY CONTRIBUTIONS
- ----------------------------------------------------------------------------
I may choose one or a combination of investments that you offer for IRA
funds. Details are explained in the section of this summary called
FINANCIAL INFORMATION.
DEDUCTING MY CONTRIBUTIONS
- ----------------------------------------------------------------------------
I may be able to take a federal income tax deduction equal to all or part of
my regular contributions (up to $2,000 or 100% of my compensation, whichever
is less) to my personal IRA. If I also contribute to a spousal IRA, I may
be able to deduct total contributions of up to $2,250 or 100% of my
compensation, whichever is less. I can do this even if I do not itemize my
other deductions.
The amount I am entitled to deduct depends on whether I (and possibly my
spouse) am an "active participant" in a retirement plan for the year and
level of my adjusted gross income (AGI) as calculated on my tax return:
* If neither I nor my spouse is an active participant, I can take the
full deduction.
* If I am an active participant (or my spouse is), but my adjusted gross
income is below a certain level, I can take the full deduction.
* If I am an active participant (or my spouse is), and my adjusted gross
income is above the specified level, the deduction is phased down and
eventually eliminated.
ACTIVE PARTICIPANT
I am an "active participant" for the year if I am covered by a retirement
plan. If I am married, I am also usually treated as an "active participant"
if my spouse is covered by a retirement plan.
I am covered by a retirement plan if my employer or union has a retirement
plan under which money is added to my account or I am eligible to earn
retirement credits. For example, if I am covered under a profit-sharing
plan, certain government plans, a salary reduction arrangement (such as a
tax sheltered annuity arrangement or a 401(k) plan), a simplified employee
pension plan, or a plan which promises a benefit based on the number of
years of my service, I am likely to be an active participant. My Form W-2
for the year should indicate whether I am an active participant.
I am an active participant for the year even if I am not yet vested (i.e., I
would not be entitled to 100% of my retirement benefit if I separated from
my employer now). I am an active participant if I make required
contributions or voluntary employee contributions to a retirement plan. In
certain plans, I may be an active participant even if I was with the
employer for part of the year.
I am generally not an active participant if the only plan by which I am
covered relates to (i) my service as an Armed Forces Reservist for less than
90 days of active service or (ii) my service as a volunteer firefighter
covered for firefighting service by a government plan under which my accrued
benefit is less than $1,800 per year. Of course, these exceptions do not
apply if I am also covered by any other plan.
If I am married but I file a separate tax return and my spouse and I have
lived apart at all times during the year, my spouse's active participation
status does not affect my ability to deduct my contributions. In this case,
I am treated as if I am single for purposes of calculating my IRA deduction.
THRESHOLD INCOME LEVELS
If I am an active participant, I must look at my adjusted gross income for
the year to determine whether I can deduct IRA contributions. If I file a
joint return with my spouse, I must use our combined AGI. My tax return
will show how to calculate AGI for this purpose.
If I am single, the threshold AGI level is $25,000. If I am married and
file a joint tax return, the threshold level is $40,000. If I am married
but file a separate return, the threshold level is $0.
AMOUNT OF DEDUCTION FOR ACTIVE PARTICIPANTS
- ----------------------------------------------------------------------------
* If I am an active participant and my AGI is at or below the applicable
threshold AGI level, I am eligible for the full IRA deduction.
* If I am an active participant and my AGI is less than $10,000 above the
threshold level, I may deduct part of my IRA contributions. I may
estimate the limit on my deductions by using a table provided by the
IRS. However, my deduction limit may be slightly higher if I use the
following formula:
My Deduction Limit =
10,000 - Excess AGI X Maximum Allowable
-------------------
$10,000 Deduction
In this formula, "excess AGI" is the amount by which my AGI is greater than
my threshold level. The maximum allowable deduction is $2,000 ($2,250 if I
also contribute to a spousal IRA).
In applying the formula, I round the result up to the next higher $10.00
level (the next higher number that ends in zero). For example, if the
result of the formula is $1,525, I will round up to $1,530.
If the result of the formula is less than $200.00, my deduction limit is
$200.00. For example, if I am married, file a joint return, and my AGI is
anywhere between $49,000 and $50,000, I can always deduct $200.00. However,
if I file a separate return from my spouse and my compensation for the year
is less than $200.00, I may never deduct more than 100% of my compensation.
* If I am an active participant and my AGI is $10,000 or more above the
threshold level, I may not deduct any part of my IRA contributions.
The following examples show how persons who are active participants
calculate their IRA deductions:
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an
AGI of $31,619. She calculates her deductible IRA contribution as follows:
Her AGI is $31,619
Her Threshold Level is $25,000
Her Excess AGI (AGI - Threshold Level) is
($31,619 - $25,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
10,000 - $6,619 X $2,000 = $676
---------------
$10,000 (rounded to $680)
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. They have a combined AGI
of $44,255. They may each contribute to an IRA and calculate their
deductible contributions to each IRA as follows:
Their AGI is $44,255
Their Threshold Level is $40,000
Their Excess AGI (AGI - Threshold Level) is
($44,255 - $40,000) = $4,255
Their Maximum Allowable Deduction is $2,000
So, each spouse computes his or her IRA
Deduction limit as follows:
10,000 - $4,255 X $2,000 = $1,149
---------------
$10,000 (rounded to $1,150)
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation, or
elected to be treated as earning no compensation, Mrs. Young could establish
an IRA for herself and a spousal IRA for her husband. The amount of
deductible contributions which could be made to the two IRAs is calculated
using a Maximum Allowable Deduction of $2,250 rather than $2,000.
10,000 - $4,225 X $2,250 = $1,293
---------------
$10,000 (rounded to $1,300)
The $1,300 can be divided between the two accounts, but neither IRA may
receive a deductible contribution of more than $1,150 (the individual limit
calculated in Example 2).
EXAMPLE 4: Mr. Jones, a married person, files a separate tax return and is
an active participant. He has $1,500 of compensation and wishes to make a
deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI (AGI - Threshold Level) is
($1,500 - $0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is
10,000 - $1,500 x $2,000 = $1,700
---------------
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr. Jones
may not deduct an amount in excess of his compensation, so, his actual
deduction is limited to $1,500.
CONTRIBUTIONS TO AN IRA I HAVE INHERITED
I am not allowed to deduct contributions to an IRA I have inherited unless I
am the surviving spouse of the person who established the IRA and have
chosen to treat the IRA as my own.
DEADLINE FOR CONTRIBUTIONS
To be deductible for a particular year, my contributions have to be made
before the original due date (generally, April 15th) for filing my federal
income tax return for that year. This deadline does not change even if I
get an extension of the due date for my tax return.
CONTRIBUTIONS AFTER AGE 70-1/2
I am not allowed to deduct any contribution I make to my IRA during or after
the year I reach age 70-1/2. I cannot deduct any contributions I make to a
spousal IRA during or after the year my spouse reaches age 70-1/2.
NONDEDUCTIBLE CONTRIBUTIONS
- ----------------------------------------------------------------------------
Even if I cannot deduct all of my IRA contributions because I am an active
participant in a retirement plan for the year and my AGI is greater than the
threshold AGI level, I may still contribute up to the lesser of $2,000 or
100% of my compensation to my IRA ($2,250 if I also contribute to a spousal
IRA). The portion of my contribution that is not deductible will be a
"nondeductible contribution". Also, I may choose to make a contribution
nondeductible even if I could have deducted part or all of it. Interest or
other earnings on my IRA contributions, whether from deductible or from
nondeductible contributions, will not be taxed until distributed to me.
If I make a nondeductible contribution to an IRA, I must report the amount
of the nondeductible contribution to the IRS as part of my tax return for
the year.
If my compensation for the year will be at least $2,000, I may make
contributions up to $2,000 at any time during the year without knowing at
the time how much I will be able to deduct. When I fill out my tax return,
I will determine what amount is deductible.
If some portion of my contribution is not deductible, I may then either
choose to leave that amount in the IRA and designate it as a nondeductible
contribution on my tax return or withdraw the amount and all earnings on it.
I must make the withdrawal before the due date (including extensions) for
filing my federal income tax return for the year. Any earnings I withdraw
must be reported as income for the year for which the contribution was made,
and may be subject to the 10% penalty tax on premature distributions.
EXCESS CONTRIBUTIONS
- ----------------------------------------------------------------------------
There is an annual 6% excise tax penalty on any contribution to the extent
it exceeds the maximum contribution allowed for any year. I can avoid this
penalty by withdrawing the excess and all earnings on it before the due date
(including extensions) for filing my federal income tax return for the year
the excess contribution was made. If I do not meet this deadline, the 6%
penalty tax applies for each year the excess remains in my IRA. I can stop
the annual 6% tax by:
* distributing sufficient funds; or
* making reduced contributions below the maximum contribution limit in a
future year or years.
However, a 10% penalty tax for premature distributions may apply to the
withdrawn earnings on excess contributions, even if I withdraw the excess
before the due date for filing my income tax return.
TERMS FOR CONTRIBUTIONS
- ----------------------------------------------------------------------------
The frequency and size of contributions are up to me. I do not have to make
contributions to my IRA in any given year.
You will normally accept only cash contributions. If I wish to make a
rollover contribution, I must first sell any property involved and
contribute the proceeds to my IRA unless special arrangements are made.
ROLLOVERS TO MY IRA
I may be able to roll over into my IRA amounts I receive from other
retirement plans or IRAs. By making a rollover, I can defer paying taxes on
those amounts until I withdraw the funds from my IRA. The following types
of rollovers are possible:
1. ROLLOVER CONTRIBUTIONS FROM RETIREMENT PLANS
I can contribute to my IRA all or part of the money I receive in a
qualifying distribution:
* from a tax-qualified plan set up by a corporation, partnership, or sole
proprietorship;
* from an annuity contract or custodial account (as described in Section
403(b) of the Internal Revenue Code and usually called a tax-sheltered
annuity or tax-sheltered custodial account).
A qualifying distribution includes any distribution of the entire balance
credited to me under the plan, contract or account, which is made after I
turn age 59-1/2 or on account of the termination of the plan or a complete
discontinuance of contributions.
A distribution will also qualify for a rollover if I received 50% or more of
the balance credited to me on account of my separation from service with the
employer, my disability, or the death of my spouse while he or she was
covered by the plan. The 50% requirement is calculated using my balance
immediately before I received the distribution.
I may not roll over to this IRA any required minimum distribution I had to
receive from the retirement plan for the year the rollover occurs.
NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Any nondeductible "after-tax" employee contributions I have made to the plan
making the distribution cannot be included in the rollover. However,
earnings on those contributions can be included.
DEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Before 1987, some tax-qualified plans, annuity contracts and custodial
accounts allowed participants to make "voluntary deductible employee
contributions". If I withdraw all or part of such contributions or the
earnings on them, I may contribute all or part of the amount I received to
my IRA as a rollover. I can roll over my voluntary deductible employee
contributions even if I have not received any other distribution from the
plan.
DEADLINE FOR ROLLOVER CONTRIBUTIONS
I must make any rollover contribution within 60 days after I receive the
distribution or withdraw voluntary deductible employee contributions or
earnings on those contributions.
SEPARATE IRAs FOR CERTAIN ROLLOVERS
Certain tax benefits may be available to me if I establish separate IRA
plans to hold rollovers of total distributions I received from any of the
following sources:
* a qualified pension or profit sharing plan, or
* an annuity contract or custodial account described in Section 403(b) of
the Internal Revenue Code.
Any distribution of "accumulated deductible employee contributions" from a
plan is also eligible. However, I am not required to use a separate IRA if
I do not want to. I will consult my tax advisor for more details if this
applies to me.
2. ROLLOVER CONTRIBUTIONS AND TRANSFERS FROM OTHER IRAs
I can also roll over into this IRA all or part of a distribution I receive
from another IRA. I have to deposit the money into this IRA within 60 days
after I receive the distribution from the other IRA.
I cannot make this type of rollover more often than once every 12 months.
However, I can simply arrange a direct transfer of my IRA from the previous
custodian or trustee to you. Since transfers are not limited to once every
12 months, I should consider arranging for a transfer, instead of a
rollover, whenever a transfer is feasible.
No rollover or transfer can be made to this IRA from an IRA I inherited,
unless I inherited it from my spouse.
I may not be able to roll over or transfer to this IRA any required minimum
distribution I had to receive for the year the rollover or transfer occurs.
If I am subject to the minimum distribution rules, I must make sure that I
receive a sufficient amount from some IRA. Amounts that I receive and then
roll over do not count toward satisfying that requirement.
3. ROLLOVER CONTRIBUTIONS FROM U.S. RETIREMENT BONDS ISSUED BEFORE 1984
If I redeem a U.S. retirement bond issued prior to 1984 before the end of
the tax year in which I reach the age of 70-1/2, I can roll over part or all
of that amount into this IRA. I must make the rollover contribution within
60 days after redeeming the bond.
I may not make this type of rollover more often than once every 12 months.
No rollover of this type can be made to this IRA from a bond I inherit,
unless I have inherited it from my spouse.
IRS RULES ON ROLLOVERS
- ----------------------------------------------------------------------------
All rollover contributions are subject to strict rules contained in the
Internal Revenue Code. If I do not follow those rules, I will lose the tax
benefits of a rollover, and I may have to pay increased taxes on the amount
involved. I SHOULD CHECK WITH MY ATTORNEY OR TAX ADVISOR TO AVOID ADVERSE
TAX CONSEQUENCES IN CONNECTION WITH ANY ROLLOVER CONTRIBUTIONS.
DISTRIBUTION OF BENEFITS
I can generally choose to have benefits distributed to me at any time by
filing a request with you. However, because of the penalty taxes that apply
to premature distributions, I would usually not start distributions until
after I reach age 59-1/2 unless I qualify for one of the exceptions to the
penalty tax. I must begin receiving distributions by the April 1st
following the year in which I reach age 70-1/2. I may continue to make
contributions, even though I am receiving benefits, until the year I reach
age 70-1/2.
PAYMENT OF BENEFITS
- ----------------------------------------------------------------------------
I may have my benefits distributed to me in one lump sum, in periodic
payments over periods measured by life expectancy, or in any combination of
these methods.
MINIMUM PAYMENTS
The Internal Revenue Code requires that certain minimum amounts be
distributed for each year, beginning with the year I reach age 70-1/2.
The minimum amount for each year is determined by dividing the value of my
account on December 31st of the previous year by my life expectancy, or by
the joint life expectancy of me and my designated beneficiary, whichever
applies.
Life expectancies are calculated from tables published by the IRS. The life
expectancies of me and/or my spouse will be recalculated annually, unless I
elect to use fixed life expectancies. (That election must be filed with you
on or before the day my payments are required to start.) Life expectancy of
any beneficiary other than my spouse is fixed at the time payments begin and
then reduced one year per year thereafter.
If I have more than one IRA, the minimum amount must be calculated
separately for each IRA. Those amounts are then added together. Under
current IRS rules, I can satisfy the minimum distribution requirement by
withdrawing the total amount from one IRA, or by spreading the amount among
all my IRAs in any way I wish.
The distribution for the year in which I reach age 70-1/2 must be made not
later than April 1st of the following year. Thereafter, the distribution
for each year must be made by December 31st of that year. For example,
if I reach age 70-1/2 in 1988, the distribution for 1988 must be made
by April 1, 1989, and the distribution for 1989 must be made by
December 31, 1989.
WARNING: IF I DELAY MY DISTRIBUTION FOR THE YEAR
I REACH AGE 70-1/2 UNTIL THE NEXT YEAR, I WILL
RECEIVE TWO TAXABLE DISTRIBUTIONS IN THE SECOND
YEAR. THIS CAN DOUBLE MY TAX LIABILITY IN THE
SECOND YEAR. I MUST CONSIDER THIS IN DECIDING WHEN
TO START MY DISTRIBUTIONS.
If payments are below the minimum amounts, a tax penalty must be paid. The
penalty is 50% of the amount by which the minimum required to be distributed
exceeds the amount actually distributed. It is my responsibility to make
sure I request enough payments to avoid the penalty tax.
The IRS published special "transition rules" for calculated minimum
distributions for 1985, 1986 and 1987. Those transition rules do not
apply to distributions after 1987.
If I made a rollover or transfer to this IRA after I became subject to the
minimum distribution rules and my designated beneficiary under the prior IRA
or retirement plan had a shorter life expectancy than my beneficiary under
this IRA, the amount rolled over or transferred may have to be held
separately. The minimum distribution rules of the prior IRA or plan would
continue to be used to calculate distributions from any such separate part
of my IRA.
INCIDENTAL DEATH BENEFIT RULES
Beginning in 1989, the minimum required distributions from my IRA must also
satisfy certain "incidental death benefit" rules. These rules will affect
me only if I choose to use a joint and survivor life expectancy to calculate
my distributions, my designated beneficiary is not my spouse, and the
beneficiary is considerably younger than me. The IRS published a table
showing the longest life expectancy number I can use at various ages.
PREMATURE DISTRIBUTIONS
- ----------------------------------------------------------------------------
A premature distribution is one made before I reach age 59-1/2, except in
the case of:
* Disability.
* Distributions in the form of substantially equal period payments over my
life expectancy or the joint life expectancy of myself and my designated
beneficiary.
* Distributions to my beneficiary after I die.
DEFINITION OF DISABILITY
I will be considered disabled if I am unable to engage in any substantial
gainful employment. My disability must be a medically determinable physical
or mental impairment that is expected to result in death or to be of
long-continued and indefinite duration.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on premature distributions. The penalty tax is
paid with my federal income tax return and is not deducted from the amount I
withdraw from my IRA. There is no penalty tax on a premature distribution
if the distribution is used to make a rollover contribution to another
retirement program.
This penalty tax is in addition to any other penalties that may apply, such
as an early withdrawal penalty when an investment is cashed in before its
maturity. A premature distribution is also subject to regular income tax.
If I start a series of period payments before age 59-1/2 to avoid the
penalty tax, the tax may be "recaptured" if I later change the schedule.
This happens if I change the schedule before reaching age 59-1/2, unless I
become disabled. If the payments start after age 54-1/2, the tax applies if
I change the schedule within 5 years after payments started, even if I reach
age 59-1/2 before the change is made.
EXCESS DISTRIBUTIONS
- ----------------------------------------------------------------------------
If I receive "excess" distributions from retirement programs during the
year, there is a tax penalty equal to 15% of the excess. Distributions from
my IRA are added to other retirement distributions I receive during the year
to determine the amount of the excess distributions. However, certain
distributions are not taken into account for this purpose, including
distributions made after my death, distributions attributable to
nondeductible contributions, or distributions that are not taxable because
of a rollover.
If my total distributions for a year are less than $150,000, there is no
penalty tax. If I receive a total of more than $150,000, the excess over
$150,000 may be subject to the 15% penalty tax unless I qualify for certain
exceptions in the law. The penalty tax will not be imposed on the part
of the distribution which is attributable to the balance in my IRA on
August 1, 1986 if I make a special election in accordance with IRS rules.
If I might receive excess distributions in a particular year, I should
consult an attorney or tax adviser to determine the consequences.
TAXES ON IRA BENEFITS
- ----------------------------------------------------------------------------
When my benefits are distributed to me, they will usually be taxed as
ordinary income in the year received. The favorable tax treatment of a
lump-sum distribution from a qualified corporate or Keogh plan does not
apply to distributions from an IRA.
If I made any nondeductible contributions, I have already paid taxes on
them. The portion of benefits attributable to those contributions therefore
will not be taxed again. In this case, each distribution from my IRA will
consist of a taxable portion (return of deductible contributions, if any,
and IRA earnings) and a nontaxable portion (return of nondeductible
contributions).
As a result, I cannot receive a distribution that is entirely tax-free. The
following formula is used to determine the non-taxable portion of my
distributions for a year:
Remaining
Nondeductible Total
contributions X distributions
------------------
Year-end total IRA (for the year)
account balances
Non-taxable
= distributions
(for the year)
To figure the year-end total IRA account balance, I treat all of my IRAs as
a single IRA. This includes all regular IRAs, as well as Simplified
Employer Pension (SEP) IRAs, and IRAs holding rollover contributions. I
also add back the distributions taken during the year.
After I have made a contribution to my IRA, I can receive a refund of it
without being subject to income taxes if all of the following requirements
are met:
* The refund is received by the due date (including extensions) for my
federal income tax return for the year in which the contribution was paid
to my IRA
* No tax deduction has been allowed for the contribution, and
* The refund includes all earnings attributable to the contribution (which
are then treated is being earned and received by me in the year the
contribution was made).
I can receive this type of refund even if the contribution was not an excess
contribution. Even though the refunded contribution is not subject to
income taxes, the returned earnings are taxable, and may also be subject to
the 10% premature distribution excise tax if I am under age 59-1/2.
There are certain other very limited situations in which I can receive a
refund after the due date for my tax return (including extensions) and not
be subject to income taxes on the refund. These situations involve such
things as very small excess contributions or rollovers based on erroneous
information supplied to me by the plan that made the distribution. I should
contact my tax advisor for the details before requesting a refund after the
due date for my tax return.
ROLLOVER TO OTHER RETIREMENT ARRANGEMENTS
- ----------------------------------------------------------------------------
Under certain circumstances, I can postpone taxes on distributions I receive
from my IRA by rolling them over, provided my rollover satisfies all the
technical requirements of the Internal Revenue Code. However, required
minimum distributions may not be eligible for this rollover treatment. Two
general types of rollovers may be possible:
1. ROLLOVER TO ANOTHER IRA
Any distribution I receive from this IRA may be used as a rollover
contribution to another IRA, individual retirement annuity (but not an
endowment contract), or retirement bond if I satisfy the requirements of
Section 408(d)(3) of the Internal Revenue Code.
The amount of my distribution that I want to roll over must be paid into
another plan within 60 days after I receive the distribution from you. I
cannot make this rollover if I have made any other IRA rollover within the
past 12 months.
If I have inherited this IRA, I may not make a rollover from it unless I am
the surviving spouse of the person who established the IRA.
WARNING: IF I AM REQUIRED TO TAKE MINIMUM IRA
DISTRIBUTIONS FOR THE YEAR, I MUST MAKE SURE
THAT THE REQUIREMENT IS SATISFIED. AMOUNTS ROLLED
OVER OR TRANSFERRED FROM THIS IRA TO ANOTHER IRA
WILL NOT COUNT TOWARD THAT REQUIREMENT. I
CAN SATISFY THE RULE BY TAKING THE REQUIRED
DISTRIBUTION BEFORE I MAKE THE ROLLOVER OR TRANSFER,
BY LEAVING ENOUGH MONEY IN THIS IRA TO WITHDRAW
LATER, BY ROLLING OVER LESS THAN I RECEIVED FROM
THIS IRA, OR BY WITHDRAWING THE NECESSARY AMOUNT FROM
ANOTHER IRA.
2. ROLLOVER TO A RETIREMENT PLAN
If the entire amount in my IRA consists solely of a rollover of a "qualified
total distribution" I received from certain types of retirement plans, and
the earnings on the rollover contribution, I can make a rollover to another
retirement plan.
A "qualified total distribution" is any of the following:
* A lump sum distribution in one year of my entire benefit from a qualified
pension or profit sharing plan in which I participated. I must have
received the distribution either after reaching age 59-1/2, or on
account of terminating employment (providing I was not self-employed),
or on account of disability (if I was self-employed).
* A distribution in one year of my entire benefit upon termination of such
a plan.
* A lump sum distribution in one year of my entire benefit from a
tax-sheltered annuity or custodial account under Section 403(b) of
the Internal Revenue Code.
* Any distribution of accumulated deductible employee contributions.
In order to make this type of rollover, all of the following requirements
must be met:
* The entire value of the IRA must be distributed to me.
* I must make the rollover within 60 days after I receive the distribution
from the IRA.
* The rollover must go to a plan that is of the same type as the plan the
money originally came from. (In other words, money that came from a
403(b) program can only go into another 403(b) program, etc.) Of
course, the receiving plan must also permit rollover contributions
to it.
The rollover can include all or only part of the money I received from my
IRA. This type of rollover can be done even if I have made another rollover
during the past 12 months.
PAYMENTS AFTER MY DEATH
- ----------------------------------------------------------------------------
If I die before receiving all the benefits due to me, the remainder will be
paid to a beneficiary I designate. My beneficiary will be taxed on these
benefits just as I would have been.
* If I die after the April 1st following the year I reach age 70-1/2 and I
had already begun to receive periodic payments over a period not longer
than my own life expectancy or the joint life expectancy of me and my
beneficiary (whichever applies), then my beneficiary may choose to:
* continue receiving the payments according to my schedule;
* receive the benefits earlier; or
* receive the benefits in a lump sum.
* If I die before the April 1st following the year I reach or would have
reached age 70-1/2, my beneficiary generally must withdraw all the funds
from the account by December 31st of the year containing the fifth
anniversary of my death. However:
* If my beneficiary starts receiving payments by December 31st of
the year following the year of my death, installments can be
spread over my beneficiary's life expectancy.
* If my beneficiary is my spouse, the start of installments can be
postponed until December 31st of the year I would have reached age
70-1/2 (or until December 31st of the year following the year of
my death, if later).
* If my beneficiary is my spouse and my spouse dies before
installments are required to begin, the time for subsequent
payments will be determined as if my spouse had been the owner
of my IRA.
* If my beneficiary is my spouse, my spouse may also choose to treat my IRA
as his or her own after my death. This will happen automatically if my
spouse is required to receive benefits within a certain period after my
death but does not, or if my spouse makes a regular or rollover
contribution to my account. My spouse will then have all the rights I
have under this plan, and may make additional contributions if eligible
to do so. This election may allow my spouse to postpone receipt of
benefits beyond the usual deadlines for paying death benefits.
I may designate one or more contingent beneficiaries who will receive
benefits if no primary beneficiary survives me. If I do not designate a
beneficiary, or if none of my beneficiaries survive me, then my benefits
will go to my surviving spouse, if any, or to my estate.
If my beneficiary survives me but dies before receiving all payments from my
IRA, you will pay all the remaining balance to my beneficiary's estate in
one lump sum. The only exceptions are if my spouse was my beneficiary and
elected to treat my IRA as his or her own IRA, or if my beneficiary form
specifically provides some other way to dispose of the remainder.
If several beneficiaries are entitled to benefits from my IRA after I die,
it will be divided into separate accounts for each beneficiary. The
distribution rules will then be applied separately to each beneficiary's
benefit.
ESTATE TAXES
- ----------------------------------------------------------------------------
My IRA will be included in my estate for purposes of calculating federal
estate taxes. (There is one exception to this rule. If I irrevocably
elected a form of payment before July 18, 1984, and was receiving payments
on December 31, 1984, part or all of my IRA might be excluded from my
estate, depending on how my beneficiary receives payments.) My federal
estate taxes may be increased if the value of my total retirement benefits
(including my IRA) exceeds a level specified by the IRS.
GIFT TAXES
- ----------------------------------------------------------------------------
My IRA may be subject to federal gift taxes when I die if I have designated
a beneficiary. However, the taxable gift might be offset by the inclusion
of my IRA in my estate.
OTHER TERMS
NO LOSS OF BENEFITS
- ----------------------------------------------------------------------------
Except for penalties for early withdrawals from an investment and tax
penalties for premature distributions and excess contributions, my interest
in my IRA cannot be forfeited. There are no penalties if I fail to make
contributions in any particular year or if I stop making contributions
entirely.
ASSIGNING OR PLEDGING BENEFITS AS COLLATERAL
- ----------------------------------------------------------------------------
My IRA may not be transferred to someone else or used as collateral for a
loan. If any amount is transferred or pledged, that amount will be treated
as a distribution and will be included in my gross income for the year the
loan or transfer occurs. Tax penalties for premature distribution may also
apply.
PROHIBITED TRANSACTIONS
- ----------------------------------------------------------------------------
If I, or my beneficiary, engage in any transaction prohibited by Section
4975(c) of the Internal Revenue Code, then my IRA will lose its exemption
from federal income taxes. All or some of the amount in my IRA will become
taxable to me or to my beneficiary in the year of the prohibited
transaction. Tax penalties for premature distribution may also apply.
TERMINATING THIS ACCOUNT
- ----------------------------------------------------------------------------
My IRA will terminate when all of the assets in the account have been
distributed.
IRS APPROVAL
- ----------------------------------------------------------------------------
The form of this plan has been approved by the Internal Revenue Service.
This approval applies only to its form, and is not a determination of the
merits of the plan or the investment of any assets.
At various times, you may submit amendments to this IRA plan to the IRS in
order to conform to changes in the tax laws or for other reasons. If the
plan I adopt contains any amendments that have not yet been approved by the
IRS, you will notify me of any modifications required by the IRS to maintain
the favorable tax status of the plan.
MY REPORTING RESPONSIBILITIES
- ----------------------------------------------------------------------------
I must file IRS Form 5329 (Return for Individual Retirement Arrangement
Taxes) with my federal income tax return for any year in which I must pay a
penalty tax in connection with my IRA. I must report my IRA contributions
on my Form 1040 each year. If I make nondeductible IRA contributions, I
must file Form 8606 with my tax return. You will give me an annual
statement of the status of my account.
STATE INCOME TAXES
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I understand that state income tax laws on IRAs may differ from federal
requirements. Some states may have delays in amending their tax laws to
conform to federal rules. I will check for any provisions that affect my
IRA.
LEGAL AND TAX ADVICE
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I understand that you cannot give me advice on the tax consequences of
establishing an IRA or making rollover contributions. TO OBTAIN SUCH
ADVICE, I SHOULD CONTACT MY ATTORNEY OR OTHER TAX ADVISOR. You are not
responsible for any tax consequences to me or to my beneficiary. Your
responsibility is limited to the administration of my contributions in
accordance with this IRA plan.
FEES
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You are permitted to charge reasonable administrative and other fees. You
will notify me of the fee schedule at the time I adopt the plan, or when you
establish a fee schedule, if later. Any special expenses relating to
administration of my IRA will also be charged against my IRA.
FURTHER INFORMATION
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Further information about individual retirement plans in general may be
obtained from any district office of the Internal Revenue Service.
GROWTH OF ACCOUNT
You cannot project or guarantee the value of my IRA. This is because the
value will depend on which investments I choose and on the terms of those
investments. When I choose a specific investment, you will give me any
relevant information about how earnings on that investment are determined
and credited to my IRA.
Some investments may have penalties for early withdrawal. If I choose an
investment that has an early withdrawal penalty, you will give me a
disclosure explaining the penalty. You will subtract any penalty for an
early withdrawal from my IRA.
If you charge fees that may affect my IRA, you will give me a fee schedule.
You will also notify me if the fee schedule changes. You will subtract any
fees from my IRA, unless I pay the fees directly.
I should treat any separate information about specific IRA investments or
any separate fee schedule that you give me as if it were part of this IRA
Disclosure.
FINANCIAL INFORMATION
I may choose one or a combination of options for investing the funds in my
IRA. Typical investments are time deposits and certificates of deposit,
which are insured up to $100,000 by the FDIC, and which will earn interest
at either a fixed or a variable rate. Depending upon the laws and
regulations in effect when an investment is made, you may be able to offer
me other options. However, investment in life insurance contracts or in
certain "collectibles" (other than certain U.S.-minted gold and silver coins
and any coins issued under the laws of any state) is not permitted.
Deposits cannot be commingled with other property (except in certain common
trust funds or investment funds).
FIXED INTEREST RATES
With an investment earning interest at a fixed rate, the starting interest
rate is guaranteed to remain in effect until the investment matures.
VARIABLE INTEREST RATES
With a variable rate, the interest rate may change over the term of the
investment.
CHANGING INVESTMENTS AT MATURITY
I will be able to change from one type of investment to another on my
investment's maturity date or within seven days after it. If I do not
change my type of investment, you will automatically renew it for the same
period.
My renewed investment will be on terms as close to those of my original
investment as possible. The exception is the interest rate, which will be
set at the rate you are currently offering on that type of investment.
If the same or a similar investment is no longer available from you when my
investment matures, or if my investment is not renewable, you may hold my
funds uninvested until I give you instructions for investment.
EARLY WITHDRAWAL PENALTIES
If my investment has a specified maturity date, I agree to keep my funds
invested for that period. There may be a substantial penalty for early
withdrawals, even if I am making the withdrawal to make a rollover
contribution to another IRA. Early withdrawal penalties are withheld from
the amount withdrawn. In addition, I may have to pay Internal Revenue Code
penalties for premature distributions from my IRA.
Whenever I choose an investment, you will give me specific information on
the maturity period, the interest rate, the rules on renewal and nonrenewal,
or any applicable early withdrawal penalty.
INDIVIDUAL RETIREMENT PLAN
FORWARD
The Bank has promulgated this form of retirement plan for individuals which
is intended to be an "individual retirement account" within the meaning of
Section 408(a) of the Internal Revenue Code. The terms of the Plan and
related custodianship or trust agreement are set forth below. The Plan may
be adopted by execution of the IRA Application.
ARTICLE I - DEFINITIONS
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SEC. 1.1
PLAN. "Plan" means this retirement plan (including the IRA Application), as
it may be amended from time to time.
SEC. 1.2
ACCOUNT. "Account" means the account maintained by the Bank to which
contributions to the Plan are credited.
SEC. 1.3
BANK. "Bank" means the bank or trust company affiliated with Norwest
Corporation that signed the IRA Application, and any successor duly
appointed as provided in Sec. 5.4.
SEC. 1.4
BENEFICIARY. "Beneficiary" means the person or persons designated to
receive any benefit payable under the Plan in the event of the Individual's
death. The Individual may designate a Beneficiary and also may designate a
contingent Beneficiary who shall become the Beneficiary in the event no
primary Beneficiary survives the Individual. The Individual may alter or
revoke any such designation without the consent of any Beneficiary
previously named. To be effective, any such designation, alteration, or
revocation must be in writing in a form acceptable to the Bank and must be
filed with the Bank during the Individual's lifetime. If the Beneficiary is
more than one person, the benefit shall be paid in equal shares to such
persons who survive the Individual unless the Individual's beneficiary
designation provides otherwise. If no beneficiary designation is on file
with the Bank at the time of the Individual's death or if no Beneficiary
survives the Individual, the Individual's Beneficiary shall be his spouse if
then living, and if his spouse is not then living, then his estate. The
Bank shall determine who is the Beneficiary in each case and its
determination shall be conclusive on all parties in interest.
SEC. 1.5
COMPENSATION. "Compensation" means all compensation and earned income (as
defined in Sections 219(f)(1) and 401(c)(2) of the Internal Revenue Code)
includible in the Individual's gross income for federal income tax purposes
for a Plan Year, including salary, wages, bonuses, overtime, and net
earnings from self-employment to the extent such earnings constitute
compensation for personal services actually rendered by the Individual.
Compensation does not include any amount received as a pension or annuity or
as deferred compensation, amounts derived from or received as earnings or
profits from property (including, but not limited to interest and
dividends), or amounts not includible in gross income. Net earnings from
self-employment shall be reduced by the amount allowable as a deduction
under Section 62(a)(6) of the Internal Revenue Code with respect to
contributions on behalf of the Individual to a pension, profit sharing or
annuity plan. Compensation includes any amount includible in the
Individual's gross income under Section 71 of the Internal Revenue Code with
respect to a divorce or separation instrument described in Section
71(b)(2)(A).
SEC. 1.6
INDIVIDUAL. "Individual" means the individual adopting the Plan.
SEC. 1.7
INTERNAL REVENUE CODE. "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended from time to time, and any successor statute.
SEC. 1.8
IRA APPLICATION. "IRA Application" means the agreement between the
Individual and the Bank whereby the Individual has adopted the Plan and
whereby the custodianship or trust has been created.
SEC. 1.9
PLAN YEAR. "Plan Year" means the taxable year of the Individual for federal
income tax purposes, which will normally be the calendar year. The first
Plan Year is the taxable year for which the Individual first contributes to
the Plan.
SEC. 1.10
ROLLOVER CONTRIBUTION. A "Rollover Contribution" means a contribution of
assets to the Account from a qualified employee benefit plan, a tax-
sheltered annuity or custodial account, an individual retirement account, or
an individual retirement annuity, which contribution meets the requirements
for a rollover contribution under Sections 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8) or 408(d)(3) of the Internal Revenue Code, or a contribution under
any other provision of the Internal Revenue Code which may from time to time
permit rollover contributions to this Plan. Potential tax benefits are
available if funds the Individual may receive as a qualified total
distribution (i) from a qualified corporate pension or profit-sharing plan,
or from a qualified H.R. 10 plan of a self-employed person or partnership in
which the Individual participated as a common-law employee, or (ii) from an
annuity contract or custodial account described in Section 403(b) of the
Internal Revenue Code, are not mixed with each other or with any other
contributions the Individual may make to an individual retirement plan.
Therefore, the Individual anticipates that he or she will establish a
separate individual retirement plan for the purpose of separately holding
any such funds, although it is understood that the Individual is not
required to do so.
SEC. 1.11
SEP PROGRAM. A "SEP Program" is a simplified employee pension program that
meets the requirements of Section 408(k) of the Internal Revenue Code.
ARTICLE II - CONTRIBUTIONS
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SEC. 2.1
AMOUNT. The Individual may contribute to the Plan for any Plan Year such
amount as he may in his discretion determine, provided that the contribution
shall not exceed the maximum contribution specified by the Internal Revenue
Code for that Plan Year. To the extent the Individual's contribution
exceeds the allowable deduction described in Section 219 of the Internal
Revenue Code, the Individual may designate it as a nondeductible
contribution in accordance with Section 408(o) of the Internal Revenue Code.
(a) Contributions for a particular year must be made no later than the time
for filing the Individual's federal income tax return for that year (not
including extensions). All contributions, other than Rollover
Contributions, shall be made only in cash.
(b) The Bank will not accept any amount by which contributions, other than
Rollover Contributions, exceed in the aggregate for a Plan Year the
dollar limitations specified by the Internal Revenue Code for that Plan
Year. The annual dollar limitations in effect for years beginning on or
after January 1, 1984 for contributions to this Plan were $30,000 for
employer contributions under SEP Programs and $2,000 for other
contributions.
SEC. 2.2
VESTING. The Individual's right to amounts contributed to the Plan and to
the benefits derived therefrom shall be nonforfeitable at all times.
SEC. 2.3
EXCESS CONTRIBUTIONS. The Individual may at any time notify the Bank that
part or all of a contribution for a Plan Year is an excess contribution
because the Individual exceeded the maximum amount allowable under the
Internal Revenue Code as contributions for that year or because the
contribution exceeded the maximum amount deductible under the Internal
Revenue Code for the Plan Year and the Individual did not elect to treat the
excess as a non-deductible contribution. Upon receipt of the Individual's
request in writing designating the amount to be returned (including any
earnings to be returned), the Bank will promptly return the requested amount
to the Individual.
(a) The Individual understands that the amount of any contribution for a
Plan Year, other than a Rollover Contribution, that exceeds the maximum
contribution specified by the Internal Revenue Code for that Plan Year,
plus any net income attributable to the contribution, generally must be
returned on or before the date prescribed by law (including extensions)
for filing the Individual's federal income tax return for such Plan Year
in order to avoid an excise tax and other adverse tax consequences.
(b) Contributions shall be returned in cash.
(c) The Bank shall have no responsibility for determining whether any
contribution is an excess contribution, whether any contribution is
allowable as a deduction to the Individual, whether any contribution is
a nondeductible contribution, whether any excess contribution is returned
to the Individual in time to avoid any adverse tax consequences, or for
notifying the Individual of any excess contribution. The Bank's
responsibility is limited to the administration, in accordance with the
terms of the Plan, of contributions actually received by it.
ARTICLE III - BENEFITS
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SEC. 3.1
BENEFITS PAYABLE UPON REQUEST. The Bank shall distribute amounts in the
Account to the Individual in whole or in part at any time and from time to
time according to the methods of distribution described in Sec. 3.5 upon
receipt of a written request from the Individual specifying the amount and
manner of the distribution and the time or times when it is to be made. The
Individual understands, however, that an additional tax of 10% of the amount
of any distribution includible in his gross income made to him prior to age
59-1/2 will be imposed under Section 72(t) of the Internal Revenue Code
unless such distribution is made on account of his disability or in the form
of substantially equal periodic payments over his life expectancy or the
joint life and last survivor expectancy of himself and his Beneficiary. A
certain amount of interest on a time deposit-open account, a time
certificate of deposit or other investment also may be forfeitable under the
terms of that investment in the event of a withdrawal prior to maturity.
The Individual also understands that an additional tax will be imposed on
certain retirement distributions, including distributions from this Plan,
with respect to the Individual during a year to the extent they exceed the
level specified in Section 4981A(c) of the Internal Revenue Code for that
Plan Year.
SEC. 3.2
DISABILITY. The Individual is considered disabled for purposes of Sec. 3.1
if within the meaning of Section 72(m)(7) of the Internal Revenue Code, and
the regulations issued thereunder he is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration. The Individual shall furnish
the Bank such proof of such disability as may reasonably be requested by
the Bank prior to any distribution under this Section.
SEC. 3.3
DEATH. The Beneficiary of a deceased Individual shall be entitled to
receive benefits from the Account on request upon submission of appropriate
proof of the death of the Individual.
SEC. 3.4
LIMITS ON METHODS OF DISTRIBUTION. Distributions shall be made in
accordance with Section 401(a)(9) of the Internal Revenue Code and the
regulations issued thereunder. Any distribution options are overridden to
the extent they are inconsistent with Section 401(a)(9) of the Internal
Revenue Code.
SEC. 3.5
METHODS OF DISTRIBUTION TO INDIVIDUAL. The Individual shall be paid
benefits from the Account in such amounts as he may from time to time elect,
subject to the following:
(a) The entire interest of the Individual shall be distributed to him or
distributions in installments shall commence not later than April 1st
following the calendar year in which he reaches age 70-1/2.
(b) Payments made to the Individual in installments shall be made over a
fixed period selected by him not extending beyond the life expectancy
of the Individual or the joint life and last survivor expectancy of the
Individual and his designated Beneficiary. Such benefits shall be paid
during such fixed period to the Individual during his lifetime and
thereafter to his Beneficiary in installments not more frequently than
monthly. However, the Individual may at any time elect to receive any
remaining installments earlier or in a lump sum.
(c) If the Individual's entire interest is not distributed prior to the
deadline prescribed in subsection (a), the aggregate annual payment under
this section for each year beginning with the calendar year in which the
Individual reaches age 70-1/2 shall not be less than the balance in the
Account as of the close of business on December 31 of the preceding year
divided by the life expectancy of the Individual or the joint life and
last survivor expectancy of the Individual and his designated Beneficiary
(whichever applies) determined as of the date specified in Sec. 3.9. If
in any calendar year the amount distributed exceeds the minimum required,
no credit will be given in subsequent years for such excess distribution.
Distributions for the year in which the Individual reached age 70-1/2
shall be made by April 1st of the following year, and distributions for
subsequent years shall be made by December 31 of such year.
(d) The Individual understands that there are substantial tax penalties if
distributions have not commenced by April 1st following the calendar year
in which he reaches age 70-1/2 and if installment payments are less than
the minimum amount required by the Internal Revenue Code. If no election
has been made by two business days before the April 1st following the
calendar year in which the Individual reaches age 70-1/2, the Bank is
authorized to distribute the entire amount in the Account in a single sum
to the Individual as of that April 1st.
(e) Notwithstanding the foregoing, all distributions to the Individual for
years beginning after 1988 shall comply with the requirements of IRS
Regulation 1.401(a)(9)-2 requiring that at least 50 percent of the
present value of the amount available for distribution will be paid
within the life expectancy of the Individual.
SEC. 3.6
METHODS OF DISTRIBUTION TO BENEFICIARY. After the death of the Individual,
any remaining benefits shall be paid as follows:
(a) If the Individual died after the April 1st following the year he reached
age 70-1/2 and after commencing to receive benefits in installments under
Sec. 3.5, any installments remaining unpaid at his death shall be paid to
his Beneficiary pursuant to the election made by the Individual under
that section; provided, however, that the Beneficiary may elect to
receive the installments earlier or in a lump sum.
(b) If the Individual dies prior to the April 1st following the year he
reached or would have reached age 70-1/2, his Beneficiary shall receive
the entire undistributed Account by December 31 of the year containing
the fifth anniversary of the Individual's death, subject to the
following:
(1) The Beneficiary may elect to receive distributions in installments
(determined according to the method described in Sec. 3.5(c)) over a
period not exceeding the Beneficiary's life expectancy, provided such
election is filed with the Bank not later than December 31 of the year
following the year of the Individual's death.
(2) If the Beneficiary is the Individual's surviving spouse, installments
pursuant to paragraph (1) over a period not exceeding the spouse's
life expectancy may commence at any time prior to the later of
December 31 of the year following the year of death or December 31 of
the year the Individual would have reached age 70-1/2.
(3) If a surviving spouse described in paragraph (2) dies before
distributions begin, subsections (a) and (b) shall be applied as if
the surviving spouse were the Individual.
(4) A Beneficiary who has made an election under this subsection may
thereafter elect to receive any payments earlier than otherwise due or
in a lump sum.
(5) If no election of distribution method is filed with the Bank prior to
the date distributions would be required to begin under paragraphs (1)
or (2), a Beneficiary who is the surviving spouse of the Individual
will be deemed to have elected to be paid under paragraph (2) and any
other Beneficiary will be deemed to have elected to be paid under the
first sentence of this section.
(6) If the Beneficiary is more than one person, separate sub-accounts
shall be created to hold the benefit of each such person following the
Individual's death, and this Article III shall be applied separately
with respect to each such Beneficiary.
(c) If a Beneficiary dies after the Individual but prior to receiving the
entire benefit to which the Beneficiary is entitled due to the
Individual's death, any remaining benefit shall be paid to the
Beneficiary's estate unless the Individual's beneficiary designation
provides an alternate disposition. Except as provided in subsection
(b)(3), any such remaining benefit shall be paid in a lump sum unless the
Beneficiary had begun receiving installments pursuant to subsection
(b)(1) or (2) prior to the Beneficiary's death. However, any
distributions pursuant to this subsection must satisfy the requirements
of subsection (b).
SEC. 3.7
ELECTION OF METHOD OF DISTRIBUTION. The elections under Sections 3.5 and
3.6 shall be exercised by the Individual or Beneficiary on a form authorized
by and filed with the Bank prior to the time the elector is to receive a
benefit payment. Any such election shall be irrevocable after the date
payments are required to begin under Sec. 3.5 or Sec. 3.6, except that the
person entitled to payments may elect to receive them earlier or in a lump
sum.
SEC. 3.8
INDIVIDUAL ELECTION BY CERTAIN BENEFICIARIES. A Beneficiary who is the
surviving spouse of the Individual shall be entitled to elect that the
benefit to which the Beneficiary is entitled upon the death of the
Individual shall be placed in an Account in the name of the Beneficiary.
Such election shall be made on a form authorized by and filed with the Bank,
except that such election shall be deemed to have been made if the surviving
spouse has not elected to commence distributions within the time required in
Sec. 3.6(b), or if the spouse makes a regular IRA contribution to the
Account or makes a Rollover Contribution to or from the Account. Upon such
an election, the surviving spouse shall thereafter be treated as the
Individual for purposes of this Plan, shall be entitled to designate his or
her own Beneficiary, and may make additional contributions to this Plan if
otherwise permitted by law. If the Beneficiary is not the surviving spouse
of the Individual, no additional contributions or Rollover Contributions may
be made to the Account following the Individual's death.
SEC. 3.9
DETERMINATION OF LIFE EXPECTANCIES. Life expectancies for purposes of
Section 3.5 and 3.6 shall be calculated using the return multiples in IRS
Regulation section 1.72-9.
(a) Initial life expectancies for purposes of Sec. 3.5 shall be determined
using the attained ages of the Individual (and his oldest Beneficiary, if
applicable) as of their birthdays in the calendar year the Individual
reaches age 70-1/2.
(1) If the Individual so elects, or if no election is made prior to the
date payments are required to begin, the Individual's life expectancy
(and the life expectancy of the Individual's spouse, if applicable)
will be recalculated annually using their attained ages as of their
birthdays in the year for which the minimum distribution is being
determined.
Alternatively, the Individual may elect to have his life expectancy
(and the spouse's life expectancy, if applicable) determined for the
year payments are required to commence and reduced one year per year
thereafter. Separate elections may be made for computing the life
expectancy of the Individual and the Individual's spouse.
(2) The life expectancy of a designated Beneficiary who is not the spouse
of the Individual will not be recalculated.
(b) The initial life expectancy for purposes of Sec. 3.6 shall be determined
using the attained age of the Beneficiary as of the Beneficiary's
birthday in the year distributions are required to commence.
(1) If a Beneficiary who is the surviving spouse of the Individual so
elects, or if no election is made by the spouse prior to the date
payments to the spouse are required to begin, the spouse's life
expectancy will be recalculated annually using the spouse's attained
age as of the spouse's birthday in the year for which the minimum
distribution is being determined.
(2) If the Beneficiary is not the surviving spouse of the Individual, or
if a Beneficiary who is the surviving spouse so elects, the
Beneficiary's life expectancy determined for the year distributions
are required to commence will be reduced by one year per year
thereafter.
SEC. 3.10
PAYMENT OF SMALL ACCOUNTS. If any installment payment will cause the
remaining balance in the Account to fall below $100 (or such other minimum
amount that the Bank may establish from time to time), the Bank may
distribute the balance of the Account in a single sum.
SEC. 3.11
FACILITY OF PAYMENT. The Bank may refuse to make payment to any person who
is incapable under applicable state law for any reason of personally
receiving and giving a valid receipt for such payment. Until claim is made
for such payment by a duly appointed guardian, conservator or committee of
such person, the Bank may make all or any part of such payment to any
person, institution or agency in the judgment of the Bank contributing
toward or providing for the care and maintenance of such person. To the
extent payment is so made the Bank shall be fully discharged.
SEC. 3.12
NO PLEDGE OR TRANSFER OF BENEFITS. The benefits, rights, privileges,
payments, proceeds, claims, or other interest of the Individual or his
Beneficiary under the Plan shall not be transferable or subject to
commutation, anticipation, pledge or encumbrance by the Individual or his
Beneficiary.
SEC. 3.13
PROHIBITED TRANSACTIONS. The Individual understands that if he or his
Beneficiary engages in a prohibited transaction within the meaning of
Section 4975(c) of the Internal Revenue Code, the Account may lose its
exemption for federal income tax purposes, and all or a part of the assets
of the Account (depending on the transaction engaged in) may be deemed
distributed to the Individual, with potential tax and banking law penalties
for premature distribution. A prohibited transaction includes a pledge of
the Account to secure a loan and a loan from the Account to the Individual
or a member of his family.
ARTICLE IV - ACCOUNT
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SEC. 4.1
ACCOUNT. All contributions by the Individual in support of the Plan,
together with all investments made therewith, the proceeds thereof and all
earnings and accumulations thereon and the part thereof from time to time
remaining, shall be held and administered by the Bank as a single Account,
in accordance with the terms and provisions and subject to the conditions
and limitations herein contained. The Bank shall hold the Account either as
custodian or as trustee as specified in the IRA Application. The Bank may
create such sub-accounts as may be needed from time to time to reflect
investment options selected by the Individual.
SEC. 4.2
NO DIVERSION. At no time shall any part of the Account be used for or
diverted to purposes other than for the exclusive benefit of the Individual
or his Beneficiary.
SEC. 4.3
INVESTMENTS. Amounts in the Account shall be invested as the Individual
shall direct in one or a combination of investments which are made available
to such plans by the Bank from time to time, subject to the following:
(a) The Account may be invested in any securities or property, without
limitation by any statute, rule of law, or regulation of any governmental
body proscribing or limiting the investment of funds by corporate or
individual trustees or custodians in or to certain kinds, types, or
classes of investments or limiting the value or proportion of the
Account's assets that may be invested in any one property or kind, type,
or class of investment, other than the provisions of the Internal Revenue
Code relating to individual retirement accounts.
(b) Without limiting the generality of subsection (a), the Account may be
invested (1) in savings accounts, certificates of deposit, time
deposit-open accounts or similar interest-bearing instruments issued by
the Bank or its affiliates; (2) through any common or collective trust
fund or common investment fund maintained by the Bank or any of its
affiliates for the collective investment of such funds held by it in a
fiduciary or custodial capacity; and (3) in self-directed investments
through a brokerage option. The provisions of the document governing any
such common or collective trust or investment fund as it may be amended
from time to time shall govern any investment therein and are hereby made
a part of this Plan. Permitted investments under a brokerage options may
include, but are not limited to, preferred and common stocks and stocks
of any other kind or class of any corporation; voting trust certificates;
interests in investments trusts; bonds, notes, and debentures, secured or
unsecured; mortgages on real or personal property; conditional sales
contracts; and real estate and leases.
(c) Notwithstanding subsections (a) and (b), if the Bank is acting as
custodian and the Bank has only limited trust powers under applicable
state law, investments shall be limited to those investments allowed
under state law.
(d) All investment directions by the Individual shall be in a form
satisfactory to the Bank. Any direction by the Individual to purchase
assets shall be deemed also a direction to retain such assets so
purchased until a subsequent direction is given by the Individual
directing the disposition of the assets. The Bank shall have no
responsibility other than to comply with such directions and shall incur
no liability to anyone for complying with any such directions. If the
Individual fails to provide directions with respect to any cash held in
the Account, such cash will be invested in a money market account or such
other similar investment as may be designated by the Bank from time to
time as the default investment for purposes of the investment option
selected by the Individual.
(e) Following the Individual's death, each Beneficiary shall have the same
rights to control the investment of the portion of the Account allocated
to that Beneficiary as the Individual possessed prior to death.
(f) Notwithstanding the foregoing, if the Bank is acting as trustee, the
Individual (or each Beneficiary following the Individual's death) may
delegate to the Bank the discretionary authority to invest and reinvest
the principal and interest of the Account in securities and properties
authorized under subsections (a) and (b). The investments by the Bank
under this subsection shall be made in the manner in which an ordinarily
prudent person of discretion and intelligence who is a trustee of the
property of others would invest as such trustee for trusts established
for the same purposes as the trust under this Plan.
(g) No part of the Account may be invested in life insurance contracts or in
"collectibles" (other than certain U.S.-minted gold and silver coins) as
defined in Section 408(m) of the Internal Revenue Code. Assets in the
Account will not be commingled with other property, except in a common
trust fund or common investment fund.
(h) If this Plan is adopted as an amendment of a prior Plan, any investment
directions under the prior Plan (including any provision delegating
discretionary investment authority to the Bank as trustee) shall continue
in effect until the Individual (or Beneficiary where applicable) files a
different investment direction with the Bank.
SEC. 4.4
INFORMATION. The Individual agrees to provide the Bank with such
information at such times as may be necessary to enable the Bank to prepare
and file any reports required by the Internal Revenue Service or other
governmental unit or agency. In case of a distribution to the Individual
before age 59-1/2 other than due to disability pursuant to Sec. 3.2 or in
the form of substantially equal periodic payments over his life expectancy
or the joint life and last survivor expectancy of himself and his
Beneficiary, the Individual agrees to furnish the Bank a written
representation as to whether the Individual intends to make a "rollover
contribution" of the amount distributed within the meaning of Section
408(d)(3) of the Internal Revenue Code.
SEC. 4.5
POWERS. The Bank shall have the right, power and authority to do each and
every act and thing and to enter into and carry out each and every agreement
with respect to the Account which may be necessary or advisable to discharge
its responsibilities hereunder.
SEC. 4.6
COMPENSATION AND REIMBURSEMENT. The bank shall be entitled to receive
reasonable compensation or fees for its services in such amount as may be
established from time to time by the Bank, and to be reimbursed for all
expenses reasonably incurred in the administration of the Account. Such
compensation and expenses shall be paid from the Account if not paid by the
Individual, but expenses solely attributable to or incurred in connection
with the investment and reinvestment of the Account (such as brokerage,
postage, express or insurance charges and stock transfer stamp expenses)
shall be paid from the Account. The Bank shall have a lien on the Account
for its compensation and expenses incurred in accordance with the foregoing.
ARTICLE V - CUSTODIAN OR TRUSTEE
- ----------------------------------------------------------------------------
SEC. 5.1
STATUS OF BANK. The Bank shall serve either as custodian under the Plan or
as trustee of the Plan as specified in the IRA Application signed by the
Individual. If this document is adopted as an amendment of a prior Plan,
the Bank shall continue to serve in the same capacity as under the prior
Plan unless the Individual and the Bank execute a new IRA Application
changing the Bank's status.
SEC. 5.2
RESIGNATION. The Bank may resign as custodian or trustee at any time by
giving at least 30 days prior written notice to the Individual or, in the
event the Individual is not living, to the Beneficiary.
SEC. 5.3
REMOVAL. The Individual or, in the event the Individual is not living, the
Beneficiary, may remove the Bank as custodian or trustee by written notice
delivered to the Bank at least 30 days prior to the date such removal is to
be effective.
SEC. 5.4
SUCCESSOR. In the event of the resignation or removal of the Bank as
custodian or trustee, the Individual or the Beneficiary, as the case may be,
shall appoint and designate a successor which shall have the same powers and
duties as those conferred upon the Bank hereunder. If the Bank has resigned
or been removed, it shall, upon the appointment and qualification of the
successor, assign, transfer and set over to the successor the funds and
properties then constituting the Account. No successor shall be in any way
liable or responsible for anything done or omitted to be done prior to the
date on which it becomes a successor, nor shall it be required to examine or
question in any way the administration of the Account prior to its
appointment.
SEC. 5.5
RECORDS AND REPORTS. The Bank shall keep accurate and detailed records of
its administration of the Account and of all investments, receipts and
disbursements and other transactions hereunder. All such records shall be
open to inspection at all reasonable times by any person designated by the
Individual. The Bank shall provide such annual reports to the Individual
and others as are required by the Internal Revenue Code.
SEC. 5.6
LIMITATIONS ON LIABILITY. The Bank shall not incur any personal liability
of any nature in connection with any act done or omitted to be done in good
faith and with reasonable care and prudence in connection with the Plan, and
the Bank shall be indemnified and held harmless by the Individual or from
the Account, or both, from and against any and all claims of liability to
which it shall be subjected by reason of any such act or conduct, as well as
all expenses reasonably incurred in its defense.
SEC. 5.7
NOTICE BY BANK. Any notice, statement, report or other communication which
the Bank is required or permitted to give the Individual shall be deemed
given when sent by regular mail to the Individual at his last address shown
on the records of the Bank.
SEC. 5.8
DEALINGS WITH BANK. No person (other than the Individual or a Beneficiary)
dealing with the Bank shall be required to take cognizance of the provisions
hereof, and any such person shall be entitled to conclusively assume that
the Bank is properly authorized to do any act which it purports to do
hereunder. Any person may conclusively assume that the Bank has full power
and authority to receive and receipt for any money or property payable to
the Account, and no such person shall be bound to inquire as to the
disposition or application of any money or property paid to the Bank or in
accordance with its written directions.
ARTICLE VI - AMENDMENT AND TERMINATION
- ----------------------------------------------------------------------------
SEC. 6.1
AMENDMENT BY INDIVIDUAL AND BANK. The Plan may be amended from time to time
in any respect by a writing signed by the Individual and the Bank and filed
with the Bank.
SEC. 6.2
AMENDMENT BY BANK. The Bank shall have the right to cause the Plan to be
amended from time to time in any respect by giving written notice to the
Individual of the amendment to be made, which 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 given, or within such longer period as the notice may specify, the
Individual gives the Bank written notice of refusal to consent to the
amendment.
SEC. 6.3
PROHIBITED AMENDMENT. Notwithstanding any other provisions of the Plan to
the contrary, no amendment shall be effective if it shall cause any part of
the Account to be used for or diverted to purposes other than for the
exclusive benefit of the Individual and his Beneficiary.
SEC. 6.4
TERMINATION of the Plan. The Plan shall terminate when all amounts in the
Account have been distributed. As provided in Sec. 3.1, the Individual may
at any time direct distribution of amounts in the Account, subject to any
applicable tax and banking law penalties.
<PAGE>
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Sole distributor of the Lutheran Brotherhood Family of Funds
THIS LITERATURE MUST BE PRECEDED OR ACCOMPANIED
BY A PROSPECTUS OF THE FUNDS.
<PAGE>
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
-------------------------------
SELF-DIRECTED IRA ROLLOVER
-------------------------------
- ----------------------------------------------------------------------------
WAIVER ELECTION
To preserve your right to roll over your Rollover IRA Account into a
qualified plan (for example, your next employer's qualified plan), you must
not make accumulation contributions to your "Rollover IRA," nor can you
deposit a lump-sum distribution into an account which has been utilized as
an "Accumulation IRA".
However, if you desire to have only one Individual Retirement Account with
the understanding that you will not be able to roll over any portion of this
account to a qualified plan (even the portion that represents your original
rollover), you may, by signing the Waiver below, elect to treat this account
as an Accumulation IRA.
I have been informed by Norwest Bank Minnesota, N.A. that, in order to
preserve the right to roll over the distribution which I receive from a
qualified plan, I must set up two separate Individual Retirement Accounts.
One such account would consist only of those funds rolled over from the
qualified plan, together with interest on those funds. The other account
would consist of my annual contributions to an Accumulation IRA.
I understand that if I make any contributions to the funds rolled over from
a qualified plan, or otherwise commingle rollover amounts with accumulation
amounts, I will have relinquished the right to ultimately roll over the
funds distributed to me to another qualified plan. Norwest Bank Minnesota,
N.A. has fully advised me of the implications of my decision, and it is my
decision to establish only one Individual Retirement Account. My waiver is
a knowing and intentional one, and I hereby release and hold harmless
Norwest Bank Minnesota, N.A. from any liability for any loss, damage or
injury which I may sustain as a result of my election not to establish two
separate Individual Retirement Accounts.
- -------------------------------- --------------------------------
Client's Signature Witness
- -------------------------------- --------------------------------
Date Date
- ----------------------------------------------------------------------------
ASSETS INCLUDED IN THE ROLLOVER
NOTE: Please identify the assets you are including in this rollover. This
listing is for our information purposes only, and will not initiate any
action by LBSC.
CASH, CERTIFICATES OF DEPOSIT, SAVINGS ACCOUNT
- ----------------------------------------------------------------------------
BALANCE NAME OF INSTITUTION ACCOUNT NO. MAT. DATE
---------------------------------------------------------------
-------- -------------------- ----------- ---------
-------- -------------------- ----------- ---------
-------- -------------------- ----------- ---------
- ----------------------------------------------------------------------------
I understand I must liquidate my Certificate of Deposit
and I am responsible for any early withdrawal penalties.
STOCKS, BONDS, GOV'T ISSUES, MUTUAL FUNDS, LIMITED PARTNERSHIP
- ----------------------------------------------------------------------------
NO. OF SHARES COMPLETE NAME OF ISSUE CUSIP NO.
-------------------------------------------------------------------
------------- --------------------------------- -----------
------------- --------------------------------- -----------
------------- --------------------------------- -----------
------------- --------------------------------- -----------
------------- --------------------------------- -----------
------------- --------------------------------- -----------
------------- --------------------------------- -----------
------------- --------------------------------- -----------
- ----------------------------------------------------------------------------
I have notified my current custodian to rollover the above assets to my
Self-Directed IRA at Lutheran Brotherhood Securities Corp.
I understand securities (excluding Massachusetts Financial Services Mutual
Funds) will be held in my discount brokerage account, and will be subject to
Wall Street Investor Services' fee structure.
- --------------------------- -----------------------------------------
Date Client's Signature
<PAGE>
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
-------------------------
DISTRIBUTION REQUEST
SELF-DIRECTED IRA
-------------------------
All outstanding fees will be deducted prior to this distribution.
- ----------------------------------------------------------------------------
A.
1. Client Name
-----------------------------------------------------------
Social Security Number
-----------------------------------
2. I HEREBY REQUEST A: // TOTAL DISTRIBUTION // PARTIAL DISTRIBUTION
// PERIODIC DISTRIBUTION (Please complete Account
Privileges Application
SC 482)
- ----------------------------------------------------------------------------
B. ASSETS TO BE DISTRIBUTED
LUTHERAN BROTHERHOOD FAMILY OF FUNDS
- ----------------------------------------------------------------------------
NO. OF SHARES OR DOLLAR AMOUNT FUND NAME/ACCOUNT NUMBER
---------------------------------------------------------------
---------------- ------------- -------------------------
---------------- ------------- -------------------------
---------------- ------------- -------------------------
---------------- ------------- -------------------------
- ----------------------------------------------------------------------------
MASS. FINANCIAL SERVICE MUTUAL FUND
- ----------------------------------------------------------------------------
---------------- ------------- -------------------------
---------------- ------------- -------------------------
---------------- ------------- -------------------------
---------------- ------------- -------------------------
---------------- ------------- -------------------------
- ----------------------------------------------------------------------------
BROKERAGE ACCOUNT ASSETS
- ----------------------------------------------------------------------------
I understand I am responsible for
liquidation of brokerage account assets,
NO. OF SHARES by placing all trades through Lutheran
Brotherhood Securities Corp. at
1-800-421-3997 or locally 612-339-3596.
--------------------------------------------------------------
------------- -----------------------------------------
------------- -----------------------------------------
------------- -----------------------------------------
------------- -----------------------------------------
- ----------------------------------------------------------------------------
LIMITED PARTNERSHIPS
- ----------------------------------------------------------------------------
NON-PUBLICLY TRADED LIMITED PARTNERSHIPS:
I understand I am responsible for
NO. OF UNITS their liquidation.
--------------------------------------------------------------
------------ -----------------------------------------
------------ -----------------------------------------
------------ -----------------------------------------
------------ -----------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
C. PAYEE INSTRUCTIONS
* Check will be made payable to shareholder of record unless
otherwise indicated.
* Signature Guarantee required if payable to other than shareholder
of record or beneficiary.
- ----------------------------------------------------------------------------
Name(s)
- ----------------------------------------------------------------------------
Street
- ----------------------------------------------------------------------------
City State Zip
SIGNATURE(S) GUARANTEED BY:
/
- --------------------------------------- ---------------------------------
Name of Firm Authorized Signature/Title
*The Signature Guarantee must be by an officer of a commercial bank, savings
and loan, trust company, credit union, or a securities broker, dealer,
exchange, association or clearing house.
NOTE: Notarization by a Notary Public is not acceptable.
EXPLANATION OF SIGNATURE GUARANTEE
The requirement of a Signature Guarantee is standard in the securities
business. Its chief purpose is to authenticate your signature. The
guarantee also carries with it certain statutory warranties which are relied
upon by our transfer agent, Lutheran Brotherhood Securities Corp. Only a
person which has been formally authorized to do so may execute a Signature
Guarantee on behalf of his firm.
- ----------------------------------------------------------------------------
D. NOTICE OF WITHHOLDING ON DISTRIBUTIONS OR WITHDRAWALS FROM A LBSC
TAX-DEFERRED PLAN.
The distribution you receive from your Lutheran Brotherhood Self-Directed
IRA is subject to federal income tax withholding unless you elect not to
have withholding apply. Withholding will be at the rate of 10% of your
total distribution unless you elect otherwise.
If you elect not to have withholding apply to your distribution, or if you
do not have enough federal income tax withheld from your distribution you
may be responsible for payment of estimated tax rules if your withholding
and estimated tax payments are not sufficient.
I ELECT: // not to have Federal Income Tax Withheld
// to have Federal Income Tax Withheld
Failure to make an election will result in withholding.
Shareholder's Age Birthdate / /
---- ---- ----
If I am under the age of 59 1/2 I understand the IRS may impose a penalty
upon the early withdrawal of tax deferred money.
I HAVE READ ALL THE AFOREMENTIONED STATEMENTS AND AUTHORIZE THE DISTRIBUTION
AND WITHHOLDING ELECTION.
THE SIGNATURE MUST CORRESPOND IN EVERY PARTICULAR,
WITHOUT ALTERATION, WITH THE NAME AS PRINTED ON
YOUR ACCOUNT STATEMENT.
------------------------------------------ -------------
Signature(s)/Title(s Date
MAIL TO: LUTHERAN BROTHERHOOD SECURITIES CORP.,
BOX 310, MINNEAPOLIS, MN 55440-9188.
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT YOUR LUTHERAN BROTHERHOOD
REGISTERED REPRESENTATIVE OR CALL OUR OFFICE TOLL-FREE.
<PAGE>
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
---------------------
SELF-DIRECTED IRA
TRANSFER FORM
---------------------
INSTRUCTIONS: To transfer an existing plan from another custodian, complete
this authorization form and your Self Directed IRA Application Adoption
Agreement and forward to Lutheran Brotherhood Securities Corp.
- ----------------------------------------------------------------------------
Current Trustee/Custodian
- ----------------------------------------------------------------------------
Street Address City State ZIP
RE:
------------------------- ------------------------------------
Account Number Client's Name
I have established an Individual Retirement Account with Lutheran
Brotherhood Securities Corp and wish to terminate administration of the
above-mentioned retirement account with you. Please transfer my account in
accordance with the following instructions.
I HEREBY REQUEST A: // TOTAL TRANSFER // PARTIAL TRANSFER
- ----------------------------------------------------------------------------
ASSETS TO BE TRANSFERRED
All assets to be transferred must be listed individually
below. Please attach copies of account statements showing
assets to be transferred
CERTIFICATES OF DEPOSIT SAVINGS ACCOUNT
- ----------------------------------------------------------------------------
BALANCE NAME OF INSTITUTION ACCOUNT NO. MAT. DATE LIQUIDATE
---------------------------------------------------------------
//
------- ------------------- ----------- --------- ---------
//
------- ------------------- ----------- --------- ---------
//
------- ------------------- ----------- --------- ---------
- ----------------------------------------------------------------------------
I understand that an early withdrawal penalty may be
assessed if I request the premature liquidation of a
certificate of deposit and agree to accept the penalty.
STOCKS
- ----------------------------------------------------------------------------
NO. OF SHARES COMPLETE NAME OF ISSUE LIQUIDATE RE-REGISTER CUSIP NO.
--------------------------------------------------------------------------
// //
------------- ---------------------- --------- ----------- ----------
// //
------------- ---------------------- --------- ----------- ----------
// //
------------- ---------------------- --------- ----------- ----------
- ----------------------------------------------------------------------------
BONDS GOV'T ISSUES
- ----------------------------------------------------------------------------
NO OF SHARES MAT. DATE COMPLETE NAME OF ISSUE LIQUIDATE RE-REGISTER CUSIP NO
- ----------------------------------------------------------------------------
// //
- ----------- -------- --------------------- -------- ---------- --------
// //
- ----------- -------- --------------------- -------- ---------- --------
// //
- ----------- -------- --------------------- -------- ---------- --------
- ----------------------------------------------------------------------------
MUTUAL FUNDS
- ----------------------------------------------------------------------------
NO. OF SHARES COMPLETE DESCRIPTION LIQUIDATE RE-REGISTER
-------------------------------------------------------------------------
// //
------------- --------------------- --------- ---------------------
// //
------------- ---------------------- --------- ---------------------
// //
------------- ---------------------- --------- ---------------------
- ----------------------------------------------------------------------------
LIMITED PARTNERSHIPS
- ----------------------------------------------------------------------------
NO. OF UNITS COMPLETE DESCRIPTION LIQUIDATE RE-REGISTER CUSIP NO.
- ----------------------------------------------------------------------------
// //
------------- -------------------- --------- ----------- ------------
// //
------------- -------------------- --------- ----------- ------------
// //
------------- -------------------- --------- ----------- ------------
- ----------------------------------------------------------------------------
I certify that this is an accurate and complete listing of all
assets I wish to transfer.
I ACKNOWLEDGE:
Norwest Bank, Minnesota, N.A. reserves the right to review all assets
being transferred prior to final acceptance as Custodian of this account.
I am informed that penalties may be incurred due to the premature
liquidation of any assets listed above.
AGE 70 1/2 RESTRICTIONS: I have instructed my current Custodian to
process any required minimum distributions prior
to the transfer.
I UNDERSTAND SECURITIES (EXCLUDING MASSACHUSETTS FINANCIAL SERVICES MUTUAL
FUNDS, AND NONPUBLICLY TRADED LIMITED PARTNERSHIPS) WILL BE HELD IN A
DISCOUNT BROKERAGE ACCOUNT ASSIGNED TO ME, AND WILL BE SUBJECT TO WALL
STREET INVESTOR SERVICES' FEE STRUCTURE.
- --------------------------------------------------------- ----------------
Client's Signature Date
INSTRUCTIONS FOR RESIGNING CUSTODIAN
All eligible securities should be transferred via the institutional
delivery system to Wall Street Investor Services clearing through
Alex Brown and Sons. Please reference the client's name and
Lutheran Brotherhood Securities Corp. brokerage account number.
Client Name
-----------------------------------------------------------------
Brokerage Account Number
---------------------------------------------------
- ----------------------------------------------------------------------------
DTC DELIVERY INSTRUCTIONS:
Complete the enclosed Alex Brown and Sons Transfer Instructions and return
with this form
Lutheran Brotherhood Securities Corp
P.O. Box 310
Minneapolis, MN 55440-9180
ADDRESS PHYSICAL DELIVERIES TO:
Wall Street Investor Services
ATTN: DDBS, 25th Floor
17 Battery Place
New York, NY 10004
Reference client name and brokerage account number
CASH, NON-PUBLICLY TRADED LIMITED PARTNERSHIPS AND OTHER PAPERWORK:
Lutheran Brotherhood Securities Corp
P.O. Box 310
Minneapolis, MN 55440-9180
(Checks must be payable to LUTHERAN BROTHERHOOD SECURITIES CORP.
and reference client name, brokerage account number.)
- ----------------------------------------------------------------------------
(TO BE COMPLETED BY NORWEST BANK OF MINNESOTA, N.A.)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
ACCEPTANCE: Norwest Bank of Minnesota, N.A. has established an Individual
Retirement Account for the above-named client and agrees to accept the
assets of the above-named plan. Should you have any questions or require
further direction regarding this transfer, please contact Lutheran
Brotherhood Securities Corp. at (800)421-3997 or (612)339-3596.
Authorized Signature: Date
----------------------------------- ---------------
<PAGE>
(LOGO) LUTHERAN
BROTHERHOOD
SECURITIES CORP.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
LUTHERAN BROTHERHOOD SECURITIES CORP.
SELF DIRECTED IRA FEE SCHEDULE
CUSTODIAN FEES
Plan Establishment Fee...................................................$25
Annual Maintenance Fee...................................................$40
Termination, Rollover or Transfer to Successor Custodian
(waived for persons aged 70 1/2 or disabled)..........................$60
Transactions Requiring Custodian Processing:
Sale, Transfer or Registration of Other Mutual Funds
(does not apply to transactions within the SDI plan)..................$10
Purchase, Sale, Transfer or Re-registration of
a limited partnership, etc. ..........................................$15
Returned Checks..........................................................$25
*The $40 annual maintenance fee will be deducted from your SDI plan in
December unless prepaid by a separate check. If your account balance is
less than $40, you will be billed for this fee.
DISCOUNT BROKERAGE SERVICE FEES - RETAIL COMMISSION RATES*
Clearing through Alex Brown & Sons, Inc. Member New York Stock Exchange
and Securities Investor Protection Corp.
STOCKS
- ----------------------------------------------------------------------------
DOLLAR AMOUNT RATE MIN/MAX
------------- ---- -------
Under - $ 10,000 $27.50 +.0092 of $ amount
$10,000.01 - $25,000 $27.50 +.0066 of $ amount
$25,000.01 - $50,000 $27.50 +.0050 of $ amount Minimum $41.23/trade
$50,000.01 - $100,000 $27.50 +.0036 of $ amount Maximum. 50/share
$100,000.01 - $200,000 $27.50 +.0033 of $ amount
$200,000.01 - and over $27.50 +.0028 of $ amount
BOND (1 BOND = $1,000 FACE VALUE)
- ----------------------------------------------------------------------------
DOLLAR AMOUNT RATE MIN/MAX
------------- ---- -------
1st - 24th bonds $27.50 + $3.30 per bond Minimum $41.25/order
25th bond and over $2.20 per additional bond
*RATES ARE SUBJECT TO CHANGE,
HANDLING CHARGE:
ALEX BROWN & SONS, INC., ASSESSES A $1.50 HANDLING CHARGE PER TRADE.
- ----------------------------------------------------------------------
Commission Examples on Back
COMMISSION EXAMPLES (MINIMUM COMMISSION OF $41.25 ON ALL TRADES)
STOCKS
- ----------------------------------------------------------------------------
Once the minimum trade rate of $41.25 has been met, the rate charged is the
lesser of the appropriate formula or $.50/share.
100 shares @ $60 per share = $6,000
$6,000.00 x .0092 = $55.20 + 27.50 = $82.70
100 shares x .50 per share = $50,000 maximum commission
COMMISSION CHARGE WOULD BE $50.00
500 shares @ $60.00 per share = $30,000
$30,000.00 x .0050 = 150.00 + 27.50 = $177.50
500 Shares x .50 Per Share = $250.00 maximum commission
COMMISSION CHARGE WOULD BE $177.50
BONDS
- ----------------------------------------------------------------------------
$10,000 Face Value Corporate Bond = $27.50 + ($3.30 x 10) = $ 60.50
$30,000 Face Value Corporate Bond = $27.50 + ($3.30 x 24) +
($2.20 x 6) = $119.90
<PAGE>
SELF-DIRECTED IRA
APPLICATION/ADOPTION AGREEMENT
LUTHERAN
(LOGO) BROTHERHOOD
SECURITIES CORP.
<PAGE>
THE ADVANTAGES OF OWNING A
LUTHERAN BROTHERHOOD SELF-DIRECTED IRA
* INVESTMENT OPTIONS
Want your IRA invested in the stocks or bonds of America's finest
corporations? High-yielding securities? U.S. government securities?
Money market instruments? With the Lutheran Brotherhood Self-Directed
IRA, the choice is yours. You can also choose the way you want to
invest -- through individual securities, mutual funds or limited
partnerships.
* FLEXIBILITY
You can invest your IRA dollars in a variety of investments. The
investments you choose depend on your objectives and risk temperament.
Plus, you're free to move your IRA dollars as your objectives change.
* TAX-DEFERRED EARNINGS
In addition to the performance and earnings of your IRA investment
portfolio, you also enjoy the advantage of sheltering your earnings from
federal taxes*.
* ACCOUNT UPDATES
We confirm your investments by sending you quarterly account updates to
track your IRA. Annual statements summarize the year's account activity.
* PERSONAL SERVICE
When you make an investment, it's nice to know that you can get personal
service. That's why we have more than 1,700 registered representatives
across the country to answer your questions. And, if you want, you can
call us toll-free at 1-800-421-3997. Locally, call (612) 339-3596.
*Distributions are subject to tax when withdrawn.
- ---------------------------------------------------------------------------
LUTHERAN BROTHERHOOD SECURITIES CORP.
SELF-DIRECTED IRA INVESTMENT OPTIONS
THE LUTHERAN BROTHERHOOD
FAMILY OF FUNDS*:
LB Opportunity Growth Fund, Inc.
LB Fund, Inc.
LB High Yield Fund, Inc.
LB Income Fund, Inc.
LB Money Market Fund
DISCOUNT BROKERAGE SERVICE*
If you prefer to own individual stocks or bonds as part of your
self-directed IRA, you can buy and sell stocks and bonds through LBSC's
discount brokerage service. The commission rates charged are less than
those of a full-cost broker.
OTHER MUTUAL FUNDS
A variety of other mutual funds are also available for your Self-Directed
IRA.
LIMITED PARTNERSHIPS
Various limited partnership programs are available for your Self-Directed
IRA.
*For a free prospectus containing more complete information about the
Lutheran Brotherhood Family of Funds, including charges and expenses,
contact your local registered representative or Lutheran Brotherhood
Securities Corp., 625 Fourth Avenue S., Minneapolis, MN 55415, or
call 1-800-328-4552.
<PAGE>
SELF-DIRECTED IRA APPLICATION/ADOPTION AGREEMENT
PLEASE PRINT USING BLACK INK ONLY
- ----------------------------------------------------------------------------
I. INDIVIDUAL
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Name
- ----------------------------------------------------------------------------
Street Address Apt. No. if any
- ----------------------------------------------------------------------------
City State Zip Code
Social Security Number:
----------------------------------------------------
Gender: // Male // Female Birth Date:
------------------
Marital Status: // Married // Single
Day Phone: Evening Phone:
----------------------- ----------------------
- ----------------------------------------------------------------------------
II. ACCOUNT TYPE
- ----------------------------------------------------------------------------
// Regular IRA
// Spousal IRA (A SPOUSAL ACCOUNT AGREEMENT MUST BE ATTACHED SC55)
// Simplified Employee Pension Plan (SEP)
(ATTACH A SEP AGREEMENT 1627-52)
// Transfer of existing IRA directly from previous Custodian or Trustee
(SEPARATE SELF-DIRECTED IRA TRANSFER FORM MUST BE ATTACHED)
// IRA Rollover
(IF SECURITIES ARE INCLUDED, OR THIS IRA WILL COMBINE ROLLOVER &
REGULAR CONTRIBUTIONS, ATTACH SELF-DIRECTED IRA ROLLOVER FORM)
- ----------------------------------------------------------------------------
III. CONTRIBUTION INFORMATION
- ----------------------------------------------------------------------------
Indicate fund and amount of contribution. (Make check payable to
Lutheran Brotherhood Securities Corp. In addition to your contribution,
include a one-time establishment fee of S25.)
CONTRIBUTION YEAR // 19 // 19
--- ---
// LB Opportunity Growth Fund, Inc. $
-------------------
// LB Fund. Inc. $
-------------------
// LB High Yield Fund, Inc. $
-------------------
// LB Income Fund, Inc. $
-------------------
// LB Money Market Fund * $
-------------------
IF YOU WISH TO INCLUDE AN EXISTING LB FAMILY OF FUNDS IRA ACCOUNT IN YOUR
SDI PLAN, PLEASE LIST THE ACCOUNT NUMBER(S):
// LB Opportunity Growth Fund, Inc.
--------------------
// LB Fund. Inc.
--------------------
// LB High Yield Fund, Inc.
--------------------
// LB Income Fund, Inc.
--------------------
// LB Money Market Fund *
--------------------
*IF A LUTHERAN BROTHERHOOD MONEY MARKET FUND ACCOUNT IS NOT ALREADY INCLUDED
IN THE SDI PLAN, ONE WILL BE ESTABLISHED TO SERVE AS THE CASH ACCOUNT.
- ----------------------------------------------------------------------------
IV. SCHEDULE OF CUSTODIAN FEES
- ----------------------------------------------------------------------------
For establishment fee, see the enclosed schedule, form SC506.
- ----------------------------------------------------------------------------
V. INITIAL DESIGNATION OF BENEFICIARY(IES)
- ----------------------------------------------------------------------------
As primary beneficiary:
- ----------------------------------------------------------------------------
Name
- ----------------------------------------------------------------------------
Relationship
- --------------------------------------------- ----------------------
Social Security Number Birth Date
As contingent beneficiaries (if the primary beneficiary should fail to
survive me):
- ----------------------------------------------------------------------------
Name
- ----------------------------------------------------------------------------
Relationship
- --------------------------------------------- ----------------------
Social Security Number Birth Date
- ----------------------------------------------------------------------------
Name
- ----------------------------------------------------------------------------
Relationship
- --------------------------------------------- ----------------------
Social Security Number Birth Date
I UNDERSTAND THE ENTIRE DEATH BENEFIT UNDER THIS IRA WILL BE PAID TO THE
PRIMARY BENEFICIARY(IES) WHO SURVIVE ME IN EQUAL SHARES (UNLESS DIFFERENT
PERCENTAGES ARE DESIGNATED ABOVE). IF NO PRIMARY BENEFICIARY SURVIVES ME,
THE ENTIRE BENEFIT WILL BE PAID TO THE CONTINGENT BENEFICIARY(IES) WHO
SURVIVE ME IN EQUAL SHARES (UNLESS DIFFERENT PERCENTAGES ARE DESIGNATED
ABOVE). IF NO PRIMARY BENEFICIARY SURVIVES ME, THE ENTIRE BENEFIT WILL BE
PAID ACCORDING TO THE TERMS OF THE IRA PLAN. I MAY CHANGE THIS BENEFICIARY
SELECTION AT ANY TIME WITHOUT THE CONSENT OF ANY PERSON NAMED AS
BENEFICIARY. NEITHER THIS SELECTION NOR ANY FUTURE CHANGE OF BENEFICIARY
WILL BE EFFECTIVE UNLESS FILED WITH YOU BEFORE MY DEATH.
THIS BENEFICIARY SELECTION AND ALL RIGHTS TO BENEFITS UNDER THIS IRA ARE
GOVERNED BY THE TERMS OF THE IRA PLAN, AS IT MAY BE AMENDED FROM TIME TO
TIME.
Note: If you are married and live in a community property state or if
you accumulated your IRA assets while living in a community property state,
your IRA may be subject to community property laws. If so and you wish to
name a primary beneficiary other than your spouse, spousal consent may be
required and your spouse should sign the consent below. Consult your
attorney regarding the effectiveness of consent in your state. Spousal
consent alone may not be sufficient to save community property rights in
your state.
SPOUSAL CONSENT
I agree with my spouse in naming a primary beneficiary other than myself. I
also acknowledge that I shall have no claim against the trustee for any
payment to my spouse's named beneficiary.
- --------------------------------- ------------------------------------
Name Signature
- ----------------------------------------------------------------------------
VI. CUSTODIAN ACCEPTANCE (FOR CUSTODIAN ONLY)
- ----------------------------------------------------------------------------
We accept appointment as Trustee in accordance with the terms and conditions
of the Custodial Agreement.
Custodian
NORWEST BANK MINNESOTA, N.A.
- ------------------------------------------------------ --------------
Signature Date
- ----------------------------------------------------------------------------
VII. FINANCIAL SUITABILITY INFORMATION
- ----------------------------------------------------------------------------
The following information IS REQUIRED to determine the suitability of the
investment chosen. It's strictly confidential and for Home Office use only.
OWNER OCCUPATION:
----------------------------------------------------------
Employer's Name:
-----------------------------------------------------------
Employer's Address:
--------------------------------------------------------
TAXABLE INCOME:
// Under $15,000 // $75,000 - $149,999
// $15,000 - $49,999 // Over $150,000
// $50,000 - $74,999
ESTIMATED TAX BRACKET: %
----------------------
INVESTMENT TIME HORIZON:
// Short-Term (0-3 yrs) // Long-Term (3+ yrs)
PRESENT FINANCIAL ASSETS: (include amount being invested)
Savings: $
--------------
Mutual Funds: $
--------------
Bonds: $
--------------
Stocks: $
--------------
Residence: $
--------------
Business: $--------------
Other: $--------------
Debt
Obligations: ($ )
--------------
Net Worth: $
--------------
--------------
RISK TEMPERAMENT:
(From Portfolio Allocation Questionnaire or FSA)
// Saver // Conservative // Moderate // Aggressive
THE FOLLOWING INFORMATION IS MANDATORY:
If the shareholder is employed by or associated with a member of the NASD
please complete.
- ----------------------------------------------------------------------------
Firm Name/Address
- ----------------------------------------------------------------------------
VIII. APPLICATION FOR ASSOCIATE MEMBERSHIP
- ----------------------------------------------------------------------------
The following information IS MANDATORY to determine
Associate Membership status.
(For Limited Membership, complete and attach Form 296.)
BASIS FOR MEMBERSHIP
// 1. Current Adult or Juvenile Contract Member
(Lutheran Brotherhood contractholder).
-----------------------------------
Lutheran Brotherhood Contract Number
// 2. Current Associate Member of Lutheran Brotherhood
(mutual fund shareholder).
-----------------------------------
LBSC Mutual Fund Account Number
// 3. Baptized in the Christian faith and profess to be Lutheran.
I have read the statements and answers given above. They are true,
complete, and correct to the best of my knowledge and belief. They
are, as well, the basis of my membership in Lutheran Brotherhood.
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Applicant Signature
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IX. SIGNATURE OF IRA PARTICIPANT
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I, the undersigned, appoint Norwest Bank Minnesota, N.A. as custodian of my
Self Directed Individual Retirement Account. I (1) certify that the
information I have provided is correct; (2) agree to be legally bound by the
terms of the IRA selected; (3) acknowledge that I have received and read the
"Disclosure Statement" relating to this Account and the "Custodial
Agreement" under which the Account is maintained and (4) direct Norwest Bank
to invest any cash in my account, which is not otherwise invested, in the
Lutheran Brotherhood Money Market Fund.
I certify that under penalties of perjury (1) that the Social Security
Number provided above is my correct number and (2) that as a participant of
an individual retirement plan I am not subject to back-up withholding.
I have received and reviewed a current prospectus of the Lutheran
Brotherhood Family of Funds and understand the investment objectives and
potential risks. With the exception of the Money Market Fund, I understand
that the value of the shares fluctuate and are not guaranteed. When shares
are redeemed, they may be worth more or less than what was paid for them. I
understand there may be a sales charge as explained in the prospectus and
for this and other reasons, an investment should be made for the long-term
(three or more years). Shares will not be purchased until the day this
application is received in good order by the Home Office of Lutheran
Brotherhood Securities Corp.
I agree to arbitrate any disputes between Lutheran Brotherhood Securities
Corp. and me. I specifically agree and recognize that all controversies
which may arise between Lutheran Brotherhood Securities Corp., its agents,
representatives or employees and me, concerning any transaction, account or
the interpretation, performance or breach of this agreement between Lutheran
Brotherhood Securities Corp. and me will be determined by arbitration to the
full extent provided by law. Such arbitration will be in accordance with
the rules then in effect of the National Association of Securities Dealers,
Inc.
I further understand and agree that:
1. Arbitration is final and binding on all parties.
2. I am waiving my right to seek remedies in court, including the right
to a jury trial.
3. Pre-arbitration discovery is generally more limited than and different
from court proceedings.
4. The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or seek modification
of rulings by the arbitrators is strictly limited.
5. The panel of arbitrators will typically include a minority of
arbitrators who are affiliated with the securities industry.
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I ACKNOWLEDGE THAT THIS APPLICATION CONTAINS A BINDING AND ENFORCEABLE
ARBITRATION AGREEMENT AND THAT A COPY OF THIS AGREEMENT IS INCLUDED IN THE
PROSPECTUS THAT I HAVE RECEIVED AND REVIEWED.
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Signature of Individual Date
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REGISTERED REPRESENTATIVE INFORMATION
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Registered Representative ID Print Registered Representative Name
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Registered Representative Phone Number Agency No.
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Print General Agent Name
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Signature of Registered Representative Date
EXHIBIT (14)(d)
THE
LUTHERAN
BROTHERHOOD
FAMILY OF
MUTUAL FUNDS
TAX-SHELTERED CUSTODIAL ACCOUNT
UNDER
SECTION
403(b)
OF THE
INTERNAL
REVENUE
CODE
<PAGE>
TABLE OF CONTENTS INSTRUCTIONS
General Information.....................2 1. Read the entire
Custody Agreement.......................8 booklet including
Application.........................13-14 the Custody Agreement
Agreement For Salary Reduction......15-17
How to Use the Calculation Form........18 2. Complete the necessary
Calculation Form 1698 19-20 forms in the booklet
Election Limitations (Use LB annuities disk) and mail the following
to LBSC:
SCHEDULE OF CUSTODIAN'S FEES
a. Signed application
Establishing the account $ 5.00 (pages 13 & 14)
Annual fee per fund account $10.00 b. One Agreement For
Processing a lump sum distribution $10.00 Salary Reduction
Processing each periodic distribution $ 2.00 (page 15) if
applicable
c. One Calculation
Form (pages 18-19)
as applicable.
D. $5.00 PROCESSING
FEE.
Leave in booklet for
employee:
* One Agreement For
Salary Reduction
(page 16)
3. The Custodian will
return to the Employee
a copy of the
Application upon
acceptance.
4. It is important that
the Employee carefully
read the prospectus
about the shares of
the mutual fund
selected by the
Employee. The
prospectus for such
shares, required to be
delivered to the
Employee by or on
behalf of the Fund,
describes any sales
charges and additional
information about
which the Employee
should be aware before
making that selection.
THE CUSTODIAN ASSUMES
NO LIABILITY FOR
INVESTMENT RESULTS OF
THE EMPLOYEE'S
SELECTION.
5. The Employee should
seek advice from the
Employee's attorney
regarding the legal
consequences
(including but not
limited to
federal & state tax
matters) of entering
into this Agreement,
contributing to the
Custodial Account, and
ordering the Custodian
to make distributions
from the account. The
Employee should
understand that the
Custodian, and the
Mutual Fund (or any
company associated
therewith), are
prohibited by law from
rendering such advice.
<PAGE>
INTRODUCTION
The Internal Revenue Code allows Employees of certain tax-exempt
organizations and of public schools to exclude from their current income
amounts paid by their Employer into special custodial accounts. The
Employer's contributions to the custodial account are also exempt from
current tax. The Employee's tax is deferred until he/she receives payment
from the custodial account as part of his/her retirement income.
ESTABLISHING A TAX-SHELTERED CUSTODIAL ACCOUNT
A tax-sheltered custodial account may be established by an organization
operated exclusively for educational, literary, religious, charitable, or
scientific purposes (a "Charitable Organization") for one or more of its
full or part-time Employees. Such an account may also be established by a
state, a political subdivision of a state, or an agency or instrumentality
of a state or political subdivision thereof, but only for the benefit of an
Employee who performs services for an educational institution.
<PAGE>
TAX-SHELTERED CUSTODIAL ACCOUNT (TSCA)
General Information
WHAT IS A TAX-SHELTERED CUSTODIAL ACCOUNT?
It is simply a retirement plan which is tax-favored. If you qualify for a
tax-sheltered custodial account, your dollars go into the plan without
current taxation and the earnings accumulate tax deferred.
WHO IS ELIGIBLE?
Pastors, school teachers, and other persons employed by nonprofit, Internal
Revenue Code Section 501(c)(3) Organizations and Public Educational
Institutions are eligible. The Internal Revenue Code defines 501(c)(3)
organizations as follows:
"Corporations, and any community chest, fund, or foundation, organized
and operated exclusively for religious, charitable, scientific, testing
for public safety, literary, or educational purposes or to foster
national or international amateur sports competition (but only if no part
of its activities involve the provision of athletic facilities or
equipment), or for the prevention of cruelty to children or animals, no
part of the net earnings of which inures to the benefit of any private
shareholder or individual, no substantial part of the activities of which
is carrying on propaganda, or otherwise attempting to influence
legislation... and which does not participate in, or intervene in
(including the publishing or distributing of statements), any political
campaign on behalf of any candidate for public office."
Specifically, some of the non-profit organizations which will qualify are:
1. Public and private schools, colleges and universities
2. Hospitals
3. Churches
4. Religious organizations
5. Research and scientific foundations
6. Charitable institutions
7. Humane societies
8. Social welfare agencies
9. Museums
10. Symphony orchestras
The Employer's tax counselor will be able to determine definitely if the
organization qualifies under 501(c)(3). The roster of 501(c)(3)
organizations is limited and the following tax-exempt organizations, for
instance, do not qualify:
1. Fraternal benefit societies
2. Labor unions - voluntary employee associations
3. Chambers of Commerce - business associations
4. Pleasure or recreation clubs
5. Instrumentalities of the federal government
6. Non-profit cemetery companies
7. Associations providing charitable, educational or recreational
benefits for a specified and limited membership
8. Credit unions
9. Farmers' cooperatives
10. Most mutual or cooperative undertakings
WHAT ARE THE MECHANICS OF THE PLAN?
First, the qualified Employer must agree to invest in Mutual Fund shares
amounts withheld from salary or paid in addition to current salary. The
Funds are owned by the Employee and the benefits are vested immediately.
It is as simple as that. The Employer can make the plan available to all
full or part-time Employees on an individual basis.
HOW DOES A SALARY REDUCTION PLAN WORK?
The law allows an Employee to arrange with his/her Employer that, instead of
contributing a portion of his/her salary through payroll deductions, his/her
salary will be reduced and the amount of the reduction will be used by the
Employer to purchase retirement benefits for the Employee. Instead of
paying income tax currently on the salary deductions, the Employee is
deferring the taxation on the same amount until his/her retirement years.
The "Agreement for Salary Reduction" is on pages 15 and 16 for those who
wish to make such an arrangement with their Employers. The agreement cannot
be retroactive and it applies only to amounts earned after its effective
date.
HOW MUCH MAY BE CONTRIBUTED?
As a general rule, the Employee may contribute each year an amount equal to
his/her "exclusion allowance." An Employee's "exclusion allowance" is 20%
of the "includible compensation" paid him/her by his/her Employer during the
current taxable year, multiplied by his/her years of service, less all past
retirement contributions made by his/her Employer which were not included in
his/her taxable income in prior years. An employee's includible
compensation is the amount earned during the most recent period, ending not
later than the close of the current taxable year, which constitutes a full
year of service. Thus, the most recent period of service may include more
than one tax year if the employee had a part-time job, or if a full-time
employee worked only part of a tax year. However, in all cases an Employee
is treated as having at least one year of service, thus assuring a part-time
Employee of the benefit of an exclusion allowance equal to 20% of his/her
includible compensation for part-time services. Includible compensation
includes sick pay, but not amounts contributed by the employer to TSCAs,
qualified pension plans or state retirement plans.
The above general rule does not contemplate several factors, including past
service, and past and current contributions to other retirement plans, which
will affect the actual maximum exclusion allowance. In order to determine
the current maximum monthly exclusion allowance refer to page 18 and 19.
The formula computation should be made in every case to ensure qualification
for the TSCA plan. Salary reduction TSCAs are limited to $9,500 EXCEPT for
employees who meet eligibility requirements for election limitations (see
page 20) AND who have worked for the current employer for at least fifteen
years. Those employees may contribute up to an aggregate limit of $15,000.
However, the additional contribution in any one year cannot exceed $3,000.
The law also sets a maximum on the annual dollar contribution which may be
made for an Employee. No contribution may be made in any one year which
exceeds 25% of the Employee's compensation for the current year or the
current overall dollar limitation*, whichever is less. IF AGGREGATION OF A
TSCA WITH ANOTHER QUALIFIED PLAN OF THE EMPLOYER CAUSES THE OVERALL
LIMITATION TO BE EXCEEDED, THE EXCLUSION ALLOWANCE WILL BE REDUCED TO THE
EXTENT NECESSARY TO SATISFY THE LIMITATION BEFORE THE OTHER PLAN IS
DISQUALIFIED. However, Employees of educational institutions, hospitals or
home health service agencies, a church or a convention or association of
churches; (and these Employees only) may elect that the maximum contribution
be computed under special rules (Code Section 415(c)(4) which allows certain
Employees to enjoy a greater contribution than that which would be permitted
by the 25% --current overall limitation rule.* THESE SPECIAL RULES DO NOT
PERMIT EXCLUSION OF AMOUNTS UNDER A SALARY REDUCTION ARRANGEMENT IN EXCESS
OF THE LIMIT ON ELECTIVE DEFERRALS EXPLAINED IN THE PREVIOUS PARAGRAPH.
If an Employee also maintains his/her own Keogh Plan (as might occur, for
example, where a physician is an Employee of a hospital and maintains a
separate consulting practice), or in certain other circumstances where the
Employee is a participant in other qualified plans, contributions to the
tax-sheltered custodial account and to any Keogh Plan, to other qualified
plans and to any eligible deferred compensation plans must be aggregated for
the year in question when computing the maximum dollar contribution which
will qualify for the favored tax treatment under the 25%/$30,000* rule.
In the event that the total contributions made for the Employee exceed the
maximum allowed, the excess is taxed to the Employee as ordinary income and
the Employee is subject to a penalty tax with respect to that excess.
MAY MY EMPLOYER CONTRIBUTE TO A TSCA IN ADDITION TO MY SALARY?
Yes. Tax-Sheltered Custodial Accounts may be established by an Employer for
its Employees; however, in the case of a salary addition plan, the plan is
an Employee benefit plan and is subject to the ERISA nondiscrimination and
coverage rules as well as rules regarding required reporting and disclosure.
*The current overall limitation is set at $30,000 which may be subject to
future IRS cost of living adjustments. Your Lutheran Brotherhood Registered
Representative can answer your questions about the current overall dollar
limitation.
WHAT SPECIAL PROVISIONS APPLY TO CHURCH EMPLOYEES?
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) made changes in
the TSCA provisions for church employees. The changes are summarized below:
1. All service for a particular church organization is counted as service
for one employer.
2. All prior contributions made to one church organization by one or more
churches would be counted as prior contributions made by one employer.
3. Church employees who have adjusted gross incomes of $17,000 or less
are allowed to make an election to replace the exclusion allowance
with a new limit: the lesser of 100% of includible compensation
or $3,000.
4. Church employees are allowed an additional election to replace the 25%
limitation with a $10,000 annual/$40,000 lifetime limitation (subject
to the $9,500 limit discussed above.)
5. Church employees are now allowed to elect election limitations
(catch-up options).
Who are church employees? Church employees include duly ordained,
commissioned, or licensed ministers and lay employees, including employees
of tax-exempt organizations (whether civil law corporations or otherwise
organized) which are controlled by or associated with a church. For this
purpose, a church includes a convention or association of churches, or an
organization which is exempt from tax and is controlled by or associated
with a church or a convention or association of churches.
Church employees who wish to elect either or both of the special TEFRA
limitations should sign a letter requesting the limitation(s). This letter
should be returned with the application, agreement for salary reduction form
and calculation sheet.
HOW ARE CONTRIBUTIONS TO THE TAX-SHELTERED CUSTODIAL ACCOUNT INVESTED?
The law requires that all contributions to the tax-sheltered custodial
account must be invested in shares of a "Regulated Investment Company", such
as in mutual fund shares. The Lutheran Brotherhood tax-sheltered custodial
accounts may be invested in shares of any of the Lutheran Brotherhood Family
of Mutual Funds except the Municipal Bond Fund. The Employee has the
opportunity to select the mutual fund or funds in which he/she wishes the
contribution invested, and Lutheran Brotherhood Securities Corp., will
furnish to the Employee, at his/her request, the current prospectus of one
or more of the Lutheran Brotherhood mutual funds in which the assets of the
custodial account may be invested. The Employee should review each
prospectus before deciding upon the mutual fund or funds in which the
investment should be made.
After the initial investment, the Employee may wish to shift all or part of
the investment from one of these mutual funds to another. The exchange
privilege for each of the Lutheran Brotherhood mutual funds is explained in
the current prospectus of each fund. Any fees or sales charges attributable
to such a shift of investment will be charged to the account.
HOW ARE DIVIDENDS AND DISTRIBUTIONS TO THE TAX-SHELTERED CUSTODIAL ACCOUNT
HANDLED?
All dividends and capital gain distributions with respect to the mutual fund
shares held in the custodial account will be reinvested in additional shares
of any of the Lutheran Brotherhood Family of Funds. If any distribution
with respect to such shares may be received at the election of the
shareholder in additional shares or in cash or other property, the custodian
will elect to receive the distribution in additional shares. All such
dividends and distributions are accumulated in and are received by the
custodial account free of federal tax liability until distribution.
WHEN ARE THE ASSETS OF THE TAX-SHELTERED CUSTODIAL ACCOUNT DISTRIBUTED? AND
HOW?
Until the end of 1988, distributions from a TSCA must begin by April 1 of
the calendar year following the later of (i) the calendar year in which the
employee attains age 70 1/2 or (ii) the calendar year in which the employee
retires. Beginning in 1989 distributions must commence no later than
April 1 of the calendar year following the calendar year in which the
employee attains age 70 1/2. Employees who work beyond age 70 1/2 must
begin distribution even though they continue to work. Prior to the required
beginning date stated above, distributions from the custodial account may be
requested upon the occurence of one or more of the following events:
1. The Employee shall no longer be employed by the Employer; or
2. The Employee shall have attained the age of 59 1/2 years; or
3. The Employee shall have become disabled; or
4. The Employee shall have died; or
5. The Employee shall have suffered financial hardship. (for salary
reduction TSCAs only)
The Employee (or, if he/she has died, his/her specified beneficiary or the
executor or administrator as appropriate) may send written instruction to
the custodian to make distribution in any of the methods set forth below.
However, the Employee, prior to giving such instructions, should consult
his/her own tax advisor in order to determine that such instructions, or
action by the custodian in complying with such instructions, will not
adversely and unexpectedly affect his/her federal tax liability.
Distribution from the account prior to the Employee's death shall be made in
one of the following methods as specified in a written election by the
Employee:
(1) If assets in the account are sufficient and if a systematic
withdrawal plan is then available with respect to the mutual fund
shares held in the custodial account, the Custodian may be instructed
to make installment payments to the Employee in monthly or other
regular intervals as elected by the Employee over a period of time not
exceeding the Employee's life expectancy or the joint and survivor
life expectancy of the Employee's life and a designated beneficiary.
(2) A single-sum payment.
(3) By purchase and distribution of a single-premium fixed or variable
non-transferable annuity contract meeting the requirements of 403(b)
of the Internal Revenue Code.
(4) Any combination of the methods of distribution set forth in this
paragraph.
If the Employee dies before his/her entire interest in the account is
distributed, the following distribution provisions shall apply:
(1) If the Employee dies after the distribution from his/her account has
commenced, 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 Employee's death.
(2) If the Employee dies before distribution of his/her interest in the
account commences, the Employee's entire interest will be distributed
to the Beneficiary in accordance with one of the following provisions:
(a) The Employee's entire interest will be paid within five (5) years
after the date of the Employee's death.
(b) If the Employee's interest is payable to a Beneficiary designated
by the Employee, then that interest will be distributed in
substantially equal installments over a period not extending beyond
the life expectancy of the Beneficiary. Such distributions shall
begin not later than one (1) year after the date of the Employee's
death.
(c) If the designated Beneficiary is the Employee's surviving spouse,
the spouse may elect to continue the account in his/her name with
distributions commencing no later than the date that the Employee
would have attained age 70 1/2. If the surviving spouse dies
before distributions to him/her begin, then distribution
requirements shall be applied as if the surviving spouse were
the Employee.
The interest of the Employee in the tax-sheltered custodial account is
nonforfeitable during his/her lifetime. Except for the expenses of the
account itself, under no circumstances may the assets of the custodial
account be diverted to purposes other than for the exclusive benefit of the
Employee and his/her beneficiary. The Custody Agreement provides that such
assets, and the benefits so provided, are not subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such assets or benefits to be so subjected will not be
recognized except to such extent as may be required by law.
Each Employee should complete the "Specification of Beneficiary" portion of
the Application. Such specification indicates to the custodian the person
or persons to whom the distribution is to be made should the Employee die
before final distribution from the custodial account. In the absence of an
effective specification, distribution will be made by the custodian to the
Employee's estate. The specification may be changed or revoked by the
Employee at any time provided that such change or revocation shall not take
effect until 15 days after receipt thereof by the custodian. If the
Employee has died, the custodian will comply with instructions received from
the beneficiary. If the custodian is furnished with satisfactory proof of
death of the specified beneficiary or beneficiaries prior to the time of
death of the Employee, all distributions will be made to the estate of the
Employee.
WHO ADMINISTERS THE TAX-SHELTERED CUSTODIAL ACCOUNT?
State Street Bank and Trust Company of Boston, Massachusetts, is available
to act as custodian of tax-sheltered custodial accounts. As such, it is to
invest all contributions in the shares of the Lutheran Brotherhood Family of
Mutual Funds designated by the Employee. It also is to collect and reinvest
all dividends and capital gain distributions and credit the shares so
purchased to the custodial account.
The custodian is to keep accurate and detailed records of all receipts,
investments, disbursements and other transactions concerning the custodial
account. After the close of each calendar year, the custodian will forward
to the Employee a written statement reflecting all such activities during
that year, together with a statement of the shares held and their net asset
value at the end of such year.
In order to provide current information concerning the mutual fund shares
held in the custodial account, the custodian will also furnish to, or cause
to be furnished to the Employee all notices, prospectuses, financial
statements and proxy-soliciting materials relating to the mutual fund shares
held in the custodial account. Such information will enable the Employee to
determine how shares held in the custodian account should be voted, and the
custodian will not vote any such share on any proposal except in accordance
with the written instructions of the Employee.
The custodian and the Employer respectively will also keep such records and
file with the Internal Revenue Service and the Department of Labor such
returns, reports, and other information concerning the custodial account as
may be required of either of them.
The custodian intends to delegate its administrative duties to Lutheran
Brotherhood Securities Corp., as contemplated by the plan.
WHAT IS THE COST OF THE TAX-SHELTERED CUSTODIAL ACCOUNT AND HOW IS IT PAID?
The custodian will collect fees for administrative services which,
initially, are the fees specified on the fee schedule set forth in the
Application for the custodial services rendered to the custodial account.
The fee schedule may be amended in the future.
In addition to the fees for administrative services paid to the custodian,
the custodial account may incur expenses such as sales charges upon the
investment of funds, other administration expenses (such as fees for legal
services rendered to the custodian specifically attributable to the
custodial account) and taxes (such as transfer taxes incurred in connection
with the investment or reinvestment of assets of the custodial account or
income, estate, inheritance or other taxes levied or assessed in respect of
such assets).
All such fees and expenses will be collected by the custodian and paid by it
out of the assets of the custodial account. If sufficient cash is not
available in the custodial account at the time payment of such fees or
expenses is due, then the custodian will redeem a sufficient number of
shares then held in the custodial account in order to obtain sufficient
cash.
AMENDMENTS
Pursuant to the terms set forth in the Custody Agreement, the Employer and
the Employee authorize Lutheran Brotherhood Securities Corp. to amend the
Custody Agreement in any respect at any time effective on a stated date; but
only if the purpose of such amendment is to meet the requirements of Section
403(b) of the Internal Revenue Code, as amended, or any successor provision
of law; to obtain expediently a ruling from the Internal Revenue Service
that such requirements are met; or to conform with other applicable law by
the custodial account. The Employee will be informed promptly of any such
amendment. Any other amendment requires the consent of the Employee.
The custodian may resign or be removed. In such event, the Employee shall
appoint a successor custodian qualified to act as such in accordance with
Section 401(f) of the Internal Revenue Code. If the Employee does not
appoint a successor custodian, the custodial account will be terminated.
REPORTING REQUIREMENTS
Tax-Sheltered Custodial Accounts may be subject to annual reporting under
the Internal Revenue Code. Unless exempt from the filing requirements, IRS
regulations require every Employer who maintains a TSCA for its Employees to
file a 5500C or 5500R annually with the IRS regarding each account no later
than seven months after the end of the "plan year". If the "plan year" is
the same as the calendar year, the report is due no later than July 31. If
such a report is filed late, the IRS may assess a penalty of $25 for each
day until such report is actually received.
ADDITIONAL INFORMATION
This description of the Lutheran Brotherhood Family of Mutual Funds
Tax-Sheltered Custodial Account, together with the Custody Agreement and the
Application, have been prepared for the purpose of enabling Employers of the
type described in Section 403(b)(1)(A) of the Internal Revenue Code, as
amended, to establish custodial accounts for their Employees which will be
treated as qualified plans of the type as described in Section 403(b) of the
Code. This description provides merely a summary of the terms of the
Custody Agreement, and in the event of any conflict between this description
and the terms of the Custody Agreement, the latter will control.
It is the responsibility of the Employee to determine that his Employer is
an entity of the type described in the second section of this description,
that he is an Employee of such entity within the meaning of the law, and
that the amount of the contribution made by the Employer does not exceed the
"exclusion allowance" referred to on pages 18 and 19. Neither Lutheran
Brotherhood Securities Corp. nor the custodian shall have any responsibility
in this regard.
Questions concerning the establishment of a custodial account or
contributions to be made to a custodial account should be directed to:
Lutheran Brotherhood Securities Corp. 625 Fourth Avenue South
Minneapolis, Minnesota 55415 Call Toll Free: 1-800-328-4552 - Out of State
residents; 1-800-752-4208 - Minnesota residents; (612) 339-8091 - Local
<PAGE>
CUSTODY AGREEMENT
For a Lutheran Brotherhood Family of Mutual Funds Tax-Sheltered
Custodial Account.
SECTION 1. INTRODUCTION
The Employer, being an Employer of the type described in Section
403(b)(1)(A) of the Code, hereby does or previously has established a
Tax-Sheltered Custodial Account (the "Account") with the State Street Bank
and Trust Company for the retirement benefit of the Employee named in the
Application attached hereto upon the terms and conditions set forth in this
Agreement.
This Agreement shall take effect upon acceptance in writing by the State
Street Bank and Trust Company of Boston, Massachusetts, of its appointment
in the Application by the Employer to serve as Custodian in accordance
herewith. As provided more fully in Section 4 below, the Custodian is to
invest all contributions to the Account in Regulated Investment Company
Stock.
SECTION 2. ESTABLISHMENT OF CUSTODIAL ACCOUNT
The Custodian shall open forthwith and maintain an Account for the benefit
of the Employee. The name, address and social security number of the
Employee are set forth on the Application. The Custodian will notify the
Employee of the number of the Account and, if future contributions are made
to the Account, the Account number will also be referred to by them at the
time such contributions are made.
SECTION 3. RECEIPT OF CONTRIBUTIONS
All contributions to the Account shall be made in cash. The Custodian shall
accept and hold in the Account such contributions as it may receive from
time to time from the Employer. The initial contribution shall be
accompanied or preceded by an Application which shall specify the Regulated
Investment Company in which such funds are to be invested. Subsequent
Employer contributions shall be identified as to Employee's name and
Regulated Investment Company account number. If at any time adequate
instructions are not received or, if received, it is, in the opinion of the
Custodian, not clear, the Custodian may hold all or a portion of the
contribution in cash without liability for interest, rising security prices
or distributions pending receipt of a fully executed Application or written
instructions from the Employee.
The Custodian shall also accept and hold in a separate account such
contributions as it may receive from time to time from the Employee. All
such contributions shall be identified as to the Employee's name and account
number and that they are voluntary contributions.
In no event shall a contribution be sent to the Custodian which causes the
annual additions to the account from all sources to exceed either (I) the
lesser of $30,000 or 25% of the Employee's compensation from the Employer
for the taxable year, or (II) such other limit as may be prescribed by
Section 415 of the Code under the circumstances. If an "excess
contribution" as defined in Section 4973(c) of the Code exists with respect
to the Account for a taxable year, then -- upon receiving written notice
specifying the year in question, the amount of the excess, the reason it is
an excess, and the amount of net income in the Account attributable to the
excess -- the Custodian shall redeem sufficient Regulated Investment Company
shares to the Employer in an amount equal to the excess plus such net income
if the Employee so directs the Custodian.
SECTION 4. INVESTMENT OF ACCOUNT ASSETS
The amount of each contribution to the Account shall be applied to the
purchase of full and fractional Shares of the Regulated Investment Company,
which shall be credited to such Account with notation as to cost. Each
contribution after the initial contribution shall be invested in Shares of
the Regulated Investment Company most recently specified by the Employee.
The Regulated Investment Company or Companies in which the assets of the
account shall be invested (selected from the list provided to the Custodian
and to the Employee from time to time by Lutheran Brotherhood Securities
Corp.) will be designated initially and from time to time by the Employee.
The Employee may instruct the Custodian to redeem all or part of the
Regulated Investment Company Shares then credited to the account and to
invest the redemption proceeds in other Regulated Investment Company Shares
designated by the Employee (and selected from such list). By giving such
instructions to the Custodian, the Employee shall be deemed to have
acknowledged receipt of the then current prospectus of each Regulated
Investment Company in which the Account assets are to be invested.
The Employee may instruct the Custodian to exchange all or any part of the
Shares of a Regulated Investment Company held in the Account for Shares of
another Regulated Investment Company provided that the Custodian, as holder
of the Shares then held in the Account, then has the right to exchange such
Shares for the Shares designated by the Employee; and that the then current
prospectus for the Shares to be acquired allows such exchange on the basis
requested. If the above conditions are satisfied, then, upon receipt of
such instruction, the Custodian will forthwith undertake to exercise the
exchange privilege.
All dividends and capital gain distributions received on the Regulated
Investment Company Shares held in the Account shall (unless received in
additional Regulated Investment Company Shares) be reinvested in such Shares
which shall be credited to such Account.
If any distribution on such Regulated Investment Company Shares may be
received at the election of the shareholder in additional Regulated
Investment Company Shares or in cash or other property, the Custodian shall
elect to receive it in additional Shares.
Sales charges attributable to the acquisition of Shares shall be charged to
the Account.
All Regulated Investment Company Shares acquired by the Custodian shall be
registered in the name of the Custodian or of its nominee.
SECTION 5. DISTRIBUTION FROM THE ACCOUNT
Distribution of the account shall be made only in accordance with a written
election communicated to the Custodian by the Employee. Such a written
election may be made only upon the occurrence of an Event of Distribution,
and shall specify the Method of Distribution from among those described
below. The Event of Distribution may be the Employee's termination of
service with the Employer or the Employee's attainment of age 59 1/2 or the
Employee's suffering financial hardship. Alternatively, the Event of
Distribution may be the Employee's disability or death.
However, Custodian assumes (and shall have) no responsibility to make any
distribution unless and until such order specified the elected manner of
distribution. Also, before making any such distribution or before honoring
any assignment of the Custodial account, Custodian shall be furnished with
any and all applications, certificates, tax waivers, signature guarantees,
and other documents (including proof of any legal representatives'
authority) requested in its discretion by Custodian, but Custodian shall not
be liable for complying with an order which appears on its face to be
genuine, or for refusing to comply if not satisfied it is genuine, and
assumes no duty of further inquiry.
Distribution from the account prior to the Employee's death shall be made in
one of the following methods as specified in a written election by the
Employee:
(1) If assets in the account are sufficient and if a systematic withdrawal
plan is then available with respect to the mutual fund shares held in the
custodial account, the Custodian may be instructed to make installment
payments to the Employee in monthly or other regular intervals as elected
by the Employee over a period of time not exceeding the Employee's life
expectancy or the joint and survivor life expectancy of the Employee and
designated beneficiary.
(2) A single-sum payment.
(3) By purchase and distribution of a single-premium fixed or variable
non-transferable annuity contract meeting the requirements of 403(b) of
the Internal Revenue Code.
(4) Any combination of the methods of distribution set forth in this
paragraph.
If the Employee dies before his/her entire interest in the account is
distributed, the following distribution provisions shall apply:
(1) If the Employee dies after the distribution from his/her account has
commenced, 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 Employee's death.
(2) If the Employee dies before distribution of his/her interest in the
account commences, the Employee's entire interest will be distributed to
the Beneficiary in accordance with one of the following provisions:
(a) The Employee's entire interest will be paid within five (5) years
after the date of the Employee's death.
(b) If the Employee's interest is payable to a Beneficiary designated by
the Employee, then that interest will be distributed in substantially
equal installments over a period not extending beyond the life
expectancy of the Beneficiary. Such distributions shall begin not
later than one (1) year after the date of the Employee's death.
(c) If the designated Beneficiary is the Employee's surviving spouse, the
spouse may elect to continue the account in his/her name with
distributions commencing no later than the date that the Employee
would have attained age 70 1/2. If the surviving spouse dies before
distributions to him/her begin, then distribution requirements shall
be applied as if the surviving spouse were the Employee.
(d) If no Beneficiary was designated by the Employee as of his or her
date of death or if the designated Beneficiaries predeceased the
Employee, distribution shall be payable in a single sum to the estate
of the Employee within one year from the date of the Employee's death.
The Custodian and the Employer shall keep such records, make such
identifications and file with the Internal Revenue Service and the
Department of Labor such returns, reports, and other information concerning
the Account as may be required by either of them. The Custodian, the
Employer and the Employee shall furnish to one another such information
relevant to the Account as may be required to carry out such obligations.
SECTION 6. VOTING AND OTHER ACTION
The Custodian shall cause to be forwarded to the Employee all notices,
prospectuses, financial statements, proxies and proxy-soliciting materials
relating to the Regulated Investment Company Shares held in the Account.
The Custodian shall not vote any Regulated Investment Company Shares held
hereunder except in accordance with the written instructions of the
Employee.
SECTION 7. REPORTS
The Custodian shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions required to be performed
hereunder.
Not later than sixty (60) days after the close of each year, the Custodian
shall forward to the Employee a written report or reports, reflecting the
receipts, disbursements, and other transactions affected by it during such
year and the Shares held in the Account, and the net asset value thereof, at
the close of such year. Upon the expiration of sixty (60) days after the
furnishing of such report to the Employee, the Custodian shall be forever
released and discharged from all liability and accountability to anyone with
respect to its acts, transactions, duties, obligations or responsibilities
as shown in or reflected by such report, except with respect to any such
acts or transactions as to which the Employee shall have filed written
objections with the Custodian within such sixty-day period.
SECTION 8. FEES AND EXPENSES
1. The Custodian will collect the fees for its services hereunder, which
initially, in the aggregate, shall be the fees set forth in the
Application. The Custodian may substitute a different fee schedule at
any time upon thirty (30) days written notice to the Employee.
2. Any income, gift, estate and inheritance taxes, and other taxes of any
kind whatsoever, including transfer taxes, incurred in connection with
the investment or reinvestment of the assets of the Account, that may be
levied or assessed in respect to such assets, and all other
administrative or extraordinary expenses incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to
the Custodian, shall be charged to the Account.
3. All fees and taxes and other administrative expenses may be charged to
the Account, with the right to liquidate Regulated Investment Company
Shares for this purpose or (at the Custodian's option) to the Employee.
SECTION 9. RIGHTS, DUTIES AND RESPONSIBILITIES
The Custodian shall be an agent for the Employer and the Employee to receive
and invest contributions to the account, to hold and distribute account
assets, and to keep adequate records and report thereon, all in accordance
with the terms and conditions of this Agreement. The Custodian may perform
any of its administrative duties through other persons designated by the
Custodian from time to time, except that Regulated Investment Company Shares
must be registered as stated in Section 4 and the Custodian intends
initially to delegate all such duties to Lutheran Brotherhood Securities
Corp.
The Custodian may conclusively rely upon and shall be protected in acting
upon any written order from the Employer or the Employee or his/her
Beneficiary or other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed and, if it acts in good faith, in taking or omitting to take any
other action.
Notwithstanding any other provision of this Agreement, the Custodian shall
have no liability or responsibility for determining the amount of or
collecting any contribution, or determining the amount or timing of any
distribution. The Custodian shall not be obligated or expected to commence
or defend any legal action or proceeding in connection with this Agreement
or such matters unless agreed upon by the Custodian and the Employee, and
unless fully indemnified for so doing to the Custodian's satisfaction. The
Custodian shall not be liable for interest on any cash balances maintained
in the Account.
The Employer and the Employee (and where applicable the Employee's
beneficiary) shall prepare and file with the Internal Revenue Service and
other government agencies such returns, forms and other information at such
times as may be required by either of them.
To the extent permitted by applicable law the Employee and the Employee's
Beneficiary as appropriate, shall always fully indemnify the Custodian and
save it harmless from any and all liability whatsoever which may arise in
connection with this Agreement and matters which it contemplates, except
that which arises due to the Custodian's negligence or willful misconduct.
The parties do not intend to confer any fiduciary duties on the Custodian,
and none shall be implied. Neither shall the Custodian serve as plan
administrator. No amendment to the Account or to this Agreement shall place
any greater burden on the Custodian without its written consent.
The Custodian, the Employer and the Employee shall furnish to one another
such information relevant to the Account as may be required to carry out the
obligations of the parties under this Agreement.
SECTION 10. AMENDMENT
The Employee and the Employer authorize Lutheran Brotherhood Securities
Corp., to amend this Agreement in any respect at any time, effective on a
stated date, in order to meet the requirements of Section 403(b) of the Code
or successor provision of law; to obtain expediently an Internal Revenue
Service determination, opinion or ruling that such requirements are met, or
to conform with other applicable laws. Lutheran Brotherhood Securities
Corp. will give prompt written notice to the Employee and the Custodian of
any such amendment.
Any amendment to this Agreement other than one made for the purpose set
forth in the preceding paragraph shall require the written consent of the
Employee and Lutheran Brotherhood Securities Corp. and notice to the
Custodian.
This Section 10 shall not be construed to reduce the freedom of the Employee
to instruct the Custodian of different or additional investment choices
which may be made within the limit of Section 4, or the freedom of the
Custodian to substitute fee schedules within the limits of Section 8; and no
such agreement of substitution shall be deemed to be an amendment of the
Account or of this Agreement.
SECTION 11. RESIGNATION OR REMOVAL OF CUSTODIAN
The Custodian may resign at any time upon thirty (30) days notice in writing
to the Employee. The Employee may remove the Custodian upon thirty (30)
days notice in writing to the Custodian. Upon such resignation or removal,
the Employee shall appoint a successor custodian which successor shall be a
"bank" as defined in Section 408(n) of the Code and which has agreed to and
is qualified to act as custodian under an agreement having the same force
and the effect as this Agreement.
Upon receipt by the Custodian of written acceptance of such appointment by
the successor custodian, the Custodian shall transfer and pay over to such
successor the assets of the Account and all records (or copies thereof)
pertaining thereto, provided that (if so required by the Custodian) any
successor custodian shall agree not to dispose of any such records without
the Custodian's consent. The Custodian is authorized, however, to reserve
such sum of money or property as it may deem advisable for payment of any
fees, taxes, expenses or costs of the account constituting a charge on or
against the assets of the account on or against the Custodian, with any
balance of such reserve remaining after the payment of all such items to be
paid over to the successor custodian. The successor custodian shall hold
the assets paid over to it under terms similar to those of this Agreement
that qualify under Section 401(f) of the Code.
If within thirty (30) days after the Custodian's resignation or removal, or
such longer time as the Custodian may agree to, the Employee has not
appointed a successor custodian which has accepted such appointment, the
Custodian shall terminate the Account. The Custodian shall not be liable
for the acts or omissions of such successor.
SECTION 12. TERMINATION OF ACCOUNT
Termination of the Account shall be effected by distributing all assets
thereof to the Employee pursuant to the direction of the Employee, or
his/her designated Beneficiary in the event of his/her death, or his or her
personal representative (or, in the absence of such direction, as determined
by the Custodian), in lump sum or in kind subject to the Custodian's right
to reserve funds as provided in Section 11.
If the Custodian receives written notice that the Internal Revenue Service
has determined that the Account fails to satisfy the requirements under
Section 403(b)(7) of the Code, as they existed at the time the Account was
established, by reason of some inadequacy in the original Account or in this
Agreement not removed by a retroactive amendment, the Custodian shall
terminate the Account by distributing the assets thereof to the Employee.
Upon termination of the Account in any manner provided for in this section
or in Section 11, this Agreement shall have no further force and effect.
SECTION 13. MISCELLANEOUS
At no time shall it be possible for any part of the assets of the Account to
be used for, or diverted to, purposes other than for the exclusive benefit
of the Employee except as specifically provided in this Agreement.
The assets of the Account shall be non-transferable and shall not be subject
to alienation, assignment, trustee process, garnishment, attachment,
execution of levy of any kind except by the Custodian for its fees and for
the expenses of the Account; and no attempt to cause such assets to be
subjected shall be recognized except to such extent as may be required by
law or provided for herein.
The tax treatment of any contributions to the Account, and of any earnings
of the Account, depends, among other things, upon the nature of the
Employer, the relationship of the Employee to the Employer, and the amount
of contributions made in any year to the Account (and to other plans,
accounts or contracts with the benefit of special tax treatment) for the
benefit of the Employee. The Custodian and Lutheran Brotherhood Securities
Corp., assume no responsibility with respect to such matters, nor shall any
term or provision of this Agreement be construed as to place any such
responsibility upon any one of them.
Any notice from the Custodian to any person provided for in this Agreement
shall be effective if sent by first-class mail to him/her at his/her last
address on the Custodian's records. Any notice or written instruction from
the Employee to the Custodian may be sent to: Lutheran Brotherhood
Securities Corp., 625 Fourth Avenue South, Minneapolis, MN 55415.
This agreement is accepted by the Custodian in, and shall be construed and
administered in accordance with, the laws of the Commonwealth of
Massachusetts.
SECTION 14. DEFINITION
As used in this Agreement, the following terms have the meaning hereinafter
set forth unless a different meaning is clearly required by the context:
"Account" means the custodial account established hereunder for the
retirement benefit of the Employee.
"Agreement" means this Custody Agreement, together with the information,
terms and provisions set forth in the Application.
"Application" means the Application for Retirement Benefit Plan for Employee
of Certain Tax Exempt Organizations or of Public Schools.
"Beneficiary" means the person or persons designated as such on a form
acceptable to the Custodian for use in connection with the Plan, signed by
the Employee, and filed with the Custodian. The form may name persons or
estates to take upon the contingency of survival. However, the Beneficiary
shall be the Employee's estate to the extent that no such designation on
such a form effectively disposes of the Account as of when distribution is
to commence in accordance with it; moreover, a form shall not become
effective for that purpose until the fifteenth day after it is filed with
the Custodian. The form last accepted by the Custodian before such
distribution is to commence, upon becoming effective during the Employee's
lifetime, shall be controlling and, whether or not fully dispositive of the
account, thereupon shall revoke all such forms previously filed by the
Employee.
"Code" means the Internal Revenue Code of 1986 as amended from time to time.
"Custodian" means State Street Bank and Trust Company or any successor
thereto.
"Employee" means the individual named in the Application, and "Employer"
means the organization, state, political subdivision of a state or agency or
instrumentality of such state or political subdivision, named in the
Application.
"Regulated Investment Company" means a domestic corporation which is a
regulated investment company within the meaning of Section 851(a)(2) of the
Code and which issues only redeemable shares, and "Regulated Investment
Company Shares" means such redeemable Shares.
<PAGE>
TAX-SHELTERED CUSTODIAL ACCOUNT AGREEMENT APPLICATION
FOR RETIREMENT BENEFIT PLAN FOR EMPLOYEE OF
CERTAIN TAX EXEMPT ORGANIZATIONS OR OF PUBLIC SCHOOLS
- ----------------------------------------------------------------------------
Check Correct Fund: // LB Fund // LB Income Fund // LB Money Market Fund
// LB High Yield Fund // Other Fund
- ----------------------------------------------------------------------------
COMPLETE AND SIGN
My TSCA is intended to be:
// Active or // Inactive
// Rollover contribution // Transfer Contribution
MAKE CHECK PAYABLE TO LUTHERAN BROTHERHOOD SECURITIES CORP.
MAIL ALL MATERIAL TO:
Lutheran Brotherhood Securities Corp.
P.O. Box 310
Minneapolis, Minnesota 55440-9188
- ----------------------------------------------------------------------------
PLEASE BE SURE THAT THE APPLICATION IS SIGNED BY
THE EMPLOYER AND EMPLOYEE.
The Employer and Employee named below hereby apply for the establishment
of a Custodial Account in accordance with the terms of the Custody Agreement
attached hereto, which terms are incorporated herein by reference with the
following additional terms and conditions:
1. THE EMPLOYER:
Name
--------------------------------------------------------------------
Address
-----------------------------------------------------------------
-------------------------------------------------------------------------
Tax Ident. No.
----------------------------------------------------------
2. THE EMPLOYEE:
Name
--------------------------------------------------------------------
Address
-----------------------------------------------------------------
-------------------------------------------------------------------------
Birthday Soc. Sec. No.
---------------------- --------------------------
Phone (Day) (Evening)
------------------- --------------------------
3. All contributions made by the Employer and the Employee are to be
deposited in the Custodial account established hereby or previously
established for the benefit of the Employee. Such funds are to be
invested in accordance with the terms and provisions of the Custody
Agreement, and the Custodian is hereby instructed by the Employee that
such funds initially are to be invested in the shares of the Regulated
Investment Company.
The Employee hereby acknowledges that he/she has received a copy of, and
has read, the current prospectus of the investment company or companies
named above and agrees to the terms and administrative fees thereof. The
fee schedule is listed below and subject to change.
SCHEDULE OF CUSTODIAN'S FEES
Establishing the account........................................$ 5.00
Annual fee per fund account.....................................$10.00
Processing a lump sum distribution..............................$10.00
Processing each periodic distribution...........................$ 2.00
- ----------------------------------------------------------------------------
Initial contribution $
---------------------
Please bill me: // Monthly $ // Semi-annually $
--------- ---------
// Quarterly $ // Annually $
--------- --------------
// Other $
------------------- ---------------------
// Check here if combined billing -- Make check payable to
Lutheran Brotherhood
if combined billing with TSA.
- ----------------------------------------------------------------------------
"I the undersigned, certify that I am a qualified purchaser as set forth in
the current prospectus of the Fund" and I certify under penalties of perjury
that the Social Security or Taxpayer Identification Number provided above is
correct, and I am not subject to back-up withholding.
- ----------------------------------------------------- -------------------
SIGNATURE OF EMPLOYEE DATE
- ----------------------------------------------------- -------------------
SIGNATURE OF EMPLOYER/TITLE DATE
STATE STREET BANK AND TRUST COMPANY HEREBY ACCEPTS its appointment as
Custodian of the Custodial Account pursuant to the Custody Agreement
(for Trustee only)
- ----------------------------------------------------- -------------------
SIGNATURE/TITLE DATE
<PAGE>
TO BE COMPLETED BY REGISTERED REPRESENTATIVE:
02000 LBSC / 0 / / / / 0 / / / / 0 / / / /
- ---------- ---------------------------------------
DEALER REGISTERED REPRESENTATIVE ID
---------------------------------------------------------
SIGNATURE OF REGISTERED REPRESENTATIVE DATE
/ / / /
- --------- -----------------------------------
AGENCY NO. PRINT GENERAL AGENT NAME
---------------------------------------------------------
SIGNATURE OF PRINCIPAL (Home Office use only)
<PAGE>
APPLICATION FOR ASSOCIATE MEMBERSHIP
The following information is mandatory to determine membership status.
BASIS FOR MEMBERSHIP (select one from below)
1. Current Adult or Juvenile
Benefit Contract Member ------------------------------------------
(Lutheran Brotherhood (1) Lutheran Brotherhood Contract No.
contract holder).
2. Current Associate Member
of Lutheran Brotherhood ------------------------------------------
(Mutual Fund shareholder). (2) Lutheran Brotherhood Securities Corp.
Mutual Fund Account No.
3. Current member of a Lutheran church congregation.
4. Baptized in the Christian faith under the auspices of a Lutheran church
and professes to be Lutheran.
5. Baptized in the Christian faith, prior member of a Lutheran church
congregation, and professes to be Lutheran.
6. Affiliated with a Lutheran church organization and professes to
be Lutheran.
---------------------------------------------------------
(3-6) Lutheran Church Congregation Name
7. An employee of an organization with either 50% owners or
50% employees Lutheran.
- ---------------------------------------------------
SIGNATURE OF EMPLOYEE
- ----------------------------------------------------------------------------
SUITABILITY REQUIREMENTS
The following information is mandatory to determine suitability of sale.
It is strictly confidential and for Home Office use only.
Occupation
-----------------------------------------------------------------
Taxable Income:
// Under $10,000
// $10,000 to $24,999
// $25,000 to $49,999
// Over $50,000
INITIAL DESIGNATION OF BENEFICIARY(IES)
As primary beneficiary: (a)
Name
------------------------------------------------------------------------
Address
--------------------------------------------------------------------
Soc. Sec. No. Date of Birth / /
--------------------------------- ---------------
Name
------------------------------------------------------------------------
Address
--------------------------------------------------------------------
Soc. Sec. No. Date of Birth / /
--------------------------------- ---------------
As secondary beneficiary (if the person(s) named in (a) should fail to
survive me):
Name
------------------------------------------------------------------------
Address
--------------------------------------------------------------------
Soc. Sec. No. Date of Birth / /
--------------------------------- ---------------
Name
------------------------------------------------------------------------
Address
--------------------------------------------------------------------
Soc. Sec. No. Date of Birth / /
--------------------------------- ---------------
- ----------------------------------------------------------------------------
* QUALIFY FOR CUMULATIVE DISCOUNT (list all existing account numbers and
identify fund)
- ------------- ------------- ------------- ------------- -------------
SEE PROSPECTUS FOR DETAILS
- ----------------------------------------------------------------------------
SPECIAL INSTRUCTIONS OR COMMENTS:
------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<PAGE>
AGREEMENT FOR SALARY REDUCTION
BY THIS AGREEMENT made between
(the "Employee")
- ------------------------------------------------------------
and
(the "Employer")
- ------------------------------------------------------------
the parties hereto agree as follows:
EFFECTIVE with respect to amounts earned on or after the first day
of , 19 (which date is subsequent to the execution
--------------------- ---
of this Agreement), the Employee's salary will be reduced by the amount
indicated below, and at the same time the Employer's contribution to the
Employee's Lutheran Brotherhood Family of Mutual Funds Tax-Sheltered
Custodial Account (the "Account") will be increased by a corresponding
amount, to be invested in accordance with the Custody Agreement relating to
the Account and as designated by the Employee.
This Agreement shall be legally binding and irrevocable as to each of the
parties hereto while employment continues; provided, however, that either
party may terminate this Agreement as of the end of any month, so that it
will not apply to salary subsequently earned, by giving at least thirty days
written notice of the date of termination; and provided, further, that no
more than one agreement for such salary reduction may be made within any
taxable year of the Employee.
Reduce my annual gross compensation beginning by
--------------------------
the sum of $ on a basis.*
-------------- -------------------------------------
Monthly, Quarterly, Annually
The amount cannot exceed the exclusion allowance under Section 403(b) of the
Internal Revenue Code, or such other limits as may be prescribed by Code
Section 415 under the circumstances.
*EXCEPTIONS TO THE ABOVE: // 9 monthly // 10 monthly // twice monthly
// every other month // other
----------------
It is understood that the amount of such salary reduction, together with any
contribution by the Employer, will be paid by the Employer directly to State
Street Bank and Trust Company, Boston, Massachusetts.
Signed this day of , 19 :
------ -------------- -- -------------------------------
EMPLOYEE
Signed this day of , 19 :
------ -------------- -- -------------------------------
EMPLOYER/TITLE
<PAGE>
AGREEMENT FOR SALARY REDUCTION
BY THIS AGREEMENT made between
(the "Employee")
- ------------------------------------------------------------
and
(the "Employer")
- ------------------------------------------------------------
the parties hereto agree as follows:
EFFECTIVE with respect to amounts earned on or after the first day
of , 19 (which date is subsequent to the execution
--------------------- ---
of this Agreement), the Employee's salary will be reduced by the amount
indicated below, and at the same time the Employer's contribution to the
Employee's Lutheran Brotherhood Family of Mutual Funds Tax-Sheltered
Custodial Account (the "Account") will be increased by a corresponding
amount, to be invested in accordance with the Custody Agreement relating to
the Account and as designated by the Employee.
This Agreement shall be legally binding and irrevocable as to each of the
parties hereto while employment continues; provided, however, that either
party may terminate this Agreement as of the end of any month, so that it
will not apply to salary subsequently earned, by giving at least thirty days
written notice of the date of termination; and provided, further, that no
more than one agreement for such salary reduction may be made within any
taxable year of the Employee.
Reduce my annual gross compensation beginning by
--------------------------
the sum of $ on a basis.*
-------------- -------------------------------------
Monthly, Quarterly, Annually
The amount cannot exceed the exclusion allowance under Section 403(b) of the
Internal Revenue Code, or such other limits as may be prescribed by Code
Section 415 under the circumstances.
*EXCEPTIONS TO THE ABOVE: // 9 monthly // 10 monthly // twice monthly
// every other month // other
----------------
It is understood that the amount of such salary reduction, together with any
contribution by the Employer, will be paid by the Employer directly to State
Street Bank and Trust Company, Boston, Massachusetts.
Signed this day of , 19 :
------ -------------- -- -------------------------------
EMPLOYEE
Signed this day of , 19 :
------ -------------- -- -------------------------------
EMPLOYER/TITLE
<PAGE>
TIPS FOR COMPLETING THE TSA CALCULATION FORM
The following instructions are intended to assist you in completing the
exclusion allowance calculation for TSAs and TSCAs. All TSA/TSCA
calculations may be done using the annuities disk. By following these
instructions, you should arrive at the total amount your client can
contribute to his or her Lutheran Brotherhood TSA (or TSCA) for the current
year. If you have specific questions on how to complete the calculation,
you can call Advanced Marketing on the Express Line.
- ----------------------------------------------------------------------------
THE FOLLOWING ITEM NUMBERS REFER AND POINT TO THE SAME IDENTICAL NUMBERS AS
THEY APPEAR ON THE FORM: MAXIMUM ANNUAL LEVEL TSA/TSCA CONTRIBUTION (SALARY
REDUCTION)
- ----------------------------------------------------------------------------
1a. Only for ELCA pension contributions made by employer during the current
year, or for salary addition TSA contributions made by any employer.
- ----------------------------------------------------------------------------
1b. Employer contributions to pension plan, state teacher's retirement
plan, or synod plan other than ELCA. Also include any before-tax
pension contributions made by employee. DO NOT put TSA contributions
here.
- ----------------------------------------------------------------------------
1c. Participants in Sec. 457 plans can include employees of state and local
governments, or other tax-exempt organizations. Contributions will
reduce dollar-for-dollar the allowable contribution to a TSA. Maximum
annual contribution for a Sec. 457 plan is $7,500.
- ----------------------------------------------------------------------------
2. For church employees, include total years of service with the same
SYNOD, even if employee has served several churches within that synod.
For school employees, include total years of service in the same SCHOOL
DISTRICT.
- ----------------------------------------------------------------------------
3. Assume normal retirement age 65 unless the employee plans to retire at
a different age.
- ----------------------------------------------------------------------------
4a. All salary reduction contributions to TSAs and/or TSCAs made through
Dec. 31 of the preceding year. Remember, only contributions made while
employed by the present employer need to be included.
- ----------------------------------------------------------------------------
4b. All pension contributions made by the current employer, including
before-tax employee contributions if applicable. DO NOT include
interest or dividends on the account, just contributions.
- ----------------------------------------------------------------------------
4c. All prior salary addition contributions to TSAs and/or TSCAs with the
present employer, as well as all prior contributions to Sec. 457 plans.
- ----------------------------------------------------------------------------
5. If employee receives housing, car, or other allowance, it should not be
included as salary unless he/she pays taxes on it. If the employee
makes before-tax contributions to the pension plan (1b) or to a
Sec. 457 plan (1c), subtract those amounts from the salary.
- ----------------------------------------------------------------------------
6. Applies only to employees who also own a controlling interest in a
business and maintain a plan (Keogh, SEP, or corporate) for
that business.
- ----------------------------------------------------------------------------
7. Applies only to employees who contribute to a 401(k) plan or a salary
reduction SEP. Such contributions will reduce dollar-for-dollar the
allowable contribution to a TSA.
- ----------------------------------------------------------------------------
8. This applies only to employees who have exceeded the $9,500 annual limit
on TSA contributions in effect since 1987. See the TSA booklet for more
information on the Special Exclusion Allowance.
- ----------------------------------------------------------------------------
<PAGE>
LUTHERAN BROTHERHOOD MAXIMUM ANNUAL LEVEL TSA/TSCA CONTRIBUTION
625 Fourth Avenue South (salary reduction)
Minneapolis, Minnesota 55415
(LOGO)
- ----------------------------------------------------------------------------
FOR:
- ----------------------------------- -------------------------------------
Client's Name Contract/Account No. (if applicable)
- ----------------------------------------------------------------------------
Answer for your present employer and tax year unless otherwise indicated.
1. $ TOTAL CURRENT CONTRIBUTIONS (Sum of a, b and c)
-------------
(a) $ ELCA and/or salary addition TSA/TSCAs
----------
(b) $ Concordia and other employer plans
----------
(include employer and before-tax
employee contributions)
(c) $ Section 457 Def Comp.
----------
2. YEARS OF SERVICE to date.
---------------
3. ADDITIONAL YEARS TO RETIREMENT
---------------
4. $ TOTAL PRIOR YEARS' CONTRIBUTIONS (sum of a, b and c)
-------------
(a) $ TSA/TSCA reduction
----------
(b) $ Employer plans (include synod plans)
----------
(c) $ TSA/TSCA addition and Section 457 Def Comp
----------
5. $ INCLUDABLE COMPENSATION (salary less any employee
-------------
before-tax contributions entered in 1b and/or any
entry in 1c)
6. $ TOTAL ANNUAL CONTRIBUTIONS to other plans controlled by
-------------
employee (such as an HR-10 Plan on any self-employment
earnings).
7. $ CURRENT ELECTIVE DEFERRALS with other employers (401(k)
-------------
and/or salary reduction SEPs).
8. $ TOTAL CONTRIBUTED SINCE 1/1/87 under Special Exclusion
-------------
Allowance (amount in excess of $9500 per year).
<PAGE>
STEP 1: Exclusion Allowance
1. $ 5. $ 3.
--------------------- -------------------- ---------------------
(3. -- 1 YEAR) x (2.+ 3.) x x 5
--------- ----------------
$ $
--------------------- --------------------- ---------------------
4. + - $ (2. + 3.) +
--------------- -------------- -----------
$ $ A B
--------------------- -------------------- -----------------
-------------------- -----------------
x 5
$
--------------------
Divide: $ A DIVIDED BY B =
--------------- ----------------- --------------
$
--------------
GRAND TOTAL
<PAGE>
STEP 2: Overall Percentage Limit
1a. $ 5.* $
----------------------- -----------------------
1c. + $ - $
------------------- ----------------------
$ C
------------------------- ----------------------
----------------------
6. + $
---------------------
$
-------------------------
7. + $
---------------------
$
-------------------------
x 4
$
-------------------------
Divide: $ C DIVIDED BY 5 =
----------------- ---------------
$
---------------
GRAND TOTAL
* If there is a figure in box 6. and/or 7. above, add the applicable
earnings upon which these contributions were based to the figure in box 5.
<PAGE>
STEP 3: Overall Dollar Limit
$30,000
1a. - $
------------------------
$
-------------------------------
1c. - $
------------------------
$
-------------------------------
6. - $
------------------------
$
-------------------------------
7. - $
------------------------
-----------------
$
-----------------
GRAND TOTAL
- ----------------------------------------------------------------------------
IMPORTANT: SIGNATURE IS NEEDED ON THE BACK
(IF THIS IS A TWO-SIDED DOCUMENT)
<PAGE>
STEP 4: Salary Deferral Limit
$ 9,500
1c. - $
------------------------
$
-------------------------------
7. - $
------------------------
----------------
$
----------------
GRAND TOTAL
<PAGE>
OPTIONAL STEP 4: Special Exclusion Allowance. Substitute if Step 4 is
smaller than Steps 1, 2, and 3 and the employee has 15 or more years of
service with a qualifying employer (educational institution, hospital, home
health service agency, health and welfare service agency, or a church,
convention or association of churches).
- ----------------------------------------------------------------------------
STEP A: $ 3,000 A
- ----------------------------------------------------------------------------
STEP B: $15,000
8. - $
----------------------
$ B
-----------------------------
-----------------------------
- ----------------------------------------------------------------------------
STEP C: $ 5,000
2. x
-----------------------
$
-----------------------------
4a. - C
----------------------
$----------------------
----------------------
- ----------------------------------------------------------------------------
STEP D:
$ 9,500
1c. - $
-----------------------
$
-----------------------------
7. - $
----------------------
$
------------------------------
+ $ Smallest of Step A, B or C
----------------------
---------------
$ Optional Step 4
---------------
GRAND TOTAL
<PAGE>
STEP 5:
Compare the results of the computations in steps 1, 2, 3 and 4. The
smallest is the amount the employee may contribute to his/her TSA/TSCA(s).
If the smallest is Step 4 and the employee has at least 15 years of service
to date, the increased special exclusion allowance may be available, see the
Optional Step 4 above.
$ Smallest of steps 1, 2, 3 or 4.
---------------------
- - Total annual amount currently being contributed
-------------------
to TSAs/TSCAs with other companies.(Note: LB and
LBSC are not the same company.) Name of other
company:
-----------------------------------------
$ Maximum annual contribution to Lutheran Brotherhood.
----------------------
----------------------
DIVIDED BY Total number of payments to be remitted in current
-------------
taxable year.
$ Maximum Amount per payment.
----------------------
----------------------
<PAGE>
Prepared by: Date:
-------------------------------------- ----------------
This form is designed to help to determine the allowable contribution to a
Tax-Sheltered Annuity or Custodial Account. It is the employee's
responsibility to determine that the employer is a 501(c)(3) organization or
public educational institution, that he/she is an employee of that
organization within the meaning of law, and that the amount of contribution
made by the employer does not exceed the lesser of the Exclusion Allowance,
Overall Limitation or the Salary Deferral Limit. Neither Lutheran
Brotherhood, Lutheran Brotherhood Securities Corp. nor the custodian (if
TSCA) shall have any responsibility in this regard.
Employee Signature: Date:
-------------------------------- -----------------
<PAGE>
THE
LUTHERAN BROTHERHOOD
FAMILY OF MUTUAL FUNDS
LUTHERAN BROTHERHOOD FUND. . .
seeks growth of capital and of income by concentrating in the stocks of
high quality companies.
LUTHERAN BROTHERHOOD HIGH YIELD FUND. . .
seeks high current income and growth of capital by investing primarily
in high yield, lower-rated corporate bonds.
LUTHERAN BROTHERHOOD INCOME FUND. . .
seeks to obtain as high a current income as possible consistent with
preservation of principal with a secondary objective of obtaining
long-term growth of capital in order to maintain the investor's
purchasing power.
LUTHERAN BROTHERHOOD MONEY MARKET FUND. . .
seeks current income consistent with stability of principal. The fund
offers a convenient means of accumulating an interest in a
professionally managed diversified portfolio limited to money market
instruments maturing in one year or less.
Principal Distributors of the Lutheran Brotherhood Funds
625 Fourth Avenue South, Minneapolis, Minnesota 55415
Call toll free:
1-800-328-4552 - Out of state residents
1-800-752-4208 - Minnesota residents
(612) 339-8091
THIS BOOKLET IS NOT AUTHORIZED FOR DISTRIBUTION UNLESS PRECEEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS CONTAINING FURTHER INFORMATION
ABOUT SALES CHARGES AND OTHER IMPORTANT FACTS.
EXHIBIT (14)(e)
LUTHERAN BROTHERHOOD
PROTOTYPE
SIMPLIFIED EMPLOYEE PENSION
PLAN
(LOGO) LUTHERAN BROTHERHOOD
<PAGE>
TABLE OF CONTENTS
Participant Information and Disclosure
Questions and Answers
IRS Letter of Determination
Adoption Agreements
LB Prototype Simplified Employee Pension Plan
---------------------------------------
----------------------------------------------------------
TO THE PLAN ADMINISTRATOR:
* Two copies of the Adoption Agreement are provided. They should be
completed by the Plan Administrator. One copy should be sent to Lutheran
Brotherhood and the other should be kept by the Plan Administrator.
* An identical copy of this booklet is to be completed and given to each
individual plan participant when he becomes eligible to participate in
the plan.
* A copy of the Participant Information and Disclosure must be given to all
employees at the earlier of:
1. The time the employee first becomes eligible to participate in the
plan (normally, this is only applicable when the plan is first
established), or
2. The time the employee is first hired by the employer.
* The Administrator must furnish each participant with a copy of any
amendment to the terms of the SEP plan and a written explanation of its
effect within thirty (30) days of the effective date of the amendment.
* At the end of each calendar year, the Plan Administrator must notify each
participant in writing of any employer contributions made under the SEP.
This notification must be made by the later of January 31 of the year
following the year for which the contribution is made or thirty (30) days
after the contribution is made. Notification must be given on the W-2
form or by supplying an amended W-2 form if contributions are made after
the original W-2 forms have been distributed.
* The Participant Information and Disclosure is designed to answer any
questions the Administrator may have regarding the operation of the plan
and to disclose information on the employer's prototype SEP plan to the
employee.
* The latter portion of the booklet contains a copy of the actual plan
document as approved by the Internal Revenue Service.
<PAGE>
PARTICIPANT INFORMATION AND DISCLOSURE
FOR A
SIMPLIFIED EMPLOYEE PENSION PLAN
TO THE EMPLOYEE:
The following information is being provided to you in accordance with the
requirements the Internal Revenue Service has set for disclosure of
information on your employer's Prototype Simplified Employee Pension (SEP)
Plan. This information must be provided to all employees either at the time
of employment or when the SEP agreement is executed (whichever occurs
later). In addition to the SEP Disclosure Information contained herein,
your employer is also required to provide you with information about the
employer's Prototype Simplified Employee Pension agreement at the time you
become eligible to participate in the plan.
TO THE PLAN ADMINISTRATOR:
As the plan administrator named in the Adoption Agreement for Lutheran
Brotherhood's Prototype Simplified Employee Pension, you are required to
provide the information in this form to all current employees at the
establishment of the plan and to each new employee at the time the employee
is first employed by the employer.
- ----------------------------------------------------------------------------
GENERAL INFORMATION
A "Simplified Employee Pension" or SEP is a type of IRA program
introduced by the Revenue Act of 1978. Through the SEP, Congress intended
to provide employers with a "simplified" approach to retirement plans which
would avoid the administrative requirements and costs imposed on employers
by ERISA. Basically, a SEP program utilizes a regular IRA established by
the employee to which the employer contributes under a plan containing a
written allocation formula and meeting certain other SEP requirements.
Consequently, all the usual IRA tax, investment and administrative rules
apply unless specifically modified.
Two kinds of documents are necessary in establishing a SEP
program: First, the employer must execute a plan which contains a written
allocation of employer contributions; second, each employee must execute and
establish his or her own IRA agreement. Although the concept is simple,
there are a number of specific requirements involved.
HOW THE PLAN WORKS
In very general terms, a SEP will permit employers to contribute up to
fifteen percent (15%) of the employee's compensation, limited to a maximum
of thirty thousand dollars ($30,000). Compensation includes the aggregate
of all compensation paid in the form of wages and salary (including
overtime, bonuses, etc.) up to two hundred thousand dollars ($200,000), but
determined without regard to the employer contribution to the SEP.
Contributions are made to the employee's Individual Retirement Account or
Annuity (IRA). The SEP must be either a model SEP plan executed on an IRS
form or a master or prototype SEP upon which a favorable opinion letter has
been issued by the IRS. Each individual's IRA to which the Employer
contributes must allow for SEP-IRA contributions up to thirty thousand
dollars ($30,000). Lutheran Brotherhood's Individual Retirement Annuity and
Lutheran Brotherhood Funds' Individual Retirement Custodial Account qualify
as SEP-IRAs.
When a SEP is properly adopted, the employer is obligated to forward any
contributions to the employee's SEP-IRA fiduciary (whether trustee,
custodian or insurance company). The amount contributed to a SEP by an
employer is excluded from gross income rather than deducted as under prior
law. The employee's Form W-2 will therefore not include the SEP
contribution under "wages". The employer must check the appropriate box on
Form W-2 to indicate that the employee is an active participant in a
retirement plan.
In addition to the employer contributions, an individual may make regular
IRA contributions to the SEP-IRA and may deduct up to the lesser of one
hundred percent (100%) of compensation or two thousand dollars ($2,000), to
the extent permitted by law, or the individual may contribute to a separate
IRA.
HOW EMPLOYEES BECOME PARTICIPANTS IN THE SEP PLAN
A SEP may require that an employee has attained age twenty-one (21) and
has worked for the employer during at least three (3) of the immediately
preceding five (5) calendar years before that employee becomes eligible to
share in any employer contribution for a particular calendar year. The plan
may also have lower age and service requirements. A SEP plan must include
all eligible employees, whether full-time or part-time. However, employers
may require an employee to have earned income of at least three hundred
dollars ($300) during the calendar year for years after 1986 ($200 prior to
1987) before a contribution is made on his behalf. The SEP plan may also
exclude certain union employees and nonresident aliens to the same extent
other qualified plans can exclude these employees. An eligible employee may
also be an active participant in another qualified retirement plan or tax-
deferred annuity.
The employer may require that the employee establish a SEP-IRA
arrangement as a condition of employment. If the employer does not require
employees to become participants and an eligible employee elects not to
participate, all other employees of the same employer are prohibited from
entering into a SEP-IRA arrangement with that employer. If one or more
eligible employees do not participate and the employer attempts to establish
a SEP-IRA agreement with the remaining employees, the resulting arrangement
may result in adverse tax consequences to the participating employees.
For tax years beginning after 1983, the employer may have to include a
"leased employee" in a SEP. A leased employee is any person who is not an
employee of the recipient and who is hired by a leasing organization, but
who performs services for another (the recipient of the services). Leased
employees are treated as employees of the employer if:
1) Services are provided under an agreement between the employer and
the leasing organization.
2 Services are performed for the employer and related persons, on a
substantially full-time basis, for a period of at least one year,
and
3) Services are of a type historically performed by employees in the
employer's field of business.
HOW EMPLOYER CONTRIBUTIONS ARE CREDITED TO PLAN PARTICIPANTS
The law does not require an employer to make any contributions to a
SEP for any given year. Therefore, employer SEP contributions are made
totally at the discretion of the employer. However, a SEP plan must specify
the conditions for an employee's sharing in employer contributions and the
manner of allocation among eligible employees of the employer's
contributions. Employer contributions cannot discriminate in favor of
officers, shareholders, owner-employees, or highly compensated employees.
The employer's contributions must bear a uniform relationship to each
employee's total compensation, counting only the first two hundred thousand
dollars ($200,000) of compensation. A SEP may not condition the allocation
of an employer contribution upon the employee's being employed on the last
day of the plan year. However, the law permits flexibility in the amount of
annual employer contributions so long as the employer makes its contribution
on a nondiscriminatory basis. Since the law requires a SEP to consider
"total" compensation, it would appear that the allocation formula cannot
exclude bonuses or overtime from the definition of compensation. The
allocation formula, though, can provide for a reduction of employer
contributions based on a Social Security integration formula.
CONTRIBUTION CALCULATION FOR THE SELF-EMPLOYED
The SEP contribution for a self-employed person is a percentage of their
earned income. Earned Income is net income minus the pension contribution
for the self-employed person. Net income is gross income less business
expenses less any contributions for other employees.
The formula for determining plan contributions for the self-employed is
as follows:
Income after business
expenses and after X Contribution
contributions for eligible percentage to be
common-law employees made for the year
- ----------------------------------------------------------------------------
1 + Contribution percentage to be made
for the year
The chart below is provided for your convenience. The chart may be used
in place of the formula. Please note that the table is rounded down to the
nearest ten thousandth.
% TO BE % FOR
CONTRIBUTED SELF-EMPLOYED
1% 0.99%
2% 1.96%
3% 2.91%
4% 3.84%
5% 4.76%
6% 5.66%
7% 6.54%
8% 7.40%
9% 8.25%
10% 9.09%
11% 9.90%
12% 10.71%
13% 11.50%
14% 12.28%
15% 13.04%
WHEN A SEP IS INTEGRATED WITH SOCIAL SECURITY
Although employer contributions under the SEP agreement must bear a
uniform relationship to employees' compensation, an employer is entitled to
offset or reduce its contribution by that portion of the Social Security
taxes paid by an employer on an employee's account for retirement purposes.
This reduction reduces the employer contributions to the SEP for each
employee. This is called "integration" with Social Security, and is
permissible only if statutory requirements are satisfied. If your employer
chooses to integrate with Social Security, the SEP allocation information
your employer provides you must clearly show the integration formula.
When an employer maintains an integrated SEP plan in which more than
sixty percent (60%) of the total of SEP account balances are credited to the
accounts of highly compensated employees, a minimum three percent (3%)
contribution must be made on behalf of all eligible employees and self-
employed individuals before any contribution based on compensation in excess
of the Social Security taxable wage base may be made. The minimum three
percent (3%) contribution may not include any Social Security contributions
made by the employer on the employee's behalf.
Where an owner-employee (sole proprietor or partner owning more than
ten percent (10%) of the business) participates in an integrated SEP plan,
the owner-employee will be treated the same as a common-law employee for the
purposes of integration.
The amount of Social Security taxes paid for retirement purposes changes
each year because the Social Security wage base changes each year. The
following example illustrates the mechanics of integrating a SEP for the
1988 calendar year:
EXAMPLE
EMPLOYEE SALARY 15% CONTRIB. OASDI CONTRIB.* NET SEP CONTRIB.
Brown $50,000 $7,500 $2,565 $4,935
Jones 20,000 3,000 1,140 1,860
Smith 10,000 1,500 570 930
* The 1986 OASDI portion of employer paid Social Security taxes
is 5.7% of wages up to the taxable wage base ($45,000 in 1988).
WHEN EMPLOYER CONTRIBUTIONS MUST BE MADE
An employer can maintain a SEP on a calendar year basis or on the basis
of the employer's tax year. Contributions must be made on or before the due
date (with extensions) for filing the employer's tax return for the taxable
year.
DEDUCTIONS FOR SEP-IRA CONTRIBUTIONS
An employer may take a deduction for contributions to Lutheran
Brotherhood's prototype SEP for a given taxable year provided the
contributions are made on or before the due date (with extensions) for
filing the employer's tax return for the taxable year. Qualified SEP
contributions are deductible up to the lesser of $30,000 or 15 percent of an
employee's annual compensation. Beginning in 1987 the employer's
contribution is excluded from the employee's income rather than deducted as
under prior law.
EMPLOYEE IRA CONTRIBUTIONS
In addition to the employer's contribution, an employee may contribute
up to 100% of compensation or $2,000, whichever is less. However, the
amount which is deductible is subject to various limitations. The
contribution can be made to the same SEP-IRA to which the employer
contributes. Alternatively, it may be advantageous to make contributions to
an IRA other than the one to which the employer contributes. Other IRAs may
provide different rates of return or may have different or more beneficial
terms (such as favorable transfer and withdrawal provisions).
HOW EXCESS CONTRIBUTIONS ARE TREATED
Any excess contribution by the employee or by the employer beyond the
yearly deduction limitations may be withdrawn without penalty on, or prior
to, the due date (plus extensions) for filing your tax return. Excess
contributions left in the SEP-IRA account BEYOND that time may be subject to
an excise tax. Furthermore, late withdrawal of excess contributions may be
taxed as a premature withdrawal.
Any excess contributed to the SEP over the amount deductible for a given
taxable year can be deducted by the employer in succeeding tax years,
subject to the 15%-of-compensation SEP limit for each year.
WHEN THE EMPLOYEE IS COVERED BY MORE THAN ONE PLAN
An employee may be covered under both a SEP and another retirement plan
such as a pension or profit sharing plan. If an employee works for several
employers, one employer may cover him or her under a SEP and another
employer may cover the employee under a pension or profit sharing plan.
Also, an employee may be covered by the SEPs of several different employers.
The combined annual deduction of SEP contributions will still be the lesser
of thirty thousand dollars ($30,000) or fifteen percent (15%) of total
compensation.
An employer's deduction for contributions to a SEP reduces dollar for
dollar the deduction limit applicable to qualified profit sharing and stock
bonus plans sponsored by the same employer. A similar reduction applies to
the maximum deduction for Keogh plans when an employer maintains a Keogh
plan in addition to making a contribution to a SEP. Contributions to a SEP
also reduce the twenty-five percent (25%) deduction limit applied to
combinations of qualified corporate plans for each employee who is
participating in both the SEP and another qualified plan maintained by the
same employer. Employers that maintain both a defined benefit plan and a
SEP are required to comply with a limitation on combined benefits.
MORE THAN ONE IRA
The employee should be aware that:
1. IRAs other than the IRA(s) to which employer SEP contributions are
made may provide different rates of return and may have different terms
concerning transfers and withdrawals of funds from the IRA(s), among other
things.
2. In the event a participant makes a contribution or rollover to an IRA,
that contribution or rollover can be made to an IRA other than the one to
which employer SEP contributions are made.
3. Depending on the terms of the IRA to which SEP contributions are made,
a participant may be able to make rollovers or transfer funds from the IRA
to which the employer makes contributions to another IRA. See "rollover"
under the SEP-IRA section.
SPOUSAL IRA
Can the employer make the SEP contribution to a nonworking spouse's IRA?
No, the employer's contribution must be based solely upon the employee's
compensation. The spousal IRA must be a separate account in the name of the
spouse.
THE SEP-IRA
The SEP utilizes a regular IRA. With all IRAs, there are certain
restrictions and limitations involved.
1. Contributions must be made to a qualified annuity or to a trust or
custodial account in which the trustee/custodian is a bank or such other
person who has been approved by the Secretary of the Treasury. No part of
the SEP-IRA contribution may be invested in life insurance or be commingled
with other property except in a common trust fund or common investment fund.
2. No deduction is allowed for (a) contributions other than in cash;
(b) EMPLOYEE contributions made for the calendar year in which the employee
attains age seventy and one-half (70 1/2) or any years thereafter; (c) any
amounts which are a distribution or part of a distribution from another
retirement plan ("rollover" contribution). EMPLOYER contributions made to a
SEP-IRA for the taxable year in which an employee attains age seventy and
one-half (7O 1/2) or any year thereafter are deductible.
3. The employee's interest in the account is nonforfeitable at all times.
4. An individual is allowed to transfer (roll over) his investment in one
type of individual retirement plan to another without any tax liability. It
is permissible to withdraw or receive funds from the SEP-IRA, and no more
than sixty (60) days later, place these funds in another IRA or SEP-IRA.
This transfer is called a "rollover" and may not be done more frequently
than at one year intervals without penalty.
5. The employee may withdraw his or her employer contributions to the
SEP-IRA; however, since the purpose of the retirement plan is to accumulate
funds for retirement, receipt of any portion of this account before the
employee attains age fifty-nine and one-half (59 1/2) would be considered an
early distribution unless the distribution is a result of death or
disability. The amount of an early distribution would be includable in the
employee's gross income and would also be subject to a penalty tax equal to
ten percent (10%) of the distribution. There are two additional exemptions
from the 10% early distribution tax: (1) if the distribution is part of a
series of substantially equal periodic payments made for the life (or life
expectancy) of the employee or the joint lives (or joint life expectancies
of such employee and beneficiary, or (2) made to an employee after
separation from service on account of early retirement under the plan after
attainment of age 55.
6. If an employee or an employee's beneficiary were to engage in any
prohibited transaction (such as any sale, exchange, or leasing of any
property, a loan or extension or credit; or any other interference with the
independent status of the account), the account would lose its exemption
from tax and be treated as having been distributed. The value of the entire
account would be includable in the employee's gross income, and if he was
then under age fifty-nine and one-half (59 1/2), he would also be subject to
the ten percent (10%) penalty tax on early distributions.
7. The entire interest in the account must be distributed, or begin to be
distributed, no later than April 1 following the calendar year in which the
employee attains age seventy and one-half (7O 1/2). The distribution may be
made at once in a lump sum, or it may be made in installments. However,
installment payments cannot be scheduled to be made over a period which
extends beyond his life expectancy, or the combined life expectancy of the
employee and his beneficiary. If the amount distributed during a taxable
year is less than the minimum amount required to be distributed, the
recipient would be subject to a penalty tax equal to fifty percent (50%) of
the difference between the amount distributed and the amount required to be
distributed. Internal Revenue Service Form 5329 provides instructions on
how to determine minimum distribution and this form must be attached to an
employee's annual income tax return if a penalty tax is owed. If the
employee dies before the entire interest is distributed to him, similar
rules require distribution to continue to the beneficiary at least as
rapidly as the method of distribution to the employee.
8. Amounts distributed to an employee who is over age fifty-nine and
one-half (59 1/2) are includable in gross income in the taxable year of
receipt and are taxable as ordinary income, with no special lump sum
distribution treatment available.
WITHDRAWAL RESTRICTIONS ON THE LUTHERAN BROTHERHOOD SEP-IRA
1. FLEXIBLE PREMIUM DEFERRED ANNUITY
If the employee chooses to use Lutheran Brotherhood's Flexible Premium
Deferred Annuity, he or she may surrender a portion of the cash value of
this contract by sending written notice to Lutheran Brotherhood. The cash
surrender value will be determined as of the date the notice is received in
the Home Office.
This partial surrender:
1. Must not reduce the remaining cash value to less than $1,000;
2. Must not be less than $200; and
3. Will not be allowed if another partial surrender was taken in the
preceding 12 calendar months.
A Surrender Charge will be deducted from full or partial surrenders
as follows:
PERCENTS APPLIED
SURRENDER ISSUE ISSUE ISSUE ISSUE
IN CONTRACT AGE AGE AGE AGE 60
YEAR 0-57 58 59 AND OVER
----------- ----- ----- ----- --------
1-3 7% 7% 7% 7%
4 7 7 7 6
5 7 7 6 5
6 7 6 5 4
7 6 5 4 3
8 5 4 3 2
9 4 3 2 1
10 3 2 1 0
11 2 1 0 0
12 1 0 0 0
Thereafter 0 0 0 0
Exceptions:
1. For surrenders. made more than 5 years after the Date of Issue,
no Surrender Charge will be deducted from the portion of the Cash Value
surrendered which is paid under a life income settlement option or
a non-withdrawable installment income of 5 years or more.
2. No Surrender Charge will be deducted if the annuitant is totally
disabled or upon death.
3. Each contract year after attained age 59 there is no Surrender
Charge on the first 10% of the cash value existing at the time the first
surrender is made in that year.
2. SINGLE PREMIUM DEFERRED ANNUITY
If the employee chooses to fund the SEP-IRA with Lutheran
Brotherhood's Qualified Single Premium Deferred Annuity, surrenders up
to 10% of the cash value of the contract may be made by sending written
notice to Lutheran Brotherhood. The partial surrender may not be made more
often than once a contract year without incurring a surrender penalty. The
cash surrender value will be determined as of the date your notice is
received in the Home Office.
This partial surrender:
1. Must not reduce the remaining cash value to less than $ 5,000;
2. Must not be less than $500;
3. May be made only once each contract year; and
4. May not be repaid
Full surrenders or partial surrenders of amounts over 10% are subject
to a surrender charge as follows:
Contract Year Percent
------------- -------
1-5 6%
6 5%
7 4%
8 3%
Thereafter 0%
For full surrenders made more than 3 years after the Date of Issue, no
Surrender Charge will be deducted from the portion of the Cash Value
surrendered which is paid under a life income settlement option.
3. MUTUAL FUNDS
If the employee chooses to use Lutheran Brotherhood Funds' Individual
Retirement Custodial Account, there are no limitations on surrenders.
CONTROL OF THE SEP-IRA
The employee owns and controls the SEP-IRA. The employer sends SEP
contributions to the financial institution in which the IRA is maintained,
but SEP contributions become property of the employee when they are
deposited in the IRA. However, the employee may incur a tax penalty if
funds are withdrawn from the IRA earlier than allowed by law.
TRANSFER OF FUNDS FROM SEP-IRA TO ANOTHER TAX-SHELTERED IRA
It may be advantageous to move contributions made to one SEP-IRA to
another IRA. Other IRAs may provide different rates of return, or may have
different or more beneficial terms (such as favorable transfer and
withdrawal provisions). Depending on the contractual terms of the IRA to
which the employer contributes, you may be able to move your funds to
another IRA. Even if contractually permitted, for tax purposes there are
only two permissible ways to move funds from the SEP-IRA to another IRA.
First, it is permissible to withdraw or receive funds from the SEP-IRA, and
no more than 60 days later, place such funds in another IRA or SEP-IRA.
This is called a "rollover" and may not be done more frequently than at one
year intervals without penalty. Second, a transfer of funds may be made
between trustees. There are no restrictions on the number of times
"transfers" can be made if such funds are transferred between the trustees,
so that the employee never has possession.
WITHDRAWAL OF FUNDS FROM THE SEP-IRA
The employer's SEP contribution may be withdrawn from the employee's
SEP-IRA at any time, but any amount withdrawn (and not "rolled-over") is
includible in the employee's income. Also, if withdrawals occur before the
employee reaches age 59 1/2, and are not on account of death, disability, or
a current year excess contribution, a penalty tax may be imposed.
DISCLOSURE BY FINANCIAL INSTITUTION
The Internal Revenue Service requires the financial institutions or other
persons who sponsor the IRAs to which contributions will be made under the
SEP to provide the employee with a disclosure statement which contains the
following items of information in plain, nontechnical language.
1. The statutory requirements which relate to your IRA;
2. The tax consequences which follow the exercise of various options and
what those options are;
3. Participation eligibility rules and rules on the deduction for
retirement savings;
4. The circumstances and procedures under which an IRA may be revoked,
including the name, address and telephone number of the person designated to
receive notice of revocation (this explanation must be prominently displayed
at the beginning of the disclosure statement);
5. Explanations of when penalties may be assessed against you because of
specified prohibited or penalized activities concerning your IRA; and
6. Financial disclosure information which:
a. Either projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method
of computing and allocating annual earnings and charges which
may be assessed;
b. Describes whether and for what period the growth projections for
the plan are guaranteed, or a statement of the earnings rate and
terms on which the projections are based;
c. Stipulates the sales commission to be charged in each year as a
percentage of one thousand dollars ($1,000); and
d. Shows the proportional amount of any nondeductible life
insurance which may be a feature of the IRA.
See Publication 590, available at any IRS office, for a more complete
explanation of the disclosure requirements. In addition to this disclosure
statement, the financial institution is required to provide a financial
statement to the employee each year. It may be necessary to retain and
refer to statements for more than one year in order to evaluate the
investment performance of the IRA.
ADDITIONAL INFORMATION TO BE FURNISHED TO EMPLOYEE
In addition to the SEP Disclosure Information contained in this document,
the employer or plan administrator must provide the employee with the
following information:
1. At the time an employee becomes eligible to participate in the SEP,
the employer or plan administrator must inform the employee in writing
that a SEP agreement has been adopted and state which employees may
participate, how employer contributions are allocated, and who can
provide the employee with additional information.
2. The employer or plan administrator must inform the employee in writing
of all employer contributions to the SEP-IRA (this information must be
supplied by January 31st of the year following the year the
contribution is made, or 30 days after the contribution is made,
whichever is later).
3. If the employer amends the SEP, or replaces it with another SEP, the
employer or plan administrator must furnish a copy of the amendment or
new SEP (with a clear written explanation of its terms and effects) to
each participant within 30 days of the date the SEP or amendment
becomes effective.
4. If the employer selects or recommends the IRAs into which the SEP
contribution will be deposited (or substantially influences employees
to choose them), the employer or plan administrator must ensure that a
clear written explanation of the terms of those IRAs is provided at
the time each employee becomes eligible to participate. The
explanation must include information about the terms of those IRAs,
such as rates of return, and any restrictions on a participant's
ability to "roll over," transfer, or withdraw funds from the IRAs
(including restrictions that allow rollovers or withdrawals but reduce
earnings of the IRAs or impose other penalties).
5. If the employer selects, recommends, or substantially influences an
employee to choose a specific IRA and the IRA prohibits the withdrawal
of funds, the employer or plan administrator may be required to
provide additional information. Regulations announced by the
Department of Labor under Title I of ERISA should be consulted in this
regard.
<PAGE>
QUESTIONS AND ANSWERS
ADMINISTRATION
1. What is the name of the Plan?
The Plan's name is:
--------------------------------------------------
(Employer's name)
Simplified Employee Pension Plan.
2. Who established this retirement plan?
The Plan was established by your employer and the controlled
businesses (if any) listed below:
Name of Employer:
----------------------------------------------------
Name of Owner or Partner:
--------------------------------------------
Address:
-------------------------------------------------------------
Telephone Number:
----------------------------------------------------
Employer Identification Number:
--------------------------------------
Controlled businesses adopting the Plan:
-----------------------------
----------------------------------------------------------------------
3. When was the Plan established?
The Plan was originally established and became effective
-------------
and it was most recently amended
-------------------------------------
4. What is the Plan's year-end for accounting purposes?
// The Plan is on a calendar year.
// The Plan's year is the employer's taxable year which
ends on
--------------------------------------------------------
5. Who administers the Plan?
The Plan is administered by
------------------------------------------
6. What are the duties of the Plan Administrator?
The Plan Administrator is responsible for the general administration
of the Plan in accordance with the Plan document and applicable
law, including:
a. determining questions of eligibility,
b. making contributions to individual retirement accounts or
annuities as required by the Plan, and
c. interpreting the Plan and any rules of the Plan.
Additional information on the Plan will be provided by the
Plan Administrator.
7. What kind of retirement plan is this?
This is a Plan utilizing a regular Individual Retirement Account (IRA)
or Annuity established by yourself, to which the employer contributes
under the SEP plan.
8. If it becomes necessary to serve the Plan with any legal papers, upon
whom are they served?
The person responsible for receiving any legal papers for the Plan is
the Plan Administrator.
9. Who administers each employee's individual IRA into which
contributions are made?
The provisions of the document under which you maintain your IRA
determine the administrative distribution and investment of all
contributions made to the IRA. The employer in no way guarantees a
participant's IRA from loss or depreciation.
10. Are all the provisions of the Plan included in this summary?
No, this is only a summary of the more important provisions. The
actual provisions are complex and included in a legal document known
as the Plan and Adoption Agreement. Any discrepancies between this
description and the Plan itself should be resolved in favor of the
Plan. Nothing contained herein shall give a participant or
participant's beneficiary any rights greater than under the Plan
itself.
PARTICIPATION AND ELIGIBILITY
1. What does participation mean?
A participant is a member of the Plan and is entitled to share in the
contribution made to the SEP-IRAs by the employer.
2. Are any employees excluded from the Plan?
The following employees are excluded:
// All employees whose compensation is less than $ (not to
----------
exceed three hundred dollars ($300)) for the calendar year,
// Employees covered by a collective bargaining agreement which was
preceded by good faith bargaining over retirement benefits, and
// Employees who have not yet met the age and service requirements
described in No. 3 below.
3. What are the eligibility requirements?
If you are not excluded under No. 2 above because of the minimum
compensation and union exclusion, you become eligible to participate
when you have attained age (not to exceed age
-------------
twenty-one (21)) and have completed any service for your employer
in (not to exceed three (3)) out of the immediately
-------------
preceding five (5) calendar years. For this purpose only, "service"
is any interval of time, however short, in which you perform any work
for your employer.
4. If I am excluded from the Plan, when do I become a participant?
You become a participant on the first day of the plan year in
which you have met the age and service requirements stated above.
CONTRIBUTIONS
1. Who makes contributions to the Plan?
Contributions are made to your Individual Retirement Accounts or
Annuities by the Plan Administrator on behalf of your employer.
Whether or not a contribution is made to your IRA by your employer is
entirely within your employer's discretion. If a contribution is made
under the SEP, it must be allocated to all eligible employees at the
same percentage of compensation (excluding compensation over
two hundred thousand dollars ($200,000)). However, the contribution
for the employee may not exceed the lesser of thirty thousand dollars
($30,000) or fifteen percent (15%) of compensation.
2. How much may my employer contribute to my SEP-IRA each year?
Under the plan that your employer has adopted, your employer will
determine the amount of contribution to be made to your IRA each year.
However, the contribution for any year is limited to the lesser of
thirty thousand dollars ($30,000) or fifteen percent (15%) of your
compensation for that year. The compensation used to determine this
limit does not include any amount which is contributed by your
employer to your IRA under the SEP. It should be noted, however, that
under the agreement there is no requirement that an employer maintain
a particular level of contributions and it is possible that for a
given year no employer contribution will be made on an employee's
behalf.
3. // This SEP does not provide for integration with social security.
// This SEP provides for integration with social security. Social
security taxes paid by the employer or on your account will be
considered as an employer contribution under the SEP to your
SEP-IRA for purposes of determining the amount contributed to
your SEP-IRA.
4. May I also contribute to my IRA if my employer has a SEP?
Yes. In addition to the maximum employee contribution to the SEP-IRA,
an employee can make regular IRA contributions up to the lesser of
one hundred percent (100%) of compensation or two thousand dollars
($2,000) and deduct this contribution to the extent permitted by law.
This contribution may be made to the SEP-IRA or a separate IRA.
INVESTMENTS
1. Where are my contributions invested?
You must establish your own Individual Retirement Account or Annuity
which allows for SEP contributions up to thirty thousand dollars
($30,000) (SEP-IRA). Contributions are made to your SEP-IRA. Once
contributions are made to your SEP-IRA, they become nonforfeitable.
Payments of benefits, withdrawals and distributions are determined
under the provisions of your own SEP-IRA. See the discussion of IRAs
for restrictions on distributions from IRAs.
<PAGE>
IRS DETERMINATION LETTER
- ----------------------------------------------------------------------------
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Name: SEP 001
FFN: 50437970000-001 Case: 8680493 Washington, DC 20224
EIN: 41-0385700
Letter Serial No: B410077b Person to Contact: Mr. M. Wolfe
Lutheran Brotherhood Telephone Number: (202) 566-4111
625 Fourth Avenue South Refer Reply to: DP:E:EP:Q:2
Minneapolis, MN 55415 Date: 09/08/86
Dear Applicant:
In our opinion, the amendment to the form of your Simplified Employee
Pension (SEP) arrangement does not adversely affect its acceptability 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(I) 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,
/s/John Swieca
------------------------
John Swieca
Chief, Employee Plans
Qualifications Branch
<PAGE>
LUTHERAN BROTHERHOOD
PROTOTYPE SIMPLIFIED EMPLOYEE
PENSION PLAN
ADOPTION AGREEMENT
(a) Type of Employer (check one):
// a sole proprietor // a partnership // a corporation
(b) This Adoption Agreement is effective . By this Adoption
---------------
Agreement, the Employer (check one):
// Establishes a new SEP-IRA Plan.
// Changes the elections made in a prior Adoption Agreement under
this Prototype.
// Amends and restates its existing SEP-IRA Plan.
(c) Plan Year:
// The calendar year January 1 - December 31.
// The fiscal year of the employer to
-------- ------ -------- -----
Month Day Month Day
(d) Eligible Participants:
(1) Each Employee who has attained age (not to exceed age
--------
twenty-one (21)) and has completed (not to exceed
--------
three (3)) Years of Service out of the immediately preceding
five (5) calendar years with the Employer is eligible to participate
in the Plan as of the first day of the Plan Year in which he meets
such age and service requirements.
(2) // Exclude Employees who earn less than $300 Compensation from the
Employer during the Plan Year.
// Exclude Employees covered under a collective bargaining
agreement for which the collective bargaining unit
bargained with the Employer in good faith about retirement
benefits.
// Exclude Employees who are non-resident aliens who receive no
U.S. source income from the Employer.
(e) Employer contributions to the Plan shall be the same for all
Participants in an amount equal to:
// 1. Non-integrated with Social Security
A percentage (not to exceed fifteen percent (15%)) of each
Participant's Compensation (up to two hundred thousand dollars
($200,000)) as determined annually by the Employer before the
date the contribution for the Plan Year is due but not to exceed
thirty thousand dollars ($30,000) or that amount which qualifies
for the maximum income tax deduction allowable to an individual
under the Code for contributions to a Simplified Employee
Pension plan.
// 2. Integrated with Social Security (if the Employer maintains any
other qualified retirement plan which is integrated with Social
Security, this Plan may not be integrated with Social Security.)
The amount determined under (e) 1. reduced by one hundred percent
(100%) of Employer paid OASDI contributions. However, in no case
will the amount allocated any Participant be less than the
lesser of:
(a) three percent (3%) of such Participant's Compensation, or
(b) the highest percentage contributed on behalf of any Key
Employee
(f) The person designated by the Employer as the Plan Administrator
is . In the event that no plan
-----------------------------------
administrator is appointed, the Employer will serve in that capacity.
(g) Special Limitations on Allocations:
Note: Do not complete Item (g) unless the Employer maintains other
qualified plans.
LIMITATIONS IF EMPLOYER HAS OTHER PLANS. Section 415 of the Code
imposes certain limitations on the maximum amount of contributions and
benefits under qualified plans. The Employer does NOT have to complete
this item if the Employer maintains only this Plan. In all other cases,
the Employer should complete this item, but only with the assistance of
the Employer's tax advisor. The Employer's failure to complete this
item properly may adversely affect the qualification of all of the plans
the Employer maintains. The amount of Annual Additions allocated to any
Participant's account under this Plan shall be limited as follows:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(h) By executing this Adoption Agreement, the Employer:
(a) agrees to require each Participant to establish an IRA;
(b) acknowledges having received a copy of, and agrees to be bound by
the terms and conditions of, the Adoption Agreement and the
Prototype SEP-IRA Agreement; and
(c) acknowledges that the Employer has relied upon the Employer's own
advisor as to the legal and tax effects of adopting this SEP-IRA
Plan.
The undersigned Employer adopts this Plan and affixes the signature of the
Employer this day of , 19 .
------- ----------------- -----
Name of Employer
--------------------------------------------
By
----------------------------------------------------------
Signature of Sole Proprietor, Corporate Officer authorized
to sign for the Corporation, or a Partner authorized to
sign for the Partnership
<PAGE>
LUTHERAN BROTHERHOOD
PROTOTYPE SIMPLIFIED EMPLOYEE
PENSION PLAN
ADOPTION AGREEMENT
(a) Type of Employer (check one):
// a sole proprietor // a partnership // a corporation
(b) This Adoption Agreement is effective . By this Adoption
---------------
Agreement, the Employer (check one):
// Establishes a new SEP-IRA Plan.
// Changes the elections made in a prior Adoption Agreement under
this Prototype.
// Amends and restates its existing SEP-IRA Plan.
(c) Plan Year:
// The calendar year January 1 - December 31.
// The fiscal year of the employer to
-------- ------ -------- ------
Month Day Month Day
(d) Eligible Participants:
(1) Each Employee who has attained age (not to exceed age
--------
twenty-one (21)) and has completed (not to exceed
--------
three (3)) Years of Service out of the immediately preceding
five (5) calendar years with the Employer is eligible to participate
in the Plan as of the first day of the Plan Year in which he meets
such age and service requirements.
(2) // Exclude Employees who earn less than $300 Compensation from the
Employer during the Plan Year.
// Exclude Employees covered under a collective bargaining
agreement for which the collective bargaining unit bargained
with the Employer in good faith about retirement benefits.
// Exclude Employees who are non-resident aliens who receive no
U.S. source income from the Employer.
(e) Employer contributions to the Plan shall be the same for all
Participants in an amount equal to:
// 1. Non-integrated with Social Security
A percentage (not to exceed fifteen percent (15%)) of each
Participant's Compensation (up to two hundred thousand dollars
($200,000)) as determined annually by the Employer before the
date the contribution for the Plan Year is due but not to exceed
thirty thousand dollars ($30,000) or that amount which qualifies
for the maximum income tax deduction allowable to an individual
under the Code for contributions to a Simplified Employee
Pension plan.
// 2. Integrated with Social Security (if the Employer maintains any
other qualified retirement plan which is integrated with Social
Security, this Plan may not be integrated with Social Security.)
The amount determined under (e) 1. reduced by one hundred percent
(100%) of Employer paid OASDI contributions. However, in no case
will the amount allocated any Participant be less than the
lesser of:
(a) three percent (3%) of such Participant's Compensation, or
(b) the highest percentage contributed on behalf of any Key
Employee
(f) The person designated by the Employer as the Plan Administrator
is . In the event that no plan
-----------------------------------
administrator is appointed, the Employer will serve in that capacity.
(g) Special Limitations on Allocations:
Note: Do not complete Item (g) unless the Employer maintains other
qualified plans.
LIMITATIONS IF EMPLOYER HAS OTHER PLANS. Section 415 of the Code
imposes certain limitations on the maximum amount of contributions and
benefits under qualified plans. The Employer does NOT have to complete
this item if the Employer maintains only this Plan. In all other cases,
the Employer should complete this item, but only with the assistance of
the Employer's tax advisor. The Employer's failure to complete this
item properly may adversely affect the qualification of all of the plans
the Employer maintains. The amount of Annual Additions allocated to any
Participant's account under this Plan shall be limited as follows:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(h) By executing this Adoption Agreement, the Employer:
(a) agrees to require each Participant to establish an IRA;
(b) acknowledges having received a copy of, and agrees to be bound by
the terms and conditions of, the Adoption Agreement and the
Prototype SEP-IRA Agreement; and
(c) acknowledges that the Employer has relied upon the Employer's own
advisor as to the legal and tax effects of adopting this SEP-IRA
Plan.
The undersigned Employer adopts this Plan and affixes the signature of the
Employer this day of , 19 .
-------- ---------------- -----
Name of Employer
--------------------------------------------
By
----------------------------------------------------------
Signature of Sole Proprietor, Corporate Officer authorized
to sign for the Corporation, or a Partner authorized to
sign for the Partnership
<PAGE>
LUTHERAN BROTHERHOOD
PROTOTYPE SIMPLIFIED EMPLOYEE PENSION PLAN
This Plan is established under the Internal Revenue Code (the "Code") to
create retirement benefits for individuals participating herein upon their
retirement, disability or other termination of employment, or, in the event
of death, to pay benefits to their beneficiaries.
ARTICLE I -- DEFINITIONS
As used in this Plan, the following terms shall have the meaning set forth
below, unless a different meaning is plainly required by the context of the
Plan.
1.01 "Adoption Agreement" shall mean the application by which this Plan
is adopted by the Employer.
1.02 "Anniversary Date" shall mean the anniversary of the Effective Date
in each subsequent year.
1.03 "Annuity Contract" shall mean a flexible premium annuity contract
issued by an Insurer meeting the requirements of section 408 of
the Code.
1.04 "Beneficiary" shall mean the person or persons designated by the
Participant in his application for the Annuity Contract or Mutual
Fund shares.
1.05 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.06 "Compensation" shall mean for each Participant the aggregate of all
earned income paid by the Employer in the form of wages and salary,
professional fees or other amounts received during the calendar year
for personal services rendered to the Employer (including
commissions, bonuses, tips, overtime and extra pay) and includible
in the Employee's gross income for Federal Income Tax purposes. For
purposes of this Plan, Compensation shall also mean "earned income"
or "net income" or the net earnings from self-employment in the
trade or business with respect to which the Plan is established,
provided that personal services for the self-employed individual are
a material income-producing factor. Earned income or Compensation
shall not include Contributions made by the Employer to any other
deferred compensation plans, to any welfare benefit plan or to a
Simplified Employee Pension Plan, nor to amounts earned while a
member of any collective bargaining unit if members of such unit are
not eligible to participate in accordance with Section (c) of the
Adoption Agreement.
Compensation for purposes of contributions by or on behalf of
Participants shall be limited to the first two hundred thousand
dollars ($200,000) of such Compensation. For purposes of this
limit:
(i) All plans maintained by the same employer shall be treated as
a single plan;
(ii) All plans maintained with respect to one or more trades or
businesses which are under the common control, within the
meanings of sections 414(b) and (c) of the Code or an
affiliated service group within the meaning of section 414(m)
of the Code shall be treated as a single plan; and
(iii) All plans in which any self-employed individual participates
shall be treated as a single plan with respect to such
self-employed individual.
1.07 "Effective Date" shall mean the date on which this Plan and Adoption
Agreement are to be effective.
1.08 "Employee" shall mean any individual employed by an Employer.
Within the context of this Plan the term also shall mean a
self-employed individual who is or may become eligible for
this Plan.
1.09 "Employer" shall mean the corporation, sole proprietor, partnership
or other employer named in the Adoption Agreement and any successor
employer.
1.10 "Employer Contribution" shall mean the sum, if any, contributed
annually by the Employer and allocated among the participating
Employees in a non-discriminatory manner.
1.11 "Employer Paid OASDI" shall mean the product of the tax rate
applicable under section 3111(a) of the Code at the beginning of the
Plan Year and, in the case of an Employee described in section
401(c)(1) of the Code, Earned Income to the extent that it does not
exceed the contribution and benefit base applicable under OASDI at
the beginning of the Plan Year or wages within the meaning of
section 3121(a)(1) of the Code for all other Employees.
1.12 "Individual Retirement Account" (IRA) shall mean: A custodial
account, annuity or trust established under the provisions of Code
section 408 on which the IRS has issued a favorable opinion or
ruling letter or a model individual retirement account issued by
the IRS.
1.13 "Insurer" shall mean Lutheran Brotherhood, or any other insurance
company approved by Lutheran Brotherhood, licensed to do business in
the state where the principal office of the Employer's trade or
business is located, which insurance company issues Annuity
Contracts under the terms of this Plan.
1.14 "Key Employee" shall mean 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 who earns more
than one hundred fifty percent (150%) of the section 415 IRC
limitation on contributions to defined contribution plans, an owner
(or considered an owner under Section 318 of the Code) of one of the
ten (10) largest interests in the employer if such individual's
compensation exceeds the dollar limitation under section
415(c)(1)(A) of the Code, a five percent (5%) owner of the Employer
as defined in section 416(i)(1)(B), or a one percent (1%) owner of
the Employer who has annual compensation of more than one hundred
fifty thousand dollars ($150,000). The determination period is the
Plan Year containing the Determination Date and the four (4)
preceding Plan Years. The determination of who is a Key Employee
will be made in accordance with section 416(i)(1) of the Code and
the regulations thereunder.
1.15 "Limitation Year" shall mean the Plan Year.
1.16 "Mutual Funds" shall mean mutual fund shares purchased from Lutheran
Brotherhood Securities Corp.
1.17 "OASDI" shall mean the system of Old Age, Survivors, and Disability
Insurance established under Title II of the Social Security Act and
the Federal Insurance Contribution Act.
1.18 "Participant" shall mean an Employee by whom and for whom
contributions may be made under this Plan.
1.19 "Plan" shall mean this document plus the Adoption Agreement by which
the Employer adopts this Plan.
1.20 "Plan Year" shall mean the Plan Year elected in section (c) of the
Adoption Agreement.
1.21 "Service" shall mean any interval of time, however short, in which
an Employee performs any work for the Employer.
1.22 "Sponsor" shall mean Lutheran Brotherhood.
1.23 "Top-Heavy Plan" shall mean for any Plan Year beginning after
December 31, 1983, this Plan is top heavy if more than sixty (60%)
of the aggregate Employer contributions to the Plan were made to the
accounts of Key Employees.
1.24 "Valuation Date" shall mean the date the individual Accounts are
valued under the terms of the Plan. The annual Valuation date shall
be the last day of the Plan Year.
1.25 "Year of Service" shall mean a plan year in which any Service has
been performed.
ARTICLE II -- ELIGIBILITY
2.01 An Employee is eligible to participate in this Plan on the first day
of the Plan Year in which he meets the age, service and other
requirements of Paragraph 2.02 in this Article.
2.02 An Employee is eligible for an Employer Contribution if he has met
the age and service requirements set forth in Section (d) of the
Adoption Agreement and he is not a member of a collective bargaining
unit with which the Employer bargained in good faith about
retirement benefits (unless elected otherwise on the Adoption
Agreement), or is not a non-resident alien as described in section
410(b)(3)(A) or 410(b)(3)(C) of the Code.
2.03 In any case in which the Employer maintains the Plan of a
predecessor employer, service for such predecessor shall be treated
as service for the Employer.
ARTICLE III -- CONTRIBUTIONS
3.01 For each Plan Year the Employer shall contribute in a
nondiscriminatory manner to each Participant's Individual Retirement
Account an amount which the Employer, in its sole discretion, may
from time to time deem advisable, subject to the contribution
formula selected in the Adoption Agreement. Contributions shall
bear a uniform relationship to the total Compensation of each
Participant.
3.02 The Employer will establish and maintain records to disclose the
amount of Employer Contributions allocated to each Participant.
3.03 The Employer Contribution to the Plan shall be made and allocated to
the Individual Retirement Accounts of the various Participants no
later than the due date (plus extensions) for filing the employer's
tax return.
The Employer Contribution shall be allocated to each eligible
Participant whether or not in the employ of the Employer on the last
day of the Plan Year.
3.04 The amount of the Employer Contribution allocable to each
Participant shall not exceed either the lesser of fifteen
percent (15%) of that Participant's Compensation or thirty thousand
dollars ($30,000,) or that amount which qualifies for the maximum
income tax deduction allowable to an individual under the Code for a
contribution to a Simplified Employee Pension Plan.
3.05 In addition to employer contributions to the Plan, each Participant
may make regular IRA contributions.
3.06 Controlled groups: In the event that for any year the Employer is a
member of either a controlled group of corporations, a group of
trades or businesses under common control (within the meaning of
sections 414(b) and (c) of the Code, or an affiliated service group,
within the meeting of section 414(m) of the Code, then contributions
may be made to this Plan only if for such year all members of the
controlled group of corporations or trades or businesses under
common control or affiliated service group have adopted this Plan or
another Simplified Employee Pension program which provides for the
identical contribution and allocation formula as is specified in the
Adoption Agreement to this Plan.
3.07 The Employer does not condition any contribution made under the Plan
on behalf of the Participant upon the retention by the Participant
of the contribution within the Participant's account. Furthermore,
the Employer does not impose any prohibition on a Participant's
withdrawal of any amount from the Participant's account.
ARTICLE IV -- LIMITATIONS OF ALLOCATIONS
(See Section 4.03 through 4.12 for special definitions applicable only to
this article.)
4.01 If an Employer does not maintain any other qualified plan, the
amount of the Annual Additions which may be allocated under this
Plan on a Participant's behalf for a Limitation Year shall not
exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in this Plan.
4.02 If the Employer, in addition to this Plan, sponsors a retirement
plan qualified under Code section 401(a), the limitations of this
Section shall apply with respect to any Participant who controls his
Individual Retirement Account and the Employer defined in
Section 414. In the case of a qualified Defined Contribution Plan,
the Employer shall subtract any contribution made to a Participant's
account under this Plan on account of a particular calendar year
from the Participant's Maximum Permissible Amount under the
qualified Defined Contribution Plan for the Limitation Year with or
within which the calendar year ends. In the case of a qualified
Defined Benefit Plan, the Employer shall reduce the Projected Annual
Benefit of the Participant for any Limitation Year to the extent
necessary to prevent the sum of the Defined Benefit Plan Fraction
and Defined Contribution Plan Fraction from exceeding one (1.0) for
that Limitation Year by reason of the Employer's contributions to
the Participant's account for the calendar year ending with or
within that Limitation Year.
4.03 An Employer who has ever maintained a Defined Benefit Plan which is
now terminated may not participate in this prototype SEP 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.
For purposes of this Article, these terms shall be defined as follows:
4.04 "Annual Additions" -- The sum of the following allocated on behalf
of a Participant for a Limitation Year:
(a) all Employer contributions,
(b) all forfeitures, and
(c) all Employee contributions.
4.05 "Maximum Permissible Amount" -- For a Limitation Year, the maximum
permissible amount with respect to any Participant shall be the
lesser of (i) thirty thousand dollars ($30,000) (or such larger
amount as the Secretary of the Treasury or his delegate may
prescribe), or (ii) twenty-five percent (25%) of the Participant's
Compensation for the Limitation Year.
4.06 "Employer" -- The Employer that adopts this Plan and all members of
a controlled group of corporations (as defined in Code section
414(b) as modified by Code section 415(h), or which constitutes
trades or businesses (whether or not incorporated) which are under
common control (as defined in Code section 414(c) as modified by
Code section 415(h)) or which constitutes an affiliated service
group (as defined in Code section 414(m)), of which the adopting
Employer is part. All such employers shall be considered a single
employer for purposes of applying the limitations of section 3.03
and section 3.04.
4.07 "Limitation Year" -- Limitation Year for purposes of this section
shall mean the Plan Year or the twelve (12) consecutive month period
designated as the Limitation Year under the qualified retirement
plan.
4.08 "Defined Contribution Plan" -- A retirement plan which provides for
individual accounts for Employer contributions.
4.09 "Defined Benefit Plan" -- A retirement plan which does not provide
for individual accounts for Employer contributions.
4.10 "Annual Benefit" -- The annual benefit in the form of a straight
life annuity (with no ancillary benefits) or a qualified joint and
survivor annuity.
4.11 "Projected Annual Benefit" -- A Participant's Annual Benefit under a
Defined Benefit Plan provided by Employer contributions on the
assumptions that the Participant will continue employment until his
normal retirement age as stated in the Defined Benefit Plan, that
his compensation will continue at the same rate as in effect for the
Limitation Year under consideration until his normal retirement age
and that all other relevant factors used to determine benefits under
that plan will remain constant as of the current Limitation Year for
all future Limitation Years.
4.12 "Defined Benefit Fraction" -- A fraction, the numerator of which is
the sum of the Participant's projected annual benefits under all the
defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of one hundred
twenty-five percent (125%) of the dollar limitation in effect for
the Limitation Year under section 415(b)(1)(A) of the Internal
Revenue Code or one hundred forty percent (140%) of the average of
the highest 3 consecutive years of Compensation.
Notwithstanding the above, if the Participant was a Participant in
one or more defined benefit plans maintained by the Employer which
were in existence on July 1, 1982, the denominator of this fraction
will not be less than one hundred twenty-five percent (125%) of the
sum of the annual benefits under such plans which the Participant
had accrued as of the later of September 30, 1983, or the end of the
last Limitation Year beginning before January 1, 1983. The
preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Section 415 as in effect at the end of the 1982 Limitation Year.
For purposes of this paragraph, a master or prototype plan with an
opinion letter issued before January 1, 1983, which was adopted by
the Employer on or before September 30, 1983, is treated as a plan
in existence on July 1, 1982.
4.13 "Defined Contribution Fraction" -- A fraction, the numerator of
which is the sum of the Annual Additions to the Participant's
Individual 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 denominator of
which is the sum of the maximum aggregate amounts for the current
and all prior Limitation Years of service with the Employer
(regardless of whether a defined contribution plan was maintained by
the Employer). The maximum aggregate amount in any Limitation Year
is the lesser of one hundred twenty-five percent (125%) of the
dollar limitation in effect under section 415(c)(1)(A) of the Code
or twenty-five percent (25%) of the Participant's Compensation for
such year multiplied by 1.4.
If the Employee was a Participant in one or more defined
contribution plans maintained by the Employer which were in
existence on July 1, 1982, the numerator of this fraction will be
adjusted if the sum of this fraction and the defined benefit
fraction would otherwise exceed one (1.0) under the terms of this
Plan. Under the adjustment, an amount equal to the product of (I)
the excess of the sum of the fractions over one (1.0) times (ii) 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 later of
September 30, 1983, or the end of the last Limitation Year beginning
before January 1, 1983. This adjustment also will be made if at the
end of the last Limitation Year beginning before January 1, 1984,
the sum of the fractions exceeds one (1.0) because of accruals or
additions that were made before the limitations of this article
became effective to any plans of the Employer in existence on
July 1, 1982. For purposes of this paragraph, master or prototype
plan with an opinion letter issued before January 1, 1983, which is
adopted by the Employer on or before September 30, 1983, is treated
as a plan in existence on July 1, 1982.
ARTICLE V -- TOP-HEAVY PLAN
5.01 If the Plan is or becomes Top-Heavy in any Plan Year beginning after
December 31, 1983, the provisions of this Article will supersede any
conflicting provisions in the Plan or Adoption Agreement.
5.02 The Employer contributions allocated on behalf of any Participant
who is not a Key Employee shall not be less than the lesser of three
percent (3%) of such Participant's Compensation or in the case where
the Employer has no defined benefit plan which designates this Plan
to satisfy Section 401 of the Code, the largest percentage of
Employer contributions and forfeitures, as a percentage of the first
two hundred thousand dollars ($200,000) of the Key Employee's
Compensation, allocated on behalf of any Key Employee for that year.
The minimum allocation is determined without regard to any Social
Security contribution.
5.03 For purposes of computing the minimum allocation, compensation will
mean compensation as defined in Section 1.06.
ARTICLE VI -- PARTICIPANT'S IRA
6.01 Establishment of Account: -- Each Participant shall establish in his
own name an Individual Retirement Account (IRA) invested in Annuity
Contracts, Mutual Funds or some other funding vehicle approved by
the Sponsor, to which contributions can be made under this Plan.
Establishment of such IRA may be made a condition of employment.
6.02 Nonforfeitable Account: -- The interest of any Participant in the
balance of his IRA is at all times one hundred percent (100%)
nonforfeitable.
6.03 Exclusive Benefit: -- The Employer shall have no beneficial interest
in any asset of a Participant's IRA, and no part of any asset in a
Participant's IRA shall revert to or be repaid to the Employer
except as specified in Section 8.05, either directly or indirectly;
nor shall any part of the corpus or income of a Participant's IRA,
or any asset of a Participant's IRA (at any time) be used for, or
diverted to, purposes other than the exclusive benefit of the
Participant or of his Beneficiaries.
6.04 Administration of Account: -- The provisions of this document under
which a Participant maintains his IRA shall determine the
administration, distribution and investment of the Employer's and
Employee's, if any, contribution(s) to a Participant's IRA. The
Employer does not in any way guarantee a Participant's IRA from loss
or depreciation.
ARTICLE VII -- STATE COMMUNITY PROPERTY LAWS
7.01 The terms and conditions of this Plan shall be applicable without
regard to the community property laws of any state.
7.02 If a Participant of this Plan is married, the Compensation of the
Participant and any contributions made by or on behalf of
the Participant to the Plan under Article III shall be determined
without regard to the compensation of the Participant's spouse.
ARTICLE VIII -- AMENDMENT AND TERMINATION
8.01 Amendment by Sponsor: Each Employer who adopts this Plan delegates
to the Sponsor the power to amend the Plan or Adoption Agreement to
conform it to the provisions of any law, regulations or other
rulings pertaining to Simplified Employee Pensions and to make such
other changes to the Plan which, in the judgment of the Sponsor are
from time to time necessary or appropriate. In such case, the
Employer shall be deemed to have consented to such amendments if the
Employer does not otherwise notify the Sponsor in writing within
thirty (30) days after notification has been given to the Employer;
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.
8.02 Amendment by Employer: The Employer reserves the right at any time
to amend the Plan by changing elections in the Adoption Agreement
or to otherwise amend the Plan or the Adoption Agreement but only by
giving prior written notice to the Sponsor.
8.03 Participation in Prototype: If an Employer amends this Plan or the
Adoption Agreement (other than an election permitted in the Adoption
Agreement) or rejects an amendment of the Plan or Adoption Agreement
made by the Sponsor, the Plan will be deemed to be an individually
designed plan and may no longer participate in the Lutheran
Brotherhood Prototype Simplified Employee Pension Plan.
8.04 Termination: This plan is intended to be permanent, but the Employer
reserves the right to terminate it at any time.
8.05 Return of Employer Contributions Under Special Circumstances: Any
contribution made by the Employer because of a mistake of fact may
be returned to the Employer within one year of such contribution.
Any contribution made by the Employer which is conditional upon the
Plan's initial qualification under the Code may be returned to the
Employer within one year after the date such initial qualification
is denied. Any contributions made by the Employer which are
conditioned on the deductibility of such amount under Code Section
404 may be returned to the Employer, to the extent of the amount
disallowed, within one year after the disallowance of the deduction.
ARTICLE IX -- MISCELLANEOUS PROVISIONS
9.01 No Employee of the Employer nor anyone else shall have any rights
against the Employer except those expressly granted in this
agreement. Nothing in this agreement shall be construed to give any
Participant the right to remain as an Employee of the Employer.
9.02 In the event of a conflict between the provisions of this Plan and
any Annuity Contract issued hereunder, the provisions of the Plan
shall control.
9.03 Words used in the masculine shall apply in the feminine where
applicable and, wherever the context of this plan so indicates, the
plural shall be read as the singular and the singular as the plural.
ARTICLE X -- DUTIES AND POWERS OF THE ADMINISTRATOR
10.01 Duties and Powers: The Administrator shall conduct the general
administration of the Plan in accordance with the Plan and shall
have all the necessary powers and authority to carry out that
function, including the following powers and authority:
A. To determine questions of eligibility of Employees.
B. To make contributions to Individual Retirement Accounts as
required by the Plan.
C. To adopt any rules for the Plan that are not consistent with the
Plan or applicable law, and to amend or revoke any such rules.
D. To interpret the Plan and any rules of the Plan.
10.02 Limitations Upon Powers of the Administrator: -- The Plan shall be
uniformly and consistently interpreted and applied with regard to
all Participants in similar circumstances. The Plan shall be
administered, interpreted and applied fairly and equitably and in
accordance with the specified purposes of the Plan.
10.03 Expenses of Administration: -- The Employer shall pay for all
expenses (including reasonable attorney's fee) properly incurred by
the Administrator in the administration of the Plan.
10.04 Effect of Administrator Action: -- Except as provided in
Section 10.05, all actions taken and all determinations made by the
Administrator in good faith shall be final and binding upon all
Participants and any person interested in the Plan.
10.05 Claims Procedure: -- A claim by a Plan Participant, former
Participant, Beneficiary or any other person shall be made under the
terms of the Individual Retirement Account established by each
Participant.
<PAGE>
NOTES
<PAGE>
NOTES
EXHIBIT 16
LUTHERAN BROTHERHOOD FUND
HYPOTHETICAL FUND PERFORMANCE ILLUSTRATION
- ----------------------------------------------------------------------------
This is a hypothetical illustration of an investment
of $1,000 made on 31-Jul-92 with a 5% sales load
for the period from 31-Jul-92 through 31-Jul-93.
The table below indicates the number of shares that would have accumulated
had all dividends been reinvested on the record date and their value as of
31-Jul-93.
ENDING
SHARES ENDING REDEEMABLE
DESCRIPTION OWNED NAV VALUE
- ---------------------------------- --------- ---------- ---------------
Shares initially acquired at a
public offering price of $19.56..... 51.125 $18.31 $936.10
Shares acquired from reinvested
income dividends (see schedule)..... 0.758 18.31 13.88
Shares acquired from reinvested
capital gain distributions
(see schedule)...................... 6.466 18.31 118.39
--------- ----------- ----------------
TOTAL............................... 58.349 $1,068.37
========= ================
TOTAL RETURN FOR THE 1 YEAR PERIOD
(Based on an investment of $1,000.00
with a 5% sales load).......................... 6.84%(a)
================
ANNUALIZED TOTAL RETURN FOR THE 1 YEAR PERIOD
(Based on an investment of $1,000.00
with a 5% sales load).......................... 6.84%(b)
================
FOOTNOTES
- -----------
(a) The following formula is used to calculate total return:
(Ending redeemable value - Initial $1,000 investment)
-------------------------------------------------------
Initial $1,000 investment
(b) The following formula is used to calculate annualized total return:
1/n
[ (Total Return + 1) - 1]
When n equals the one year period ended July 31, 1993
LUTHERAN BROTHERHOOD FUND
CALCULATION OF SHARES ACQUIRED FROM REINVESTMENT
OF INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Dividends Declared on a Income
Per Share Basis Dividends Capital Gain Dist.
- ------------------------------------ -------------- ------------------------
Dividend Reinvest Investment Capital Income Shares Income Shares Cumulative
Date Price Income Gains Earned Created Earned Created Share
(BxH) (D/A) (CxH) (F/A) Balance
- -------- -------- ------ --------- ------ ------- ------ ------- ---------
A B C D E F G H
31-Jul-92
Initial $1,000 investment at a public offering price of $19.56... 51.125
25-Sep-92 18.21 0.075 3.83 0.211 0.00 0 51.336
31-Dec-92 18.19 0.050 1.49742 2.57 0.141 76.87 4.226 55.703
25-Mar-93 18.27 0.06 0.73472 3.34 0.183 40.92 2.24 58.126
24-Jun-93 18.25 0.07 4.07 0.223 0.00 0 58.349
------- -------
Total shares acquired through
reinvestment of income dividends
and capital gain distributions.............. 0.758 6.466
======= =======
Footnotes
- -----------
(a) Income earned is determined by multiplying the declared dividend
(on a per share basis) by the beginning cumulative share balance.
(b) The number of shares created through dividend reinvestment is
determined by dividing income earned by the reinvest price.
LUTHERAN BROTHERHOOD FUND
HYPOTHETICAL FUND PERFORMANCE ILLUSTRATION
- ----------------------------------------------------------------------------
This is a hypothetical illustration of an investment
of $1,000 made on 31-Jul-88 with a 5% sales load
for the period from 31-Jul-88 through 31-Jul-93.
The table below indicates the number of shares that would have accumulated
had all dividends been reinvested on the record date and their value as of
31-Jul-93.
ENDING
SHARES ENDING REDEEMABLE
DESCRIPTION OWNED NAV VALUE
- --------------------------------- ----------- ----------- -----------------
Shares initially acquired at a
public offering price of $15.44.... 64.767 $18.31 $1,185.88
Shares acquired from reinvested
income dividends (see schedule).... 7.236 18.31 132.49
Shares acquired from reinvested
capital gain distributions
(see schedule)..................... 26.770 18.31 490.16
----------- -----------------
TOTAL.............................. 98.773 $1,808.53
=========== =================
TOTAL RETURN FOR THE 5 YEAR PERIOD
(Based on an investment of $1,000.00
with a 5% sales load)............................ 80.85%(a)
=================
ANNUALIZED TOTAL RETURN FOR THE 5 YEAR PERIOD
(Based on an investment of $1,000.00
with a 5% sales load)........................... 12.58%(b)
=================
FOOTNOTES
- -----------
(a) The following formula is used to calculate total return:
(Ending redeemable value - Initial $1,000 investment)
-----------------------------------------------------
Initial $1,000 investment
(b) The following formula is used to calculate annualized total return:
1/n
[(Total Return + 1) - 1]
Where n equals the five year period ended July 31, 1993.
LUTHERAN BROTHERHOOD FUND
CALCULATION OF SHARES ACQUIRED FROM REINVESTMENT
OF INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Dividends Declared on a Income
Per Share Basis Dividends Capital Gain Dist.
- ------------------------------------ -------------- ------------------------
Dividend Reinvest Investment Capital Income Shares Income Shares Cumulative
Date Price Income Gains Earned Created Earned Created Share
(BxH) (D/A) (CxH) (F/A) Balance
- -------- -------- ------ --------- ------ ------- ------ ------- ---------
A B C D E F G H
31-Jul-88
Initial $1,000 investment at a public offering price of $15.44... 64.767
13-Sep-88 14.46 0.13 8.42 0.582 65.349
13-Dec-88 14.76 0.12 7.84 0.531 65.880
13-Mar-89 15.86 0.085 5.60 0.353 66.233
13-Jun-89 17.28 0.09 5.96 0.345 66.578
13-Sep-89 18.85 0.08 5.33 0.283 66.861
29-Dec-89 17.07 0.06 1.49557 4.01 0.235 100.00 5.858 72.954
27-Mar-90 16.25 0.095 0.05750 6.93 0.427 4.19 0.258 73.639
26-Jun-90 17.28 0.095 7.00 0.405 74.044
25-Sep-90 15.33 0.095 7.03 0.459 74.503
26-Dec-90 16.32 0.090 6.71 0.411 74.914
25-Mar-91 18.16 0.080 5.99 0.33 75.244
25-Jun-91 18.21 0.070 5.27 0.289 75.533
25-Sep-91 19.34 0.080 6.04 0.312 75.845
31-Dec-91 19.43 0.080 1.86584 6.07 0.312 141.51 7.283 83.440
26-Mar-92 18.46 0.070 0.53648 5.84 0.316 44.77 2.425 86.181
25-Jun-92 17.78 0.075 6.46 0.364 86.545
25-Sep-92 18.21 0.075 6.49 0.356 86.901
31-Dec-92 18.19 0.050 1.49742 4.35 0.239 130.13 7.154 94.294
25-Mar-93 18.27 0.06 0.73472 5.66 0.31 69.28 3.792 98.396
24-Jun-93 18.25 0.07 6.89 0.377 98.773
-------- --------
Total shares acquired through
reinvestment of income dividends
and capital gain distributions.............. 7.236 26.770
======= ========
Footnotes
- ------------
(a) Income earned is determined by multiplying the declared dividend
(on a per share basis) by the beginning cumulative share balance.
(b) The number of shares created through dividend reinvestment is
determined by dividing income earned by the reinvest price.
LUTHERAN BROTHERHOOD FUND
HYPOTHETICAL FUND PERFORMANCE ILLUSTRATION
- ----------------------------------------------------------------------------
This is a hypothetical illustration of an investment
of $1,000 made on 31-Jul-83 with a 5% sales load
for the period from 31-Jul-83 through 31-Jul-93.
The table below indicates the number of shares that would have accumulated
had all dividends been reinvested on the record date and their value as of
31-Jul-93.
ENDING
SHARES ENDING REDEEMABLE
DESCRIPTION OWNED NAV VALUE
- --------------------------------- ----------- ----------- -----------------
Shares initially acquired at a
public offering price of $14.59.... 68.540 $18.31 $1,254.97
Shares acquired from
reinvested income dividends
(see schedule)..................... 31.126 18.31 569.92
Shares acquired from reinvested
capital gain distributions
(see schedule)..................... 77.487 18.31 1,418.79
----------- -----------------
TOTAL.............................. 177.153 $3,243.67
=========== =================
TOTAL RETURN FOR THE 10 YEAR PERIOD
(Based on an investment of $1,000.00
with a 5% sales load)............................ 224.37%(a)
=================
ANNUALIZED TOTAL RETURN FOR THE 10 YEAR PERIOD
(Based on an investment of $1,000.00
with a 5% sales load)........................... 12.49%(b)
=================
FOOTNOTES
- -----------
(a) The following formula is used to calculate total return:
(Ending redeemable value - Initial $1,000 investment)
-----------------------------------------------------
Initial $1,000 investment
(b) The following formula is used to calculate annualized total return:
1/n
[ (Total Return + 1) - 1]
Where n equals the ten year period ended July 31, 1993.
LUTHERAN BROTHERHOOD FUND
CALCULATION OF SHARES ACQUIRED FROM REINVESTMENT
OF INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Dividends Declared on a Income
Per Share Basis Dividends Capital Gain Dist.
- ------------------------------------ -------------- ------------------------
Dividend Reinvest Investment Capital Income Shares Income Shares Cumulative
Date Price Income Gains Earned Created Earned Created Share
(BxH) (D/A) (CxH) (F/A) Balance
- -------- -------- ------ --------- ------ ------- ------ ------- ---------
A B C D E F G H
31-Jul-83
Initial $1,000 investment at a public offering price of $14.59... 68.540
31-Aug-83 14.14 0.20 13.71 0.969 69.509
30-Nov-83 14.30 0.25 17.38 1.215 70.724
28-Feb-84 13.25 0.15 0.73 10.61 0.801 51.63 3.896 75.421
31-May-84 12.83 0.20 15.08 1.176 76.597
31-Aug-84 14.36 0.20 15.32 1.067 77.664
30-Nov-84 14.40 0.20 15.53 1.079 78.743
28-Feb-85 14.70 0.15 1.026 11.81 0.804 80.79 5.496 85.043
31-May-85 15.55 0.20 17.01 1.094 86.137
31-Aug-85 15.52 0.20 17.23 1.110 87.247
30-Nov-85 16.32 0.15 13.09 0.802 88.049
28-Feb-86 16.85 0.15 0.902 13.21 0.784 79.42 4.713 93.546
31-May-86 17.37 0.15 14.03 0.808 94.354
31-Aug-86 17.83 0.20 18.87 1.058 95.412
28-Nov-86 17.82 0.15 14.31 0.803 96.215
02-Dec-86 17.49 0.40 38.49 2.2 98.415
27-Feb-87 18.86 0.15 0.10499 14.76 0.783 10.33 0.548 99.746
29-May-87 18.77 0.10 9.97 0.531 100.277
31-Aug-87 20.75 0.10 10.03 0.483 100.760
30-Nov-87 13.31 0.13 1.55 13.10 0.984 156.18 11.734 113.478
29-Dec-87 14.00 0.1094 12.41 0.887 114.365
11-Mar-88 14.68 0.12 13.72 0.935 115.300
13-Jun-88 14.72 0.11 12.68 0.862 116.162
13-Sep-88 14.46 0.13 15.10 1.044 117.206
13-Dec-88 14.76 0.12 14.06 0.953 118.159
13-Mar-89 15.86 0.085 10.04 0.633 118.792
13-Jun-89 17.28 0.09 10.69 0.619 119.411
13-Sep-89 18.85 0.08 9.55 0.507 119.918
29-Dec-89 17.07 0.06 1.49557 7.20 0.422 179.35 10.506 130.846
27-Mar-90 16.25 0.095 0.05750 12.43 0.765 7.52 0.463 132.074
26-Jun-90 17.28 0.095 12.55 0.726 132.800
25-Sep-90 15.33 0.095 12.62 0.823 133.623
26-Dec-90 16.32 0.090 12.03 0.737 134.360
25-Mar-91 18.16 0.080 10.75 0.592 134.952
25-Jun-91 18.21 0.070 9.45 0.519 135.471
25-Sep-91 19.34 0.080 10.84 0.560 136.031
31-Dec-91 19.43 0.080 1.86584 10.88 0.560 253.81 13.063 149.654
26-Mar-92 18.46 0.070 0.53648 10.48 0.567 80.29 4.349 154.570
25-Jun-92 17.78 0.075 11.59 0.652 155.222
25-Sep-92 18.21 0.075 11.64 0.639 155.861
31-Dec-92 18.19 0.050 1.49742 7.79 0.428 233.39 12.831 169.120
25-Mar-93 18.27 0.06 0.73472 10.15 0.555 124.26 6.801 176.476
24-Jun-93 18.25 0.07 12.35 0.677 177.153
-------- --------
Total shares acquired through
reinvestment of income dividends
and capital gain distributions.............. 31.126 77.487
======= ========
Footnotes
- ------------
(a) Income earned is determined by multiplying the declared dividend
(on a per share basis) by the beginning cumulative share balance.
(b) The number of shares created through dividend reinvestment is
determined by dividing income earned by the reinvest price.
LB Municipal Bond Fund, Inc.
Standardized Yield Calculation
As of 31-Jul-93
============================================================================
Gross Income Earned During Base Period: Amount Yield
- -------------------------------------- ------------ -------
From Municipal Obligations:
Computed on a Yield to Maturity or Yield to
Call Basis (see attached schedule).............. 2,647,190 5.16%
From Short-Term Municipal Securities:
Book Income for Past 30 days.................... 15,014 0.03%
------------ -------
Total Gross Income................................... 2,662,204 5.18%
============ =======
Total Expenses Accrued During Base Period............ 351,520 0.68%
============ =======
Average Daily Number of Shares outstanding
during the Base Period.......................... 67,314,319
============
Maximum Public Offering Price per Share
on the Last Day of the Base Period.............. $9.23
============
Standardized Yield................................... 4.50%(a)
============
Tax Equivalent Yield (Assuming a marginal
federal tax rate of 31%)........................ 6.52%(b)
============
Tax Equivalent Yield (Assuming a marginal
federal tax rate of 28%)........................ 6.25%(b)
============
Tax Equivalent Yield (Assuming a marginal
federal tax rate of 15%)........................ 5.29%(b)
=============
Footnotes:
===========
(a) The following formula is used to calculate standardized yield:
6
2[ [ (Gross Income - Expenses) +1 ] -1 ] X 100
-----------------------------------------------
[ [ (Average Daily shares x Maximum Offering Price) ] ]
(b) To convert standardized yield to a tax equivalent yield, the
following formula is used:
[ (Standardized Yield) ]
------------------------
[ (1 - Marginal Tax Rate) ]
<PAGE>
<TABLE>
<CAPTION>
LB MUNICIPAL BOND FUND, INC. STANDARD YIELD CALCULATION
INPUT AREA - PORTFOLIO HOLDINGS
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AS OF 06/30/93 (ADJUSTED FOR UNSETTLED TRADES)
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ADJUSTED
MATURITY VALUATION ACCRUED INT PAY CALL CALL O.I.D.
ROW CUSIP NO. ISSUER PAR COUPON PRICE DATE DATE INTEREST DATE DATE PRICE BASIS
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A B C D E F G H I J K L M
0 009730DJ8 AKRON BATH COPLEY
OHIO ST 1,050,000 7.450 112.898 11/15/2020 06/30/93 9,995 11/15/93 11/15/2000 102.000
1 009730FT4 AKRON BATH COPLEY
OHIO JT TWP 1,500,000 6.250 104.070 11/15/2007 06/30/93 11,979 11/15/93 11/15/2002 102.000 97.559
2 013544FR7 ALBUQUERQUE N MEX
HOSP REV 1,325,000 9.500 114.854 08/01/2006 06/30/93 52,448 08/01/93 08/01/95 103.000
3 01354FBA3 ALBUQUERQUE N MEX
EDL FACS REV 2,000,000 7.200 115.980 10/01/2007 06/30/93 36,000 10/01/93 10/01/99 102.000
4 01728ACW4 ALLEGHENY CNTY PA
HOSP DEV AUT 2,500,000 6.250 104.350 11/01/2023 06/30/93 26,042 11/01/93 11/01/2002 100.000 95.432
5 017357KD5 ALLEGHENY CNTY PA
SAN AUTH 2,575,000 42.314 06/01/2008 06/30/93 12/01/93 36.901
6 033267Q81 ANCHORAGE AK TEL
REV 1,885,000 5.700 99.955 05/01/2013 06/30/93 17,908 11/01/93
7 038315CE5 APPLING CNTY GA
DEV AUTH 1,000,000 9.250 109.822 01/01/2016 06/30/93 46,250 07/01/93 01/01/95 102.000
8 040654EF8 ARIZONA ST TRANSN
BRD HWY REV 2,000,000 5.250 98.501 07/01/2009 06/30/93 17,500 07/01/93 97.054
9 040871CU7 ARKANSAS HSG DEV
AGY 1,000,000 8.375 125.172 07/01/2010 06/30/93 41,875 07/01/93
10 04108UAR7 ARKANSAS ST DEV
FIN AUTH 1,340,000 7.125 112.638 11/15/2010 06/30/93 12,200 11/15/93 11/15/2000 102.000
11 041826DB1 ARLINGTON TX
INDPT SCH DIST 2,165,000 40.937 02/15/2009 06/30/93 08/15/93 35.903
12 047803BB6 ATLANTA GA
DOWNTOWN AUTH 875,000 7.750 114.105 10/01/2016 06/30/93 16,953 10/01/93 10/01/96 102.000
13 0524735R2 AUSTIN TX UTIL
SYS REV 2,500,000 36.544 11/15/2010 06/30/93 11/15/93 36.111
14 052473T96 AUSTIN TEX UTIL
SYS REV 7,000,000 42.089 11/15/2008 06/30/93 11/15/93 35.418
15 052473U29 AUSTIN TEX UTIL
SYS REV 8,100,000 39.033 11/15/2009 06/30/93 11/15/93 33.951
16 059195FM4 BALTIMORE MD CTFS
PARTN 1,750,000 5.250 96.091 04/01/2016 06/30/93 15,313 10/01/93 93.701
17 069903AB8 BASS OKLA MEM
BAPTIST HOSP 5,220,000 8.350 130.312 05/01/2009 06/30/93 72,645 11/01/93
18 070129AH4 BASS BROOK MINN
POLLUTN CTL 2,495,000 6.000 103.286 07/01/2022 06/30/93 74,850 07/01/93
19 097437KG1 BOISE CITY IDAHO
SCH DIST 3,000,000 5.400 99.202 07/30/2014 06/30/93 7,200 07/30/93 97.779
20 097916DD9 BOISE KUNA ID
IRR DIST 1,000,000 6.600 110.526 07/01/2005 06/30/93 33,000 07/01/93 07/01/2001 102.000
21 101565PT0 BOULDER LARIMER
& WELD CNTYS 2,500,000 58.616 12/15/2003 06/30/93 12/15/93 47.969
22 101565PU7 BOULDER LARIMER
& WELD CNTYS 5,000,000 55.322 12/15/2004 06/30/93 12/15/93 44.468
23 106214AA7 BRAZOS RIVER AUTH
TEX REV 1,000,000 8.250 115.433 05/01/2015 06/30/93 6,875 12/01/93 06/01/98 102.000
24 106214BL2 BRAZOS RIVER AUTH
TEX REV 2,000,000 8.250 117.270 05/01/2015 06/30/93 13,750 12/01/93 06/01/98 102.000
25 106457CZ5 BRECKENRIDGE MICH 500,000 5.500 98.532 05/01/2013 06/30/93 2,750 11/01/93 98.220
26 110227BH7 BRISTOL TENN
HEALTH & EDL FACS 1,750,000 7.000 109.344 09/01/2021 06/30/93 40,833 09/01/93 03/01/2001 102.000
27 115029CP3 BROWARD CNTY FLA
HSG FIN AUTH 36,140,000 12.612 04/01/2014 06/30/93 10/01/93 11.902
28 117151FD7 BRUNSWICK GA WTR
& SWR REV 2,000,000 6.000 105.195 10/01/2011 06/30/93 30,000 10/01/93 97.911
29 117151FF2 BRUNSWICK GA WTR 1,500,000 6.100 106.167 10/01/2019 06/30/93 22,875 10/01/93 97.769
30 119282BD2 BUENA VISTA MICH
SCH DIST 2,700,000 5.500 97.255 05/01/2013 06/30/93 6,600 11/01/93 95.705
31 121342AT6 BURKE CNTY GA 4,300,000 12.250 111.283 08/01/2014 06/30/93 219,479 08/01/93 08/01/94 102.000
32 130173H59 CALIFORNIA EDL
FACS AUTH REV 1,000,000 5.000 94.541 01/01/2015 06/30/93 25,000 07/01/93 83.762
33 130623KM2 CALIFORNIA ST 1,500,000 7.000 115.069 08/01/2006 06/30/93 43,750 08/01/93
34 130624CM9 CALIFORNIA ST 1,000,000 9.500 141.288 02/01/2010 06/30/93 39,583 08/01/93
35 130624JH3 CALIFORNIA ST 2,000,000 6.300 109.005 09/01/2010 06/30/93 42,000 09/01/93
36 130663XZ5 CALIFORNIA ST
DEPT WATER RES 4,400,000 6.900 115.432 12/01/2025 06/30/93 25,300 12/01/93 06/01/2000 101.500
37 13068GNG7 CALIFORNIA ST 5,350,000 5.375 95.784 12/01/2019 06/30/93 95,854 12/01/93 94.538
38 13068GNY8 CALIFORNIA ST 2,000,000 5.250 99.154 12/01/2008 06/30/93 35,000 12/01/93 96.428
39 132813AR7 CAMDEN CNTY N J
MUN UTIL AUTH 1,700,000 8.250 116.233 12/01/2017 06/30/93 11,688 12/01/93 12/01/97 102.000
40 149056AT0 CATAWBA CNTY
NC HOSP 2,750,000 6.000 103.243 10/01/2017 06/30/93 41,250 10/01/93 10/01/2002 102.000 96.295
41 167592AZ7 CHICAGO ILL O HARE
INTL ARPT 2,300,000 9.625 106.195 01/01/2013 06/30/93 110,688 07/01/93 01/01/94 103.000
42 167592BR4 CHICAGO ILL O HARE
INTL ARPT 2,700,000 9.625 106.012 01/01/2013 06/30/93 129,938 07/01/93 01/01/94 103.000
43 17902HAM7 CLACKAMAS CNTY
ORE HEALTH FAC 2,700,000 6.350 107.987 03/01/2009 06/30/93 57,150 09/01/93 03/01/2002 102.000
44 185705EY2 CLERMONT CNTY OHIO
HOSP FACS 4,000,000 5.875 102.594 09/01/2015 06/30/93 88,778 09/01/93 99.008
45 186343HJ1 CLEVELAND OHIO 1,780,000 6.375 108.209 07/01/2012 06/30/93 56,738 07/01/93 07/01/2002 102.000 94.785
46 186406BZ6 CLEVELAND OHIO
ST UNIV GEN 1,000,000 5.375 100.144 06/01/2008 06/30/93 8,958 12/01/93 98.742
47 186432SF8 CLEVELAND OHIO
WTRWKS REV 2,000,000 5.500 100.795 01/01/2013 06/30/93 14,056 07/01/93 97.663
48 186432SH4 CLEVELAND OHIO
WTRWKS REV 1,000,000 5.500 100.927 01/01/2009 06/30/93 7,028 07/01/93 98.666
49 188702MD3 CLINTONDALE MICH
CMNTY SCHS 1,000,000 5.750 100.570 05/01/2016 06/30/93 17,729 11/01/93 95.412
50 196477E41 COLORADO HSG FIN
AUTH 2,000,000 9.000 106.447 09/01/2017 06/30/93 60,000 09/01/93
51 196630SP3 COLORADO SPRINGS
COLO UTILS 710,000 9.500 112.898 11/15/2015 06/30/93 8,619 11/15/93 11/15/95 100.000
52 196630UN5 COLORADO SPRINGS
COLO UTILS 3,100,000 7.000 110.992 11/15/2021 06/30/93 27,728 11/15/93 11/15/2001 102.000
53 196630VW4 COLORADO SPRINGS
COLO UTILS 2,000,000 6.000 103.742 11/15/2018 06/30/93 15,333 11/15/93 11/15/2002 100.000 98.032
54 196722AL6 COLORADO ST
COLLEGES BRD 1,945,000 6.625 108.095 05/01/2015 06/30/93 21,476 11/01/93 05/01/2002 102.000
55 196797DJ0 COLORADO WTR RES
PWR DEV AUTH 1,195,000 6.250 104.892 09/01/2013 06/30/93 24,896 09/01/93 09/01/2002 101.000 98.585
56 207757KF1 CONNECTICUT ST SPL
TAX OBLIG 4,000,000 6.500 112.676 10/01/2010 06/30/93 65,000 10/01/93
57 228129TP7 CROWLEY TEX INDPT
SCH DIST 1,500,000 5.400 98.926 08/01/2009 06/30/93 13,500 08/01/93 97.887
58 232265LD8 CUYAHOGA CNTY OHIO
HOSP REV 1,630,000 7.450 112.808 10/01/2018 06/30/93 30,359 10/01/93 10/01/2000 103.000
59 235037SE9 DALLAS FORT WORTH
TEX REGL 3,000,000 9.125 113.200 11/01/2015 06/30/93 45,625 11/01/93 11/01/95 102.500
60 235037VB1 DALLAS FORT WORTH
TEX REGL 1,000,000 7.375 118.355 11/01/2008 06/30/93 12,292 11/01/93 05/01/2004 102.000
61 235037VD7 DALLAS FORT WORTH
TEX REGL 1,000,000 7.375 117.445 11/01/2009 06/30/93 12,292 11/01/93 05/01/2004 102.000
62 235037VF2 DALLAS FORT WORTH
TEX RGL ARPT 2,000,000 7.375 116.543 11/01/2010 06/30/93 24,583 11/01/93 05/01/2004 102.000
63 246343CC9 DELAWARE RIV JT
TOLL BRDG 2,000,000 7.875 117.408 07/01/2018 06/30/93 78,750 07/01/93 07/01/98 102.000
64 249001TC2 DENTON TEX INDPT
SCH DIST 2,285,000 6.250 107.768 02/15/2009 06/30/93 53,951 08/15/93 97.566
65 249181JS8 DENVER COLO CITY
& CNTY ARPT 7,500,000 7.250 108.669 11/15/2025 06/30/93 69,479 11/15/93 11/15/2002 102.000
66 250343DB3 DESCHUTES &
JEFFERSON CNTYS OR 1,000,000 5.600 102.100 06/01/2009 06/30/93 9,333 12/01/93
67 258887AF5 DOUGLAS CNTY COLO 3,000,000 7.250 107.640 12/01/96 06/30/93 18,125 12/01/93
68 259561BU1 DOUGLAS CNTY WASH
PUB UTIL 2,000,000 8.750 131.592 09/01/2018 06/30/93 58,333 09/01/93 09/01/2009 103.000
69 259852CM1 DOUGLASVILLE
DOUGLAS CNTY GA 1,395,000 5.400 101.423 06/01/2006 06/30/93 6,278 12/01/93
70 270416CC2 EAST ALA HEALTH
CARE AUTH 1,500,000 5.750 101.176 09/01/2013 06/30/93 43,125 09/01/93 92.904
71 270598DV4 EAST BATON ROUGE
LA MTG FIN 25,490,657 13.145 11/01/2013 06/30/93 11/01/93 13.103
72 274137RK6 EAST ORANGE N J 1,250,000 8.400 130.555 08/01/2006 06/30/93 43,750 08/01/93
73 311452BK1 FARMINGTON N. MEX
PWR REV 5,000,000 9.875 140.828 01/01/2013 06/30/93 246,875 07/01/93 07/01/2005 100.000
74 311457CH6 FARMINGTON N MEX
UTIL SYS REV 500,000 5.750 102.960 05/15/2013 06/30/93 3,674 11/15/93 95.476
75 341535LP5 FLORIDA ST BRD
ED PUB ED 1,000,000 7.875 117.273 06/01/2019 06/30/93 6,563 12/01/93 06/01/98 102.000
76 353100CN8 FRANKLIN CNTY MO
REORG SCH 700,000 5.700 102.503 03/01/2008 06/30/93 3,103 03/01/94
77 353172A25 FRANKLIN CNTY OHIO 1,060,000 6.300 112.195 12/01/2010 06/30/93 5,565 12/01/93 12/01/2001 102.000 98.957
78 353186YZ6 FRANKLIN CNTY OHIO
HOSP REV 1,475,000 5.600 101.666 05/15/2007 06/30/93 20,650 11/15/93 98.572
79 360244FJ1 FULTON DE KALB GA
HOSP AUTH 2,000,000 5.500 99.056 01/01/2012 06/30/93 18,333 01/01/94 96.425
80 373382PQ7 GEORGIA ST 1,000,000 6.300 112.685 03/01/2009 06/30/93 21,000 09/01/93
81 373382PR5 GEORGIA ST 1,000,000 6.300 112.116 03/01/2010 06/30/93 21,000 09/01/93
82 381523HJ1 GOLDSMITH MET
DIST COLO 1,890,000 46.746 06/01/2007 06/30/93 12/01/93 41.610
83 381523HL6 GOLDSMITH MET
DIST COLO 1,890,000 43.813 06/01/2008 06/30/93 12/01/93 39.070
84 381523HM4 GOLDSMITH MET
DIST COLO 1,885,000 42.618 12/01/2008 06/30/93 12/01/93 37.858
85 386442PH4 GRAND RIVER DAM
OKLA 2,175,000 5.750 105.535 06/01/2008 06/30/93 10,422 12/01/93 98.031
86 396482AQ4 GREENVILLE S C
HOSP SYS HOSP 2,000,000 7.500 110.762 05/01/2016 06/30/93 25,000 11/01/93 05/01/96 102.000
87 414003NM1 HARRIS CNTY TEX 1,750,000 8.125 118.759 08/01/2015 06/30/93 59,245 08/01/93 08/01/98 102.000
88 432320CH0 HILLSBOROUGH CNTY
FLA IDA PCR 1,705,000 7.875 120.762 08/01/2021 06/30/93 55,945 08/01/93 08/01/2001 103.000
89 432321AC1 HILLSBOROUGH CNTY
FLA INDL DEV 3,200,000 9.250 105.334 06/01/2008 06/30/93 24,667 12/01/93 12/01/93 103.000
90 438669PT4 HONOLULU HAWAII
CITY & CNTY 2,000,000 5.500 100.200 10/01/2011 06/30/93 27,500 10/01/93 97.748
91 442397CD5 HOUSTON TEX HSG
FIN CORP 1,700,000 10.000 104.000 09/15/2014 06/30/93 50,056 09/15/93
92 442436MG3 HOUSTON TEX WTR
& TWR SYS REV 1,280,000 9.375 115.449 12/01/2013 06/30/93 10,000 12/01/93 12/01/95 102.000
93 442436MH1 HOUSTON TEX WTR
& SWR SYS REV 220,000 9.375 115.549 12/01/2013 06/30/93 1,719 12/01/93 12/01/95 102.000
94 447024A67 HUNTSVILLE ALA 2,000,000 7.875 115.753 08/01/2012 06/30/93 65,625 08/01/93 08/01/97 102.000
95 451182FD6 IDAHO FALLS ID
RFDG ELEC 1,000,000 47.112 04/01/2007 06/30/93 10/01/93 38.560
96 451182FG9 IDAHO FALLS IDAHO 3,115,000 38.760 04/01/2010 06/30/93 10/01/93 31.077
97 451182FH7 IDAHO FALLS IDAHO 2,000,000 36.439 04/01/2011 06/30/93 10/01/93 28.983
98 451297LL7 IDAHO HSG AGY 625,000 9.750 104.942 01/01/2015 06/30/93 30,469 07/01/93
99 45201HXZ2 ILLINOIS HEALTH
FACS AUTH REV 162,000 7.900 116.938 08/15/2003 06/30/93 4,835 08/15/93 08/15/95 102.000
100 45201HYB4 ILLINOIS HEALTH
FACS AUTH REV 1,051,000 7.900 110.225 08/15/2003 06/30/93 31,367 08/15/93 08/15/95 102.000
101 453424AY9 INDEPENDENCE CNTY
AR POLLUTN 2,000,000 6.250 102.317 01/01/2021 06/30/93 5,556 01/01/94
102 455052FX3 INDIANA ST HSG
FIN AUTH 570,000 10.200 106.325 01/01/2016 06/30/93 29,070 07/01/93
103 455356AU9 INDIANAPOLIS IND
RESOURCE 2,100,000 7.800 111.160 12/01/2004 06/30/93 13,650 12/01/93 12/01/96 103.000
104 455356AW5 INDIANAPOLIS IND
RESOURCE 410,000 7.900 111.169 12/01/2008 06/30/93 2,699 12/01/93 12/01/96 103.000
105 455356AX3 INDIANAPOLIS IND
RESOURCE REC 2,190,000 7.900 111.470 12/01/2008 06/30/93 14,418 12/01/93 12/01/96 103.000
106 458840FW0 INTERMOUNTAIN PWR
AGY UTAH PWR 6,000,000 10.375 114.530 07/01/2016 06/30/93 311,250 07/01/93 07/01/95 102.500
107 458840GS8 INTERMOUNTAIN PWR
AGY UTAH PWR 2,000,000 9.375 113.234 07/01/2001 06/30/93 93,750 07/01/93 07/01/95 102.000
108 458840MV4 INTERMOUNTAIN PWR
AGY UTAH PWR 1,400,000 9.000 110.618 07/01/2019 06/30/93 63,000 07/01/93 07/01/95 101.500
109 458840TZ8 INTERMOUNTAIN PWR
AGY UTAH PWR 1,000,000 6.000 102.803 07/01/2009 06/30/93 30,000 07/01/93 92.270
110 467577BW1 JACKSON CNTY MO
SINGLE FAMILY 21,525,000 10.867 03/01/2015 06/30/93 09/01/93 9.398
111 472736XB8 JEFFERSON CNTY
COLO SCH DIST 2,100,000 6.000 104.405 12/15/2012 06/30/93 5,600 12/15/93 95.793
112 473027BH2 JEFFERSON CNTY KY
HOME MTG REV 570,000 9.625 106.204 05/01/2014 06/30/93 9,144 11/01/93
113 474656EN1 JEFFERSON PARISH
LA HOME MTG 605,000 10.000 103.533 12/15/2011 06/30/93 2,689 12/15/93
114 480256AW6 JONESBORO AR PUB
UTIL SYS 1,000,000 5.250 98.596 12/01/2013 06/30/93 6,708 12/01/93 94.968
115 484790FK1 KANSAS CITY KANS
UTIL SYS REV 2,175,000 47.067 03/01/2007 06/30/93 09/01/93 39.489
116 490311AN7 KENT CNTY MICH
REFUSE DISP SYS 1,000,000 8.300 117.026 11/01/2007 06/30/93 13,833 11/01/93 11/01/97 102.500
117 491265DX9 KENTUCKY DEV FIN
AUTH HOSP REV 1,000,000 9.750 118.906 08/01/2005 06/30/93 40,625 08/01/93 02/01/98 102.000
118 491552FE0 KENTUCKY ST TPK
AUTH ECON DEV 5,345,000 38.435 01/01/2010 06/30/93 07/01/93 34.250
119 491552GN9 KENTUCKY ST TPK
AUTH ECNM DEV 750,000 5.500 100.517 07/01/2009 06/30/93 10,313 07/01/93 98.424
120 494748QM1 KING CNTY WASH 5,000,000 6.750 107.411 12/01/2009 06/30/93 28,125 12/01/93 12/01/2000 100.000
121 494787AN4 KING CNTY WASH PUB
HOSP DIST 2,000,000 6.750 107.239 09/01/2010 06/30/93 45,000 09/01/93 09/01/2000 102.000 95.591
122 499523LD8 KNOX CNTY TENN
HEALTH EDL & HS 1,000,000 6.000 102.797 09/01/2019 06/30/93 22,667 09/01/93
123 515300GD7 LANE CNTY OR SCH
DIST 4 2,570,000 5.375 100.776 07/01/2009 06/30/93 11,511 01/01/94
124 517138PD9 LARIMER CNTY
COLO SCH 3,000,000 7.000 114.853 12/15/2016 06/30/93 9,333 12/15/93
125 539243NU5 LIVONIA MICH PUB
SCHS DIST 2,425,000 40.075 05/01/2009 06/30/93 11/01/93 36.040
126 543583BQ0 LARAIN CNTY OHIO
HOSP REV 1,470,000 7.125 110.630 12/15/2006 06/30/93 4,655 12/15/93 12/15/2001 102.000
127 544508FS8 LOS ANGELES CALIF
DEPT WTR & 8,500,000 5.375 95.535 09/01/2023 06/30/93 96,451 09/01/93 93.298
128 544652UL2 LOS ANGELES CA
WSTWTR SYS REV 1,500,000 5.500 99.596 06/01/2013 06/30/93 6,875 12/01/93 98.216
129 545170BU5 LOS ANGELES CNTY
CALIF TRANS 1,000,000 8.000 116.264 07/01/2016 06/30/93 40,000 07/01/93 07/01/97 102.000
130 548100NL6 LOWER COLO RIV
AUTH TEX REV 1,000,000 11.375 107.256 01/01/2013 06/30/93 56,875 07/01/93 01/01/94 103.000
131 548100QU3 LOWER COLO RIV
AUTH TEX REV 1,000,000 9.500 115.537 01/01/2011 06/30/93 47,500 07/01/93 01/01/96 102.000
132 574058BF9 MARYLAND ENVIRON
MENTAL SVC REV 1,250,000 5.500 99.230 09/01/2013 06/30/93 5,729 09/01/93 97.805
133 5742157T0 MARYLAND ST HEALTH
& HIGHER ED 2,000,000 6.700 103.789 07/01/2022 06/30/93 67,000 07/01/93 07/01/2002 102.000 96.889
134 574216BG1 MARYLAND ST HEALTH
& HIGHER 2,150,000 5.000 92.481 07/01/2023 06/30/93 35,833 07/01/93 93.031
135 574216EQ6 MARYLAND ST HLTH
& HIGHER EDL 2,500,000 5.375 98.694 07/01/2013 06/30/93 11,198 01/01/94 96.500
136 575566WK6 MASSACHUSETTS BAY
TRANSN AUTH 2,000,000 7.300 112.588 03/01/2000 06/30/93 48,667 09/01/93 03/01/98 102.000
137 575823PC7 MASSACHUSETTS ST 2,850,000 9.000 114.217 10/01/2004 06/30/93 64,125 10/01/93 10/01/95 102.500
138 575823Y52 MASSACHUSETTS ST 2,000,000 6.500 108.845 08/01/2008 06/30/93 54,167 08/01/93 97.847
139 575823YR4 MASSACHUSETTS ST 1,800,000 7.375 116.244 12/01/2008 06/30/93 11,063 12/01/93 12/01/98 102.000
140 575826AU6 MASSACHUSETTS ST 5,000,000 5.500 100.707 11/01/2008 06/30/93 45,833 11/01/93 98.976
141 5758505D0 MASSACHUSETTS ST
HEALTH & EDL 2,000,000 6.750 107.098 07/01/2024 06/30/93 67,500 07/01/93 07/01/2001 102.000 96.593
142 575850MR0 MASSACHUSETTS ST
HEALTH & EDL 2,970,000 8.750 113.552 12/01/2007 06/30/93 21,656 12/01/93 12/01/95 101.500
143 575850UT7 MASSACHUSETTS ST
HEALTH & EDL 1,500,000 8.000 115.377 07/01/2018 06/30/93 60,000 07/01/93 07/01/98 102.000
144 587844JD4 MERCER CNTY N J
IMPT AUTH REV 1,000,000 7.900 114.812 04/01/2013 06/30/93 19,750 10/01/93 04/01/97 102.000
145 587844PM7 MERCER CNTY N J
IMPT AUTH REV 1,000,000 6.600 106.859 11/01/2014 06/30/93 11,000 11/01/93 11/01/2000 102.000
146 592659TU0 METROPOLITAN WRT
DIST SOUTHN 2,000,000 6.625 112.565 03/01/2009 06/30/93 44,167 09/01/93 03/01/99 101.000
147 592663KK3 METROPOLITAN WTR
DIST SOUTHN 1,250,000 6.625 109.723 07/01/2012 06/30/93 41,406 07/01/93 07/01/2001 102.000
148 594553EA3 MICHIGAN MUN BD
AUTH 2,460,000 50.372 12/01/2005 06/30/93 12/01/93 43.850
149 59465CJK4 MICHIGAN ST HOSP
FIN AUTH REV 500,000 8.125 114.934 08/15/2012 06/30/93 15,347 08/15/93 08/15/98 102.000
150 594695SC3 MICHIGAN ST 1,250,000 5.500 98.085 10/01/2021 06/30/93 17,188 10/01/93
151 600293FD1 MILLCREEK TWP PA
SCH DIST FGIC 3,170,000 37.663 08/15/2009 06/30/93 08/15/93 32.974
152 603745JC5 MINNEAPOLIS MINN
HOSP REV 2,500,000 9.125 116.934 12/01/2014 06/30/93 19,010 12/01/93 12/01/97 102.000
153 603745JS0 MINNEAPOLIS MINN
HOSP REV 1,850,000 7.875 111.222 12/01/2014 06/30/93 12,141 12/01/93 12/01/97 102.000
154 603924AT8 MINNEAPOLIS MINN
CMNTY DEV AGY 7,685,000 40.889 03/01/2009 06/30/93 09/01/93 32.764
155 60635RBJ5 MISSOURI ST HEALTH
& EDL FACS 6,000,000 6.250 104.530 02/15/2022 06/30/93 141,667 08/15/93 02/15/2002 102.000 97.646
156 60635RCM7 MISSOURI ST HEALTH
& EDL FACS 2,000,000 6.250 107.138 06/01/2007 06/30/93 10,417 12/01/93 06/01/2002 102.000 98.624
157 60635RCQ8 MISSOURI ST HEALTH
& EDL FACS 4,515,000 6.250 105.450 06/01/2016 06/30/93 23,516 12/01/93 06/01/2002 102.000 97.034
158 60635RCR6 MISSOURI ST HEALTH
& EDL FACS 2,450,000 6.350 106.007 11/15/2017 06/30/93 19,879 11/15/93 11/15/2002 102.000 98.764
159 6069003Q9 MISSOURI ST HEALTH
& EDL FACS 2,650,000 6.875 109.983 02/15/2021 06/30/93 68,826 08/15/93 02/15/2001 102.000
160 606909BB4 MISSOURI ST HSG
DEV COMMN & ST 2,260,000 39.003 11/01/2003 06/30/93 11/01/93 34.752
161 611533EB2 MONROEVILLE PA
HOSP AUTH HOSP 4,000,000 7.000 104.341 10/01/2003 06/30/93 70,000 10/01/93 98.207
162 61213HDD6 MONTANA ST BRD
INVT WORKERS 3,500,000 6.875 109.888 06/01/2020 06/30/93 20,052 12/01/93 06/01/2001 102.000
163 616114AT1 MOORSEVILLE N C
GRADED SCH 1,000,000 6.350 107.077 10/01/2014 06/30/93 15,875 10/01/93 10/01/2002 102.000
164 639672DV3 NEBRASKA MTG FIN
FD SINGLE FAM 485,000 10.125 104.575 01/15/2014 06/30/93 22,643 07/15/93
165 639672ES9 NEBRASKA MTG FIN
FD SINGLE FAM 520,000 10.375 103.825 02/15/2014 06/30/93 20,381 08/15/93
166 644693CE1 NEW HAMPSHIRE ST
TPK SYS REV 1,100,000 10.793 131.555 11/01/2017 06/30/93 9,798 11/01/93 11/01/2006 104.000
167 646038UU1 NEW JERSEY ST 2,215,000 6.300 109.319 08/01/2007 06/30/93 58,144 08/01/93 08/01/2002 101.250
168 646088CJ1 NEW JERSEY ST HWY
AUTH GARDEN 1,000,000 10.500 112.159 01/01/2014 06/30/93 52,500 07/01/93 01/01/95 102.000
169 646133AN8 NEW JERSEY ST TRAN
CORP 3,000,000 6.375 111.851 10/01/2006 06/30/93 47,813 10/01/93
170 646139CF0 NEW JERSEY ST TPK
AUTH TPK 1,750,000 10.375 124.845 01/01/2003 06/30/93 90,781 07/01/93
171 647634XX7 NEW ORLEANS LA
RFDG 6,500,000 33.932 09/01/2012 06/30/93 09/01/93 26.498
172 649706DW5 NEW YORK N Y CITY
MUN WTR FIN 1,250,000 8.750 119.037 06/15/2010 06/30/93 4,861 12/15/93 06/15/97 102.000
173 649706XD5 NY CITY MUN WTR
FIN AUTH 2,000,000 5.875 103.502 06/15/2012 06/30/93 5,222 12/15/93 99.144
174 649831VK7 NEW YORK ST DORM
AUTH REVS 2,000,000 8.125 116.925 07/01/2017 06/30/93 81,250 07/01/93 07/01/97 102.000
175 649881B99 NEW YORK ST MED
CARE FACS FIN 2,250,000 8.000 115.898 02/15/2008 06/30/93 68,000 08/15/93 08/15/2000 100.000
176 658196PM6 NORTH CAROLINA
EASTN MUN PWR 6,000,000 6.000 104.247 01/01/2018 06/30/93 180,000 07/01/93 01/01/2003 102.000 96.278
177 658196PQ7 NORTH CAROLINA
EASTN MUN PWR 5,000,000 6.250 105.831 01/01/2023 06/30/93 156,250 07/01/93 01/01/2003 102.000 98.937
178 658196QG8 NORTH CAROLINA
EASTN MUN PWR 4,850,000 5.500 98.529 01/01/2021 06/30/93 133,375 07/01/93 87.841
179 658202G34 NORTH CAROLINA
MED CARE 1,000,000 6.250 106.105 06/01/2012 06/30/93 5,208 12/01/93 06/01/2001 102.000 95.922
180 658203GS7 NORTH CAROLINA
MUN PWR AGY 4,750,000 9.500 111.656 01/01/2019 06/30/93 225,625 07/01/93 01/01/95 103.000
181 658203QS6 NORTH CAROLINA
MUN PWR AGY 4,000,000 6.000 105.699 01/01/2011 06/30/93 140,000 07/01/93
182 658203QX5 NORTH CAROLINA
MUN PWR AGY 3,880,000 5.750 101.293 01/01/2020 06/30/93 130,142 07/01/93 92.811
183 677525JT5 OHIO ST AIR
QUALITY DEV AUTH 5,000,000 8.000 120.669 12/01/2013 06/30/93 33,333 12/01/93 06/01/2002 103.000
184 67756BAF7 OHIO ST EDL FAC
REV 2,000,000 6.500 111.189 10/01/2020 06/30/93 32,500 10/01/93 93.224
185 6776582R6 OHIO ST WTR DEV
AUTH REV 1,500,000 5.500 100.615 12/01/2011 06/30/93 6,875 12/01/93 91.852
186 678467HW4 OKEMOS MI PUB SCH
DIST 1,700,000 5.500 100.079 05/01/2011 06/30/93 5,714 11/01/93 98.874
187 67910HEA4 OKLAHOMA ST MUN
PWR AUTH 2,000,000 6.000 103.745 01/01/2028 06/30/93 60,000 07/01/93 01/01/2002 100.000 93.930
188 67910HFA3 OKLAHOMA ST MUN
PWR AUTH PWR 1,500,000 5.875 106.318 01/01/2012 06/30/93 44,063 07/01/93 97.934
189 67910HFB1 OKLAHOMA ST MUN
PWR AUTH PWR 1,500,000 5.750 103.876 01/01/2024 06/30/93 43,125 07/01/93 94.849
190 681793TD7 OMAHA PUB PWR DIST
NEB ELEC 2,500,000 9.300 110.860 02/01/2015 06/30/93 96,875 08/01/93 02/01/95 102.000
191 685913KF1 OREGON ST DEPT
GENL SVCS 600,000 5.500 100.565 01/15/2015 06/30/93 13,750 07/15/93 95.506
192 686509RS1 ORLANDO FLA UTILS
COMMN WTR&EL 4,500,000 10.500 112.268 10/01/2014 06/30/93 118,125 10/01/93 10/01/94 103.000
193 686662YC5 ORLEANS PARISH LA
SCH BRD 3,000,000 8.950 136.328 02/01/2008 06/30/93 111,875 08/01/93
194 709140CN5 PENNSYLVANIA ST 3,000,000 49.022 07/01/2006 06/30/93 07/01/93 44.237
195 709235GG4 PENNSYLVANIA ST
UNIV 2,500,000 5.500 97.640 08/15/2016 06/30/93 51,944 08/15/93 94.987
196 720175FR4 PIEDMONT MUN PWR
AGY SC 2,000,000 6.250 109.713 01/01/2021 06/30/93 62,500 07/01/93 93.429
197 721863EG9 PIMA CNTY ARIZ UNI
SCH DIST 1,700,000 8.900 132.610 07/01/2005 06/30/93 75,650 07/01/93
198 729505AZ0 PLYMOUTH CNTY MASS 3,000,000 7.000 106.682 04/01/2012 06/30/93 52,500 10/01/93 10/01/2002 102.000 99.681
199 741710AK3 PRINCE GEORGES
CNTY MD HOSP 1,000,000 7.000 107.752 07/01/2022 06/30/93 35,000 07/01/93 07/01/2002 102.000 96.042
200 745160JJ1 PUERTO RICO
COMWLTH AQUEDUCT 4,000,000 9.000 137.194 07/01/2009 06/30/93 180,000 07/01/93 07/01/2005 100.000
201 745392DQ0 PULASKI CNTY AR
HOSP REV 1,750,000 6.200 103.205 03/01/2022 06/30/93 31,947 09/01/93 03/01/2003 101.000
202 757290BG5 REDDING CALIF JT
PWRS FING AUT 3,100,000 5.500 98.847 12/01/2018 06/30/93 14,208 12/01/93 91.579
203 759136DL5 REGIONAL TRANSN
DIST COLO 3,485,000 6.250 105.837 11/01/2012 06/30/93 36,302 11/01/93 11/01/2002 101.000 98.539
204 75913WBC0 REGIONAL WASTE SYS
INC ME 350,000 7.950 117.960 07/01/2010 06/30/93 13,913 07/01/93 01/01/99 103.000
205 76716EAR5 RIO LINDA CALIF UN
SCH DIST 1,000,000 7.400 116.031 08/01/2010 06/30/93 30,833 08/01/93 08/01/2002 102.000
206 769125AQ8 RIVERSIDE CNTY
CALIF TRANSN 2,815,000 54.423 06/01/2004 06/30/93 12/01/93 47.932
207 774285QP8 ROCKWALL TEX
INDPT SCH DIST 1,775,000 5.400 98.578 02/15/2010 06/30/93 15,975 08/15/93 97.581
208 778260DY2 ROSS CNTY OHIO
HOSP REV 1,235,000 5.600 100.728 12/01/2014 06/30/93 11,527 12/01/93 97.569
209 779465BB8 ROWAN CNTY N C
INDL FACS & 2,200,000 12.250 109.266 01/01/2004 06/30/93 134,750 07/01/93 07/01/94 103.000
210 789566CL8 ST GEORGE UT WTR
REV 2,445,000 5.375 96.312 06/01/2016 06/30/93 10,952 12/01/93 94.655
211 790420AR4 ST JOHNS CNTY FLA 2,000,000 5.000 96.062 06/01/2009 06/30/93 8,333 12/01/93 82.227
212 791748AK2 ST LOUIS PARK MINN
HEALTH CARE 3,500,000 9.250 114.540 01/01/2020 06/30/93 161,875 07/01/93 01/01/2002 100.000
213 791750DE9 SAINT LOUIS PARK
MINN HOSP REV 1,400,000 7.250 111.935 07/01/2015 06/30/93 50,750 07/01/93 07/01/2000 102.000
214 791750DF6 SAINT LOUIS PARK
MINN 1,180,000 7.250 111.935 07/01/2015 06/30/93 42,775 07/01/93 07/01/2000 102.000
215 791750DG4 SAINT LOUIS PARK
MINN 1,000,000 7.250 111.008 07/01/2018 06/30/93 36,250 07/01/93 07/01/2000 102.000
216 792070AF1 ST LUCIE CNTY FLA
POLLUTN CTL 2,450,000 11.000 111.638 10/01/2019 06/30/93 67,375 10/01/93 10/01/94 103.000
217 792888HF9 ST PAUL MIN HSG
& REDEV AUTH 1,000,000 6.625 100.075 11/01/2017 06/30/93 22,083 11/01/93 99.254
218 792888HU6 SAINT PAUL MN HSG
& REDEV AUTH 1,000,000 5.500 99.253 05/15/2013 06/30/93 9.167 11/15/93 98.507
219 795747YW8 SALT RIVER PROJ
ARIZ AGRIC 5,320,000 9.625 105.403 01/01/2023 06/30/93 256,025 07/01/93 01/01/94 102.000
220 796242DH5 SAN ANTONIO TX
ARPT SYS REV 1,000,000 7.375 115.138 07/01/2010 06/30/93 15,569 07/01/93 07/01/2003 102.000
221 796242DL6 SAN ANTONIO TX
ARPT SYS REV 1,000,000 7.375 115.138 07/01/2011 06/30/93 15,569 07/01/93 07/01/2003 102.000
222 797669DX3 SAN FRNACISCO
CALIF BAY AREA 1,500,000 6.750 114.492 07/01/2010 06/30/93 50,625 07/01/93
223 798111AQ3 SAN JOAQUIN HILLS
CALIF 15,000,000 56.760 01/01/2013 06/30/93 07/01/93 52.156
224 804404AK7 SAULT STE MARIE
CHIPPEWA 3,320,000 7.750 102.575 09/01/2012 06/30/93 85,767 09/01/93 95.224
225 810453NJ5 SCOTTSDALE AZ 500,000 5.500 100.835 07/01/2009 06/30/93 6,875 07/01/93 99.464
226 813115AG7 SECOND COLUMBUS
HSG DEV CORP 1,225,000 7.000 103.524 08/15/2024 06/30/93 32,394 08/15/93 98.312
227 826775DB1 SIKESTON MO ELEC
REV 4,100,000 6.250 105.631 06/01/2022 06/30/93 21,354 12/01/93 06/01/2002 102.000 97.394
228 837140SA1 SOUTH CAROLINA
PUB SVC 2,500,000 9.500 114.406 07/01/2022 06/30/93 118,750 07/01/93 07/01/95 103.000
229 837147JM0 SOUTH CAROLINA ST
PUB SVC AUTH 1,000,000 5.500 101.219 07/01/2009 06/30/93 13,750 07/01/93 98.942
230 840480CC9 SOUTH SUBN PK &
REC, DIST COLO 1,000,000 6.250 106.579 12/15/2013 06/30/93 2,951 12/15/93 12/15/2002 101.000
231 841420BR2 SOUTHEAST MO 1,000,000 5.750 102.574 10/15/2008 06/30/93 12,139 10/15/93 97.514
232 841513HJ6 SOUTHEAST TEX
HSG FIN CORP 11,615,000 22.870 09/01/2017 06/30/93 13,125 09/01/93 6.706
233 842475PT6 SOUTHERN CA PUB
PWR AUTH PROJ 3,000,000 5.250 96.910 01/01/2014 06/30/93 11,124 07/01/93 95.073
234 873543DY5 TACOMA WASH REFUSE
UTIL REV 2,015,000 6.625 106.589 12/01/2011 06/30/93 12/01/93 12/01/2001 101.000
235 875288AT9 TAMPA FLA UTIL TAX
& SPL REV 2,200,000 8.875 113.486 10/01/2013 06/30/93 48,813 10/01/93 10/01/95 102.000
236 882555RC1 TEXAS MUN PWR AGY
REV 1,500,000 5.750 100.685 09/01/2012 06/30/63 28,750 09/01/93 93.177
237 882716AC7 TEXAS ST VET LAND
BRD-DIV 4,315,000 0.050 38.250 07/01/2010 06/30/93 1,079 07/01/93 38.250
238 882716XF5 TEXAS ST 5,250,000 5.500 98.268 04/01/2020 06/30/93 72,188 10/01/93 89.125
239 896029RH0 TRIBOROUGH BRDG
& TUNL AUTH N 1,000,000 6.750 113.463 01/01/2009 06/30/93 33,750 07/01/93
240 898138CJ9 TRUMBULL CNTY
OHIO HOSP REV 1,795,000 6.900 110.369 11/15/2012 06/30/93 15,826 11/15/93 11/15/2001 102.000 99.521
241 914029W74 UNIVERSITY AL
UNIV REVS 1,000,000 5.500 100.364 05/01/2011 06/30/93 9,167 11/01/93 97.234
242 914113LR4 UNIVERISTY CALIF
REVS 2,490,000 11.000 131.219 09/01/98 06/30/93 91,300 09/01/93
243 914113RM9 UNIVERISTY CA REVS 1,000,000 5.250 97.238 11/01/2012 06/30/93 4,375 11/01/93 95.073
244 914391PA9 UNIVERSITY
LOUISVILLE KY REVS 1,900,000 5.875 102.525 05/01/2009 06/30/93 18,604 11/01/93
245 915217KH5 UNIVERSITY VA 1,000,000 5.375 99.046 06/01/2010 06/30/93 8,958 12/01/93 97.562
246 925717DG2 VICKSBURG MICH
CMNTY SCHS 1,000,000 7.000 116.154 05/01/2007 06/30/93 11,667 11/01/93 05/01/2001 102.000
247 927691AC9 VIRGIN ISLANDS WTR
& PWR AUTH 2,000,000 7.600 112.008 01/01/2012 06/30/93 76,000 07/01/93 07/01/2002 102.000
248 939741LK8 WASHINGTON ST 2,400,000 6.700 112.941 06/01/2016 06/30/93 13,400 12/01/93 06/01/2001 100.000
249 939741M24 WASHINGTON ST 1,500,000 6.250 107.522 02/01/2011 06/30/93 39,063 08/01/93 98.949
250 939741NT7 WASHINGTON ST 2,500,000 6.250 106.037 06/01/2010 06/30/93 13,021 12/01/93 98.972
251 939741NX8 WASHINGTON ST 2,000,000 6.000 103.429 06/01/2012 06/30/93 10,000 12/01/93 96.176
252 939741QL1 WASHINGTON ST 3,000,000 5.750 101.943 10/01/2012 06/30/93 43,125 10/01/93 95.631
253 939828MU0 WASHINGTON ST PUB
PWR SUPPLY 1,500,000 54.880 07/01/2004 06/30/93 07/01/93 43.540
254 939830HH1 WASHINGTON ST PUB
PWR SUPPLY 1,000,000 7.250 109.398 07/01/2015 06/30/93 36,250 07/01/93 01/01/2000 102.000
255 954710CE7 WEST NEW YORK NJ
MUN UTIL 2,195,000 46.033 12/15/2007 06/30/93 12/15/93 38.568
256 954710CG2 WEST NEW YORK NJ
MUNI AIRPORT 2,595,000 41.348 12/15/2009 06/30/93 12/15/93 33.538
257 955023FD3 WEST OTTAWA MICH 3,455,000 55.557 05/01/2004 06/30/93 11/01/93 46.959
258 955023FE1 WEST OTTAWA MICH
PUB SCH DIST 1,860,000 52.021 05/01/2005 06/30/93 11/01/93 43.544
259 95640EBF1 WEST VY CITY UTAH
MUN BLDG 1,580,000 6.000 104.322 01/15/2010 06/30/93 43,713 07/15/93 01/15/2003 100.000 97.785
260 973129AR0 WINCHESTER VA
INDL DEV AUTH 2,000,000 8.125 112.281 01/01/2014 06/30/93 81,250 07/01/93 01/01/96 102.000
261 976710RK1 WISCONSIN HSG
FIN AUTH REV 35,000,000 12.330 07/01/2014 06/30/93 07/01/93 12.052
262 976710SR5 WISCONSIN HSG
FIN AUTH REV 18,700,000 12.587 01/01/2014 06/30/93 07/01/93 12.280
263 983366BG9 WYOMING MUN PWR
AGY PWR 1,240,000 6.000 105.116 01/01/2007 06/30/93 37,200 07/01/93 01/01/2003 102.000 98.290
------------ ---------
729,303,657 9,784,905
============ =========
264
265
266
267
268
</TABLE>
<TABLE>
<CAPTION>
CONTINUED.. PORTFOLIO HOLDINGS - OUTPUT
========================================================================================================================
AS OF 06/30/93 (ADJUSTED FOR UNSETTLED TRADES)
===============================================================
DAILY MARKET VALUE NO. GROSS
YIELD AND OF DAYS INCOME
(360 DAY ACCRUED DAILY IN BASE FOR BASE
ROW CUSIP NO. ISSUER YIELD YEAR) INCOME INCOME PERIOD PERIOD
- --- --------- --------------------------------- --------- --------- ------------ --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A B C O P Q R S T
0 009730DJ8 AKRON BATH COPLEY OHIO ST 5.5149% 0.015319% 1,195,423.37 183.13 30 5,493.90
1 009730FT4 AKRON BATH COPLEY OHIO JT TWP 5.8387% 0.016218% 1,573,027.67 255.12 30 7,653.60
2 013544FR7 ALBUQUERQUE N MEX HOSP REV 3.4419% 0.009561% 1,574,262.10 150.51 30 4,515.30
3 01354FBA3 ALBUQUERQUE N MEX EDL FACS REV 4.5119% 0.012533% 2,355,598.00 295.23 30 8,856.90
4 01728ACW4 ALLEGHENY CNTY PA HOSP DEV AUT 5.6393% 0.015665% 2,634,789.17 412.73 30 12,381.90
5 017357KD5 ALLEGHENY CNTY PA SAN AUTH 5.8482% 0.016245% 1,089,582.93 177.00 30 5,310.00
6 033267Q81 ANCHORAGE AK TEL REV 5.7000% 0.015833% 1,902,907.50 301.29 30 9,038.70
7 038315CE5 APPLING CNTY GA DEV AUTH 3.7550% 0.010431% 1,144,469.00 119.38 30 3,581.40
8 040654EF8 ARIZONA ST TRANSN BRD HWY REV 5.5577% 0.015438% 1,987,518.00 306.84 30 9,205.20
9 040871CU7 ARKANSAS HSG DEV AGY 5.9920% 0.016644% 1,293,594.00 215.31 30 6,459.30
10 04108UAR7 ARKANSAS ST DEV FIN AUTH 5.2554% 0.014598% 1,521,547.44 222.12 30 6,663.60
11 041826DB1 ARLINGTON TX INDPT SCH DIST 5.7980% 0.016106% 886,283.89 142.74 30 4,282.20
12 047803BB6 ATLANTA GA DOWNTOWN AUTH 3.6820% 0.010228% 1,015,371.00 103.85 30 3,115.50
13 0524735R2 AUSTIN TX UTIL SYS REV 5.8780% 0.016328% 913,597.50 149.17 30 4,475.10
14 052473T96 AUSTIN TEX UTIL SYS REV 5.7080% 0.015856% 2,946,223.00 467.14 30 14,014.20
15 052473U29 AUSTIN TEX UTIL SYS REV 5.8280% 0.016189% 3,161,664.90 511.83 30 15,354.90
16 059195FM4 BALTIMORE MD CTFS PARTN 5.5873% 0.015520% 1,696,903.25 263.36 30 7,900.80
17 069903AB8 BASS OKLA MEM BAPTIST HOSP 5.4615% 0.015171% 6,874,926.18 1,042.97 30 31,289.10
18 070129AH4 BASS BROOK MINN POLLUTN CTL 5.7642% 0.016012% 2,651,833.21 424.61 30 12,738.30
19 097437KG1 BOISE CITY IDAHO SCH DIST 5.6283% 0.015634% 2,983,257.00 466.41 30 13,992.30
20 097916DD9 BOISE KUNA ID IRR DIST 5.1787% 0.014385% 1,138,259.00 163.74 30 4,912.20
21 101565PT0 BOULDER LARIMER & WELD CNTYS 5.1731% 0.014370% 1,465,397.50 210.57 30 6,317.10
22 101565PU7 BOULDER LARIMER & WELD CNTYS 5.2336% 0.014538% 2,766,095.00 402.13 30 12,063.90
23 106214AA7 BRAZOS RIVER AUTH TEX REV 5.0255% 0.013960% 1,161,204.00 162.10 30 4,863.00
24 106214BL2 BRAZOS RIVER AUTH TEX REV 4.6419% 0.012894% 2,359,148.00 304.19 30 9,125.70
25 106457CZ5 BRECKENRIDGE MICH 5.6523% 0.015701% 495,409.50 77.78 30 2,333.40
26 110227BH7 BRISTOL TENN HEALTH & EDL FACS 5.6850% 0.015792% 1,954,351.58 308.62 30 9,258.60
27 115029CP3 BROWARD CNTY FLA HSG FIN AUTH 10.2286% 0.028413% 4,557,940.66 1,295.04 30 38,851.20
28 117151FD7 BRUNSWICK GA WTR & SWR REV 5.5408% 0.015391% 2,133,898.00 328.43 30 9,852.90
29 117151FF2 BRUNSWICK GA WTR 5.6440% 0.015678% 1,615,378.50 253.26 30 7,597.80
30 119282BD2 BUENA VISTA MICH SCH DIST 5.7892% 0.016081% 2,632,482.30 423.33 30 12,699.90
31 121342AT6 BURKE CNTY GA 3.3656% 0.009349% 5,004,643.87 467.88 30 14,036.40
32 130173H59 CALIFORNIA EDL FACS AUTH REV 5.4323% 0.015090% 970,409.00 146.43 30 4,392.90
33 130623KM2 CALIFORNIA ST 5.3779% 0.014939% 1,769,783.50 264.38 30 7,931.40
34 130624CM9 CALIFORNIA ST 5.6328% 0.015647% 1,452,462.33 227.26 30 6,817.80
35 130624JH3 CALIFORNIA ST 5.4807% 0.015224% 2,222,098.00 338.30 30 10,149.00
36 130663XZ5 CALIFORNIA ST DEPT WATER RES 4.4655% 0.012404% 5,104,303.60 633.15 30 18,994.50
37 13068GNG7 CALIFORNIA ST 5.5824% 0.015507% 5,220,292.82 809.49 30 24,284.70
38 13068GNY8 CALIFORNIA ST 5.2034% 0.014454% 2,018,078.00 291.69 30 8,750.70
39 132813AR7 CAMDEN CNTY N J MUN UTIL AUTH 4.5582% 0.012662% 1,987,646.80 251.67 30 7,550.10
40 149056AT0 CATAWBA CNTY NC HOSP 5.7058% 0.015850% 2,880,429.75 456.54 30 13,696.20
41 167592AZ7 CHICAGO ILL O HARE INTL ARPT 3.0286% 0.008413% 2,553,170.20 214.79 30 6,443.70
42 167592BR4 CHICAGO ILL O HARE INTL ARPT 3.3770% 0.009381% 2,992,258.80 280.69 30 8,420.70
43 17902HAM7 CLACKAMAS CNTY ORE HEALTH FAC 5.3649% 0.014902% 2,972,796.30 443.02 30 13,290.60
44 185705EY2 CLERMONT CNTY OHIO HOSP FACS 5.6449% 0.015680% 4,192,533.78 657.40 30 19,722.00
45 186343HJ1 CLEVELAND OHIO 5.3853% 0.014959% 1,982,855.92 296.62 30 8,898.60
46 186406BZ6 CLEVELAND OHIO ST UNIV GEN 5.3147% 0.014763% 1,010,397.33 149.16 30 4,474.80
47 186432SF8 CLEVELAND OHIO WTRWKS REV 5.6051% 0.015570% 2,029,953.56 316.06 30 9,481.80
48 186432SH4 CLEVELAND OHIO WTRWKS REV 5.6076% 0.015577% 1,016,296.78 158.30 30 4,749.00
49 188702MD3 CLINTONDALE MICH CMNTY SCHS 5.6388% 0.015663% 1,023,428.17 160.30 30 4,809.00
50 196477E41 COLORADO HSG FIN AUTH 8.3678% 0.023244% 2,188,938.00 508.79 30 15,263.70
51 196630SP3 COLORADO SPRINGS COLO UTILS 3.7557% 0.010432% 810,193.70 84.52 30 2,535.60
52 196630UN5 COLORADO SPRINGS COLO UTILS 5.5282% 0.015356% 3,468,476.68 532.62 30 15,978.60
53 196630VW4 COLORADO SPRINGS COLO UTILS 5.4799% 0.015222% 2,090,171.33 318.17 30 9,545.10
54 196722AL6 COLORADO ST COLLEGES BRD 5.6224% 0.015618% 2,123,921.85 331.71 30 9,951.30
55 196797DJ0 COLORADO WTR RES PWR DEV AUTH 5.6391% 0.015664% 1,278,354.04 200.24 30 6,007.20
56 207757KF1 CONNECTICUT ST SPL TAX OBLIG 5.3612% 0.014892% 4,572,036.00 680.88 30 20,426.40
57 228129TP7 CROWLEY TEX INDPT SCH DIST 5.6286% 0.015635% 1,497,388.50 234.12 30 7,023.60
58 232265LD8 CUYAHOGA CNTY OHIO HOSP REV 5.6095% 0.015582% 1,869,127.52 291.25 30 8,737.50
59 235037SE9 DALLAS FORT WORTH TEX REGL 4.1496% 0.011527% 3,441,621.99 396.70 30 11,901.00
60 235037VB1 DALLAS FORT WORTH TEX REGL 5.2650% 0.014625% 1,195,840.67 174.89 30 5,246.70
61 235037VD7 DALLAS FORT WORTH TEX REGL 5.3647% 0.014902% 1,186,740.67 176.85 30 5,305.50
62 235037VF2 DALLAS FORT WORTH TEX RGL ARPT 5.4645% 0.015179% 2,355,441.33 357.54 30 10,726.20
63 246343CC9 DELAWARE RIV JT TOLL BRDG 4.3253% 0.012015% 2,426,908.00 291.59 30 8,747.70
64 249001TC2 DENTON TEX INDPT SCH DIST 5.4995% 0.015276% 2,516,447.91 384.42 30 11,532.60
65 249181JS8 DENVER COLO CITY & CNTY ARPT 6.1733% 0.017148% 8,219,646.65 1,409.51 30 42,285.30
66 250343DB3 DESCHUTES & JEFFERSON CNTYS OR 5.3560% 0.014878% 1,030,332.33 153.29 30 4,598.70
67 258887AF5 DOUGLAS CNTY COLO 4.7915% 0.013310% 3,247,322.00 432.21 30 12,966.30
68 259561BU1 DOUGLAS CNTY WASH PUB UTIL 5.8182% 0.016162% 2,690,171.33 434.78 30 13,043.40
69 259852CM1 DOUGLASVILLE DOUGLAS CNTY GA 5.2444% 0.014568% 1,421,126.96 207.03 30 6,210.90
70 270416CC2 EAST ALA HEALTH CARE AUTH 5.5697% 0.015471% 1,560,763.50 241.47 30 7,244.10
71 270598DV4 EAST BATON ROUGE LA MTG FIN 10.2297% 0.028416% 3,350,721.32 952.13 30 28,563.90
72 274137RK6 EAST ORANGE N J 5.1565% 0.014324% 1,675,686.25 240.02 30 7,200.60
73 311452BK1 FARMINGTON N. MEX PWR REV 5.2450% 0.014569% 7,288,270.01 1,061.86 30 31,855.80
74 311457CH6 FARMINGTON N MEX UTIL SYS REV 5.5007% 0.015280% 518,473.11 79.22 30 2,376.60
75 341535LP5 FLORIDA ST BRD ED PUB ED 4.3038% 0.011955% 1,179,291.50 140.99 30 4,229.70
76 353100CN8 FRANKLIN CNTY MO REORG SCH 5.3158% 0.014766% 720,623.63 106.41 30 3,192.30
77 353172A25 FRANKLIN CNTY OHIO 4.7203% 0.013112% 1,194,830.94 156.67 30 4,700.10
78 353186YZ6 FRANKLIN CNTY OHIO HOSP REV 5.3548% 0.014874% 1,520,222.03 226.12 30 6,783.60
79 360244FJ1 FULTON DE KALB GA HOSP AUTH 5.5011% 0.015281% 1,999,451.33 305.53 30 9,165.90
80 373382PQ7 GEORGIA ST 5.1105% 0.014196% 1,147,849.00 162.95 30 4,888.50
81 373382PR5 GEORGIA ST 5.2011% 0.014448% 1,142,159.00 165.01 30 4,950.30
82 381523HJ1 GOLDSMITH MET DIST COLO 5.5381% 0.015384% 883,497.51 135.91 30 4,077.30
83 381523HL6 GOLDSMITH MET DIST COLO 5.6082% 0.015578% 828,063.81 129.00 30 3,870.00
84 381523HM4 GOLDSMITH MET DIST COLO 5.6082% 0.015578% 803,347.42 125.15 30 3,754.50
85 386442PH4 GRAND RIVER DAM OKLA 5.2093% 0.014470% 2,305,805.95 333.66 30 10,009.80
86 396482AQ4 GREENVILLE S C HOSP SYS HOSP 4.1010% 0.011392% 2,240,238.00 255.20 30 7,656.00
87 414003NM1 HARRIS CNTY TEX 4.3252% 0.012014% 2,137,525.54 256.81 30 7,704.30
88 432320CH0 HILLSBOROUGH CNTY FLA IDA PCR 5.0197% 0.013943% 2,114,935.72 294.90 30 8,847.00
89 432321AC1 HILLSBOROUGH CNTY FLA INDL DEV 3.4159% 0.009489% 3,395,351.47 322.18 30 9,665.40
90 438669PT4 HONOLULU HAWAII CITY & CNTY 5.4796% 0.015221% 2,031,498.00 309.22 30 9,276.60
91 442397CD5 HOUSTON TEX HSG FIN CORP 9.5474% 0.026521% 1,818,055.55 482.16 30 14,464.80
92 442436MG3 HOUSTON TEX WTR & TWR SYS REV 3.4497% 0.009583% 1,487,745.93 142.56 30 4,276.80
93 442436MH1 HOUSTON TEX WTR & SWR SYS REV 3.4104% 0.009473% 255,926.32 24.24 30 727.20
94 447024A67 HUNTSVILLE ALA 4.0953% 0.011376% 2,380,683.00 270.82 30 8,124.60
95 451182FD6 IDAHO FALLS ID RFDG ELEC 5.5475% 0.015410% 471,119.00 72.60 30 2,178.00
96 451182FG9 IDAHO FALLS IDAHO 5.7376% 0.015938% 1,207,370.89 192.43 30 5,772.90
97 451182FH7 IDAHO FALLS IDAHO 5.7677% 0.016021% 728,778.00 116.76 30 3,502.80
98 451297LL7 IDAHO HSG AGY 9.2149% 0.025597% 686,356.88 175.69 30 5,270.70
99 45201HXZ2 ILLINOIS HEALTH FACS AUTH REV 0.7724% 0.002145% 194,274.20 4.17 30 125.10
100 45201HYB4 ILLINOIS HEALTH FACS AUTH REV 3.7463% 0.010406% 1,189,830.22 123.82 30 3,714.60
101 453424AY9 INDEPENDENCE CNTY AR POLLUTN 6.0539% 0.016816% 2,051,893.56 345.05 30 10,351.50
102 455052FX3 INDIANA ST HSG FIN AUTH 9.5104% 0.026418% 635,121.93 167.79 30 5,033.70
103 455356AU9 INDIANAPOLIS IND RESOURCE 5.0127% 0.013924% 2,348,007.90 326.94 30 9,808.20
104 455356AW5 INDIANAPOLIS IND RESOURCE 5.1025% 0.014174% 458,491.66 64.98 30 1,949.40
105 455356AX3 INDIANAPOLIS IND RESOURCE REC 5.0128% 0.013924% 2,455,608.31 341.93 30 10,257.90
106 458840FW0 INTERMOUNTAIN PWR AGY UTAH PWR 3.9541% 0.010984% 7,183,044.00 788.96 30 23,668.80
107 458840GS8 INTERMOUNTAIN PWR AGY UTAH PWR 3.4398% 0.009555% 2,358,428.00 225.35 30 6,760.50
108 458840MV4 INTERMOUNTAIN PWR AGY UTAH PWR 4.1341% 0.011484% 1,611,650.60 185.08 30 5,552.40
109 458840TZ8 INTERMOUNTAIN PWR AGY UTAH PWR 5.7285% 0.015912% 1,058,029.00 168.36 30 5,050.80
110 467577BW1 JACKSON CNTY MO SINGLE FAMILY 10.5077% 0.029188% 2,339,100.23 682.74 30 20,482.20
111 472736XB8 JEFFERSON CNTY COLO SCH DIST 5.6228% 0.015619% 2,198,102.90 343.32 30 10,299.60
112 473027BH2 JEFFERSON CNTY KY HOME MTG REV 8.9550% 0.024875% 614,505.41 152.86 30 4,585.80
113 474656EN1 JEFFERSON PARISH LA HOME MTG 9.5830% 0.026619% 629,062.94 167.45 30 5,023.50
114 480256AW6 JONESBORO AR PUB UTIL SYS 5.3429% 0.014842% 992,667.33 147.33 30 4,419.90
115 484790FK1 KANSAS CITY KANS UTIL SYS REV 5.5891% 0.015525% 1,023,705.08 158.93 30 4,767.90
116 490311AN7 KENT CNTY MICH REFUSE DISP SYS 4.4573% 0.012381% 1,184,092.33 146.61 30 4,398.30
117 491265DX9 KENTUCKY DEV FIN AUTH HOSP REV 5.4183% 0.015051% 1,229,684.00 185.08 30 5,552.40
118 491552FE0 KENTUCKY ST TPK AUTH ECON DEV 5.8789% 0.016330% 2,054,345.41 335.48 30 10,064.40
119 491552GN9 KENTUCKY ST TPK AUTH ECNM DEV 5.5803% 0.015501% 764,189.25 118.46 30 3,553.80
120 494748QM1 KING CNTY WASH 5.5144% 0.015318% 5,398,670.00 826.95 30 24,808.50
121 494787AN4 KING CNTY WASH PUB HOSP DIST 5.7274% 0.015910% 2,189,778.00 348.38 30 10,451.40
122 499523LD8 KNOX CNTY TENN HEALTH EDL & HS 5.7691% 0.016025% 1,050,635.67 168.37 30 5,051.10
123 515300GD7 LANE CNTY OR SCH DIST 4 5.2596% 0.014610% 2,601,452.09 380.07 30 11,402.10
124 517138PD9 LARIMER CNTY COLO SCH 5.8283% 0.016190% 3,454,920.33 559.34 30 16,780.20
125 539243NU5 LIVONIA MICH PUB SCHS DIST 5.8578% 0.016272% 971,816.33 158.13 30 4,743.90
126 543583BQ0 LARAIN CNTY OHIO HOSP REV 5.7064% 0.015851% 1,630,914.53 258.52 30 7,755.60
127 544508FS8 LOS ANGELES CALIF DEPT WTR & 5.7316% 0.015921% 8,216,917.88 1,308.21 30 39,246.30
128 544652UL2 LOS ANGELES CA WSTWTR SYS REV 5.5316% 0.015366% 1,500,813.50 230.61 30 6,918.30
129 545170BU5 LOS ANGELES CNTY CALIF TRANS 4.0199% 0.011166% 1,202,639.00 134.29 30 4,028.70
130 548100NL6 LOWER COLO RIV AUTH TEX REV 2.6538% 0.007372% 1,129,434.00 83.26 30 2,497.80
131 548100QU3 LOWER COLO RIV AUTH TEX REV 3.7017% 0.010282% 1,202,869.00 123.68 30 3,710.40
132 574058BF9 MARYLAND ENVIRONMENTAL SVC REV 5.6772% 0.015770% 1,246,102.92 196.51 30 5,895.30
133 5742157T0 MARYLAND ST HEALTH & HIGHER ED 6.3076% 0.017521% 2,142,778.00 375.44 30 11,263.20
134 574216BG1 MARYLAND ST HEALTH & HIGHER 5.5351% 0.015375% 2,035,990.10 313.04 30 9,391.20
135 574216EQ6 MARYLAND ST HLTH & HIGHER EDL 5.4448% 0.015124% 2,478,545.42 374.86 30 11,245.80
136 575566WK6 MASSACHUSETTS BAY TRANSN AUTH 4.6495% 0.012915% 2,300,424.67 297.11 30 8,913.30
137 575823PC7 MASSACHUSETTS ST 3.4456% 0.009571% 3,319,306.65 317.69 30 9,530.70
138 575823Y52 MASSACHUSETTS ST 5.6197% 0.015610% 2,231,064.67 348.28 30 10,448.40
139 575823YR4 MASSACHUSETTS ST 4.3076% 0.011966% 2,103,452.70 251.69 30 7,550.70
140 575826AU6 MASSACHUSETTS ST 5.4285% 0.015079% 5,081,178.33 766.19 30 22,985.70
141 5758505D0 MASSACHUSETTS ST HEALTH & EDL 5.8244% 0.016179% 2,209,458.00 357.47 30 10,724.10
142 575850MR0 MASSACHUSETTS ST HEALTH & EDL 3.4497% 0.009582% 3,394,147.68 325.24 30 9,757.20
143 575850UT7 MASSACHUSETTS ST HEALTH & EDL 4.8539% 0.013483% 1,790,653.50 241.44 30 7,243.20
144 587844JD4 MERCER CNTY N J IMPT AUTH REV 4.0898% 0.011361% 1,167,869.00 132.68 30 3,980.40
145 587844PM7 MERCER CNTY N J IMPT AUTH REV 5.6618% 0.015727% 1,079,589.00 169.79 30 5,093.70
146 592659TU0 METROPOLITAN WRT DIST SOUTHN 4.2585% 0.011829% 2,295,464.67 271.53 30 8,145.90
147 592663KK3 METROPOLITAN WTR DIST SOUTHN 5.3182% 0.014773% 1,412,942.50 208.73 30 6,261.90
148 594553EA3 MICHIGAN MUN BD AUTH 5.5980% 0.015550% 1,239,148.74 192.69 30 5,780.70
149 59465CJK4 MICHIGAN ST HOSP FIN AUTH REV 5.1132% 0.014203% 590,016.72 83.80 30 2,514.00
150 594695SC3 MICHIGAN ST 5.5000% 0.015278% 1,267,187.50 193.60 30 5,808.00
151 600293FD1 MILLCREEK TWP PA SCH DIST FGIC 6.1478% 0.017077% 1,193,913.93 203.89 30 6,116.70
152 603745JC5 MINNEAPOLIS MINN HOSP REV 5.1868% 0.014408% 2,942,357.92 423.93 30 12,717.90
153 603745JS0 MINNEAPOLIS MINN HOSP REV 5.3858% 0.014961% 2,069,745.78 309.64 30 9,289.20
154 603924AT8 MINNEAPOLIS MINN CMNTY DEV AGY 5.7890% 0.016080% 3,142,311.97 505.30 30 15,159.00
155 60635RBJ5 MISSOURI ST HEALTH & EDL FACS 5.7537% 0.015982% 6,413,460.66 1,025.03 30 30,750.90
156 60635RCM7 MISSOURI ST HEALTH & EDL FACS 5.4043% 0.015012% 2,153,174.67 323.23 30 9,696.90
157 60635RCQ8 MISSOURI ST HEALTH & EDL FACS 5.6357% 0.015655% 4,784,578.62 749.02 30 22,470.60
158 60635RCR6 MISSOURI ST HEALTH & EDL FACS 5.6748% 0.015763% 2,617,048.08 412.53 30 12,375.90
159 6069003Q9 MISSOURI ST HEALTH & EDL FACS 5.4657% 0.015182% 2,983,373.23 452.95 30 13,588.50
160 606909BB4 MISSOURI ST HSG DEV COMMN & ST 9.3175% 0.025882% 881,465.54 228.14 30 6,844.20
161 611533EB2 MONROEVILLE PA HOSP AUTH HOSP 6.4096% 0.017804% 4,243,636.00 755.56 30 22,666.80
162 61213HDD6 MONTANA ST BRD INVT WORKERS 5.5169% 0.015325% 3,866,128.58 592.48 30 17,774.40
163 616114AT1 MOORSEVILLE N C GRADED SCH 5.5259% 0.015350% 1,086,644.00 166.80 30 5,004.00
164 639672DV3 NEBRASKA MTG FIN FD SINGLE FAM 9.6055% 0.026682% 529,831.72 141.37 30 4,241.10
165 639672ES9 NEBRASKA MTG FIN FD SINGLE FAM 9.9270% 0.027575% 560,270.59 154.49 30 4,634.70
166 644693CE1 NEW HAMPSHIRE ST TPK SYS REV 7.3271% 0.020353% 1,456,901.91 296.52 30 8,895.60
167 646038UU1 NEW JERSEY ST 5.1109% 0.014197% 2,479,557.39 352.02 30 10,560.60
168 646088CJ1 NEW JERSEY ST HWY AUTH GARDEN 3.4185% 0.009496% 1,174,089.00 111.49 30 3,344.70
169 646133AN8 NEW JERSEY ST TRAN CORP 5.1279% 0.014244% 3,403,339.50 484.78 30 14,543.40
170 646139CF0 NEW JERSEY ST TPK AUTH TPK 6.7813% 0.018837% 2,275,567.00 428.65 30 12,859.50
171 647634XX7 NEW ORLEANS LA RFDG 5.7180% 0.015883% 2,205,573.50 350.32 30 10,509.60
172 649706DW5 NEW YORK N Y CITY MUN WTR FIN 3.9690% 0.011025% 1,492,822.36 164.59 30 4,937.70
173 649706XD5 NY CITY MUN WTR FIN AUTH 5.5716% 0.015477% 2,075,260.22 321.18 30 9,635.40
174 649831VK7 NEW YORK ST DORM AUTH REVS 3.9698% 0.011027% 2,419,748.00 266.83 30 8,004.90
175 649881B99 NEW YORK ST MED CARE FACS FIN 5.2864% 0.014684% 2,675,702.75 392.91 30 11,787.30
176 658196PM6 NORTH CAROLINA EASTN MUN PWR 5.5783% 0.015495% 6,434,814.00 997.08 30 29,912.40
177 658196PQ7 NORTH CAROLINA EASTN MUN PWR 5.6098% 0.015583% 5,447,795.00 848.91 30 25,467.30
178 658196QG8 NORTH CAROLINA EASTN MUN PWR 5.6044% 0.015568% 4,912,026.65 764.69 30 22,940.70
179 658202G34 NORTH CAROLINA MED CARE 5.4896% 0.015249% 1,066,257.33 162.59 30 4,877.70
180 658203GS7 NORTH CAROLINA MUN PWR AGY 3.4206% 0.009502% 5,529,280.25 525.38 30 15,761.40
181 658203QS6 NORTH CAROLINA MUN PWR AGY 5.4447% 0.015124% 4,367,956.00 660.62 30 19,818.60
182 658203QX5 NORTH CAROLINA MUN PWR AGY 5.6194% 0.015610% 4,060,306.19 633.80 30 19,014.00
183 677525JT5 OHIO ST AIR QUALITY DEV AUTH 5.3215% 0.014782% 6,066,778.34 896.79 30 26,903.70
184 67756BAF7 OHIO ST EDL FAC REV 5.6847% 0.015791% 2,256,278.00 356.28 30 10,688.40
185 6776582R6 OHIO ST WTR DEV AUTH REV 5.4445% 0.015124% 1,516,098.50 229.29 30 6,878.70
186 678467HW4 OKEMOS MI PUB SCH DIST 5.5418% 0.015394% 1,707,055.19 262.78 30 7,883.40
187 67910HEA4 OKLAHOMA ST MUN PWR AUTH 5.4414% 0.015115% 2,134,898.00 322.69 30 9,680.70
188 67910HFA3 OKLAHOMA ST MUN PWR AUTH PWR 5.3322% 0.014812% 1,638,831.00 242.74 30 7,282.20
189 67910HFB1 OKLAHOMA ST MUN PWR AUTH PWR 5.4858% 0.015238% 1,601,263.50 244.00 30 7,320.00
190 681793TD7 OMAHA PUB PWR DIST NEB ELEC 3.4229% 0.009508% 2,868,372.50 272.72 30 8,181.60
191 685913KF1 OREGON ST DEPT GENL SVCS 5.4728% 0.015202% 617,139.41 93.82 30 2,814.60
192 686509RS1 ORLANDO FLA UTILS COMMN WTR&EL 2.8022% 0.007784% 5,170,180.50 402.43 30 12,072.90
193 686662YC5 ORLEANS PARISH LA SCH BRD 5.3313% 0.014809% 4,201,712.00 622.24 30 18,667.20
194 709140CN5 PENNSYLVANIA ST 5.5585% 0.015440% 1,470,657.00 227.07 30 6,812.10
195 709235GG4 PENNSYLVANIA ST UNIV 5.6823% 0.015784% 2,492,941.94 393.49 30 11,804.70
196 720175FR4 PIEDMONT MUN PWR AGY SC 5.5555% 0.015432% 2,256,758.00 348.26 30 10,447.80
197 721863EG9 PIMA CNTY ARIZ UNI SCH DIST 5.2089% 0.014469% 2,330,018.30 337.14 30 10,114.20
198 729505AZ0 PLYMOUTH CNTY MASS 6.1971% 0.017214% 3,252,957.00 559.97 30 16,799.10
199 741710AK3 PRINCE GEORGES CNTY MD HOSP 6.0387% 0.016774% 1,112,519.00 186.62 30 5,598.60
200 745160JJ1 PUERTO RICO COMWLTH AQUEDUCT 4.8687% 0.013524% 5,667,756.00 766.52 30 22,995.60
201 745392DQ0 PULASKI CNTY AR HOSP REV 5.8672% 0.016298% 1,838,032.97 299.56 30 8,986.80
202 757290BG5 REDDING CALIF JT PWRS FING AUT 5.5836% 0.015510% 3,078,462.23 477.47 30 14,324.10
203 759136DL5 REGIONAL TRANSN DIST COLO 5.5199% 0.015333% 3,724,718.05 571.12 30 17,133.60
204 75913WBC0 REGIONAL WASTE SYS INC ME 4.6887% 0.013024% 426,772.15 55.58 30 1,667.40
205 76716EAR5 RIO LINDA CALIF UN SCH DIST 5.3213% 0.014781% 1,191,142.33 176.07 30 5,282.10
206 769125AQ8 RIVERSIDE CNTY CALIF TRANSN 5.6494% 0.015693% 1,532,004.64 240.41 30 7,212.30
207 774285QP8 ROCKWALL TEX INDPT SCH DIST 5.6367% 0.015658% 1,765,732.73 276.47 30 8,294.10
208 778260DY2 ROSS CNTY OHIO HOSP REV 5.5023% 0.015284% 1,255,516.24 191.90 30 5,757.00
209 779465BB8 ROWAN CNTY N C INDL FACS & 5.5380% 0.015383% 2,538,599.80 390.52 30 11,715.60
210 789566CL8 ST GEORGE UT WTR REV 5.6623% 0.015729% 2,365,777.52 372.11 30 11,163.30
211 790420AR4 ST JOHNS CNTY FLA 5.3689% 0.014914% 1,929,571.33 287.77 30 8,633.10
212 791748AK2 ST LOUIS PARK MINN HEALTH CARE 6.9522% 0.019312% 4,170,771.50 805.44 30 24,163.20
213 791750DE9 SAINT LOUIS PARK MINN HOSP REV 5.4146% 0.015041% 1,617,838.60 243.33 30 7,299.90
214 791750DF6 SAINT LOUIS PARK MINN 5.4146% 0.015041% 1,363,606.82 205.09 30 6,152.70
215 791750DG4 SAINT LOUIS PARK MINN 5.5643% 0.015456% 1,146,329.00 177.18 30 5,315.40
216 792070AF1 ST LUCIE CNTY FLA POLLUTN CTL 3.7272% 0.010353% 2,802,503.55 290.16 30 8,704.80
217 792888HF9 ST PAUL MIN HSG & REDEV AUTH 6.5242% 0.018123% 1,022,832.33 185.37 30 5,561.10
218 792888HU6 SAINT PAUL MN HSG & REDEV AUTH 5.5421% 0.015395% 1,001,696.67 154.21 30 4,626.30
219 795747YW8 SALT RIVER PROJ ARIZ AGRIC 2.6590% 0.007386% 5,863,459.28 433.09 30 12,992.70
220 796242DH5 SAN ANTONIO TX ARPT SYS REV 5.7912% 0.016087% 1,166,948.45 187.72 30 5,631.60
221 796242DL6 SAN ANTONIO TX ARPT SYS REV 5.7912% 0.016087% 1,166,948.45 187.72 30 5,631.60
222 797669DX3 SAN FRNACISCO CALIF BAY AREA 5.4319% 0.015088% 1,768,003.50 266.76 30 8,002.80
223 798111AQ3 SAN JOAQUIN HILLS CALIF 7.1881% 0.019967% 8,513,985.00 1,699.97 30 50,999.10
224 804404AK7 SAULT STE MARIE CHIPPEWA 7.4895% 0.020804% 3,491,253.35 726.33 30 21,789.90
225 810453NJ5 SCOTTSDALE AZ 5.5499% 0.015416% 511,049.50 78.78 30 2,363.40
226 813115AG7 SECOND COLUMBUS HSG DEV CORP 6.7251% 0.018681% 1,300,565.89 242.96 30 7,288.80
227 826775DB1 SIKESTON MO ELEC REV 5.6107% 0.015585% 4,352,221.07 678.31 30 20,349.30
228 837140SA1 SOUTH CAROLINA PUB SVC 3.4405% 0.009557% 2,978,897.50 284.69 30 8,540.70
229 837147JM0 SOUTH CAROLINA ST PUB SVC AUTH 5.5133% 0.015315% 1,025,939.00 157.12 30 4,713.60
230 840480CC9 SOUTH SUBN PK & REC, DIST COLO 5.4282% 0.015078% 1,068,741.39 161.15 30 4,834.50
231 841420BR2 SOUTHEAST MO 5.4956% 0.015266% 1,037,877.89 158.44 30 4,753.20
232 841513HJ6 SOUTHEAST TEX HSG FIN CORP 6.1768% 0.017158% 2,669,463.89 458.02 30 13,740.60
233 842475PT6 SOUTHERN CA PUB PWR AUTH PROJ 5.6938% 0.015816% 2,918,421.48 461.58 30 13,847.40
234 873543DY5 TACOMA WASH REFUSE UTIL REV 5.7978% 0.016105% 2,147,766.34 345.90 30 10,377.00
235 875288AT9 TAMPA FLA UTIL TAX & SPL REV 3.4455% 0.009571% 2,545,502.30 243.63 30 7,308.90
236 882555RC1 TEXAS MUN PWR AGY REV 5.6879% 0.015800% 1,539,023.50 243.16 30 7,294.80
237 882716AC7 TEXAS ST VET LAND BRD-DIV 5.8180% 0.016161% 1,651,566.25 266.91 30 8,007.30
238 882716XF5 TEXAS ST 5.6235% 0.015621% 5,231,252.25 817.16 30 24,514.80
239 896029RH0 TRIBOROUGH BRDG & TUNL AUTH N 5.4506% 0.015141% 1,168,379.00 176.90 30 5,307.00
240 898138CJ9 TRUMBULL CNTY OHIO HOSP REV 5.5226% 0.015340% 1,996,947.68 306.34 30 9,190.20
241 914029W74 UNIVERSITY AL UNIV REVS 5.4650% 0.015181% 1,012,805.67 153.75 30 4,612.50
242 914113LR4 UNIVERISTY CALIF REVS 4.2066% 0.011685% 3,358,650.61 392.46 30 11,773.80
243 914113RM9 UNIVERISTY CA REVS 5.5187% 0.015330% 976,754.00 149.73 30 4,491.90
244 914391PA9 UNIVERSITY LOUISVILLE KY REVS 5.6287% 0.015635% 1,966,577.27 307.48 30 9,224.40
245 915217KH5 UNIVERSITY VA 5.4188% 0.015052% 999,417.33 150.44 30 4,513.20
246 925717DG2 VICKSBURG MICH CMNTY SCHS 4.7185% 0.013107% 1,173,205.67 153.77 30 4,613.10
247 927691AC9 VIRGIN ISLANDS WTR & PWR AUTH 6.0202% 0.016723% 2,316,158.00 387.33 30 11,619.90
248 939741LK8 WASHINGTON ST 4.7184% 0.013107% 2,723,981.60 357.02 30 10,710.60
249 939741MZ4 WASHINGTON ST 5.5710% 0.015475% 1,651,891.00 255.63 30 7,668.90
250 939741NT7 WASHINGTON ST 5.6871% 0.015797% 2,663,943.33 420.83 30 12,624.90
251 939741NX8 WASHINGTON ST 5.6991% 0.015831% 2,078,578.00 329.05 30 9,871.50
252 939741QL1 WASHINGTON ST 5.5810% 0.015503% 3,101,412.00 480.81 30 14,424.30
253 939828MU0 WASHINGTON ST PUB PWR SUPPLY 5.5284% 0.015357% 823,198.50 126.42 30 3,792.60
254 939830HH1 WASHINGTON ST PUB PWR SUPPLY 5.7514% 0.015976% 1,130,229.00 180.57 30 5,417.10
255 954710CE7 WEST NEW YORK NJ MUN UTIL 5.4383% 0.015106% 1,010,422.16 152.64 30 4,579.20
256 954710CG2 WEST NEW YORK NJ MUNI AIRPORT 5.4384% 0.015107% 1,072,978.01 162.09 30 4,862.70
257 955023FD3 WEST OTTAWA MICH 5.4976% 0.015271% 1,919,490.90 293.13 30 8,793.90
258 955023FE1 WEST OTTAWA MICH PUB SCH DIST 5.5976% 0.015549% 967,588.74 150.45 30 4,513.50
259 95640EBF1 WEST VY CITY UTAH MUN BLDG 5.4111% 0.015031% 1,691,999.35 254.32 30 7,629.60
260 973129AR0 WINCHESTER VA INDL DEV AUTH 3.7024% 0.010284% 2,326,868.00 239.30 30 7,179.00
261 976710RK1 WISCONSIN HSG FIN AUTH REV 10.2185% 0.028385% 4,315,465.00 1,224.93 30 36,747.90
262 976710SR5 WISCONSIN HSG FIN AUTH REV 10.3682% 0.028801% 2,353,750.30 677.89 30 20,336.70
263 983366BG9 WYOMING MUN PWR AGY PWR 5.4637% 0.015177% 1,340,637.16 203.47 30 6,104.10
--------------
2,673,528.00
==============
264
265
266
267
268
</TABLE>
<TABLE>
<CAPTION>
PURCHASES SETTLING IN JULY
==============================================
ADJUSTED
PURCHASE MATURITY SETTLEMENT ACCRUED INT PAY CALL CALL O.I.D.
ROW ISSUER PAR COUPON PRICE DATE DATE INTEREST DATE DATE PRICE BASIS
- --- --------- ------------------- --------- ------ ------- ---------- ------- --------- --------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A B C D E F G H I J K L M
275 58463RCU0 MEDICAL UNIV S C HOS 1,000,000 5.500 100.000 07/01/2008 07/15/93 6,422 01/01/94
276 58463RCV8 MEDICAL UNIV S C HOS 1,000,000 5.500 99.472 07/01/2009 07/15/93 6,722 01/01/94
277 13068GNG7 CALIFORNIA ST 1,750,000 5.375 97.334 12/01/2019 07/21/93 36,580 12/01/93 94.543
278 509438EG8 LAKE CNTY OHIO HOSP 2,500,000 5.500 97.928 08/15/2020 07/21/93 7,639 08/15/93 97.805
279 770251CN4 ROBBINSDALE MINN HOS 3,500,000 5.500 98.500 05/15/2023 07/28/93 22,993 11/15/93 98.502
280 098867CV4 BOONE CNTY MO 2,000,000 5.500 97.500 08/01/2009 07/29/93 8,556 08/01/93
281 939830MU6 WASHINGTON ST PUB PW 4,000,000 5.650 99.496 07/01/2008 07/29/93 17,578 01/01/94 99.502
282 810694NN5 SCRANTON LACKAWANNA 1,000,000 7.000 108.936 07/01/2019 07/30/93 5,639 01/01/94 97.984
283
284
285
286
287
</TABLE>
<TABLE>
<CAPTION>
CONTINUED.. PURCHASES SETTLING IN JULY
===============================================
DAILY MARKET VALUE NO. GROSS
YIELD AND OF DAYS INCOME
(360 DAY ACCRUED DAILY IN BASE FOR BASE
ROW ISSUER YIELD YEAR) INCOME INCOME PERIOD PERIOD
- --- --------- --------------------------------- --------- ----------- ------------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A B C O P Q R S T
275 58463RCU0 MEDICAL UNIV S C HOS 5.4543% 0.015151% 1,006,722.22 152.53 16 2,440.48
276 58463RCV8 MEDICAL UNIV S C HOS 5.5000% 0.015278% 1,006,722.22 153.80 16 2,460.80
277 13068GNG7 CALIFORNIA ST 5.4693% 0.015192% 1,739,924.86 264.34 10 2,643.40
278 509438EG8 LAKE CNTY OHIO HOSP 5.8052% 0.016126% 2,455,838.89 396.02 10 3,960.20
279 770251CN4 ROBBINSDALE MINN HOS 5.6349% 0.015653% 3,470,577.06 543.24 3 1,629.72
280 098867CV4 BOONE CNTY MO 5.5000% 0.015278% 2,008,555.56 306.86 2 613.72
281 939830MU6 WASHINGTON ST PUB PW 5.6990% 0.015831% 3,997,645.78 632.85 2 1,265.70
282 810694NN5 SCRANTON LACKAWANNA 6.2952% 0.017487% 1,094,998.89 191.48 1 191.48
------------
15,205.50
============
283
284
285
286
287
</TABLE>
<TABLE>
<CAPTION>
SALES SETTLING IN JULY
================================================
ADJUSTED
SALE MATURITY SETTLEMENT ACCRUED INT PAY CALL CALL O.I.D.
ROW CUSIP NO. ISSUER PAR COUPON PRICE DATE DATE INTEREST DATE DATE PRICE BASIS
- --- --------- ------------------- --------- ------ ------- ---------- ------- --------- -------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A B C D E F G H I J K L M
294 709235GG4 PENNSYLVANIA
ST UNIV 750,000 5.500 97.640 08/15/2016 07/01/93 15,583 08/15/93 94.987
295 976710SR5 WISCONSIN HSG
FIN AUT 18,700,000 12.587 01/01/2014 07/01/93 07/01/93 12.280
296 840480CC9 SOUTH SUBN PK
& REC 1,000,000 6.250 106.579 12/15/2013 07/02/93 2,951 12/15/93 12/15/2002 101.000
297 442397CD5 HOUSTON TEX HSG FIN 30,000 10.000 104.000 09/15/2014 07/15/93 883 09/15/93
298 455052FX3 INDIANA ST
HSG FIN A 10,000 10.200 106.325 01/01/2016 07/15/93 510 07/01/93
299 639672DV3 NEBRASKA MTG FIN FD 125,000 10.125 104.575 01/15/2014 07/15/93 5,836 07/15/93
300 639672ES9 NEBRASKA MTG FIN FD 50,000 10.375 103.825 02/15/2014 07/15/93 1,960 08/15/93
301 792888HU6 SAINT PAUL MN
HSG & 1,000,000 5,500 99.253 05/15/2013 07/19/93 9,167 11/15/93 98.507
302 685913KF1 OREGON ST DEPT GENL 600,000 5.500 100.565 01/15/2015 07/20/93 13,750 07/15/93 95.506
303 097437KG1 BOISE CITY IDAHO
SCH 500,000 5.400 99.202 07/30/2014 07/21/93 1,200 07/30/93 97.779
304 250343DB3 DESCHUTES &
JEFFERSO............ 500,000 5.600 102.100 06/01/2009 07/21/93 4,667 12/01/93
305 509438EG8 LAKE CNTY OHIO HOSP 500,000 5.500 97.928 08/15/2020 07/21/93 1,528 08/15/93 97.805
306 709235GG4 PENNSYLVANIA ST
UNIV 1,750,000 5.500 97.640 08/15/2016 07/21/93 36,361 08/15/93 94.987
307 097437KG1 BOISE CITY IDAHO
SCH 500,000 5.400 99.202 07/30/2014 07/23/93 1,200 07/30/93 97.779
308 509438EG8 LAKE CNTY OHIO
HOSP 1,000,000 5.500 97.928 08/15/2020 07/23/93 3,056 08/15/93 97.805
309 515300GD7 LANE CNTY OR SCH
DIS 570,000 5.375 100.776 07/01/2009 07/23/93 2,553 01/01/94
310 792070AF1 ST LUCIE CNTY
FLA PO 2,450,000 11.000 111.638 10/01/2019 07/27/93 67,375 10/01/93 10/01/94 103.000
311 149056AT0 CATAWBA CNTY NC
HOSP 750,000 6.000 103.243 10/01/2017 07/30/93 11,250 10/01/93 10/01/2002 102.000 96.295
312 616114AT1 MOORESVILLE N C
GRAD 1,000,000 6.350 107.077 10/01/2014 07/30/93 15,875 10/01/93 10/01/2002 102.000
313
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
</TABLE>
<TABLE>
<CAPTION>
CONTINUED.. SALES SETTLING IN JULY
===============================================
DAILY MARKET VALUE NO. GROSS
YIELD AND OF DAYS INCOME
(360 DAY ACCRUED DAILY IN BASE FOR BASE
ROW CUSIP NO. ISSUER YIELD YEAR) INCOME INCOME PERIOD PERIOD
- --- --------- --------------------------------- --------- ----------- ------------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A B C O P Q R S T
294 709235GG4 PENNSYLVANIA ST UNIV 5.6823% 0.015784% 747,882.58 118.05 -30 (3,541.50)
295 976710SR5 WISCONSIN HSG FIN AUT 10.3682% 0.028801% 2,353,750.30 677.89 -30 (20,336.70)
296 840480CC9 SOUTH SUBN PK & REC 5.4282% 0.015078% 1,068,741.39 161.15 -29 (4,673.35)
297 442397CD5 HOUSTON TEX HSG FIN 9.5474% 0.026521% 32,083.33 8.51 -16 (136.16)
298 455052FX3 INDIANA ST HSG FIN A 9.5104% 0.026418% 11,142.49 2.94 -16 (47.04)
299 639672DV3 NEBRASKA MTG FIN FD 9.6055% 0.026682% 136,554.57 36.44 -16 (583.04)
300 639672ES9 NEBRASKA MTG FIN FD 9.9270% 0.027575% 53,872.17 14.86 -16 (237.76)
301 792888HU6 SAINT PAUL MN HSG & 5.5421% 0.015395% 1,001,696.67 154.21 -12 (1,850.52)
302 685913KF1 OREGON ST DEPT GENL 5.4728% 0.015202% 617,139.41 93.82 -11 (1,032.02)
303 097437KG1 BOISE CITY IDAHO SCH 5.6283% 0.015634% 497,209.50 77.73 -10 (777.30)
304 250343DB3 DESCHUTES & JEFFERSO 5.3560% 0.014878% 515,166.17 76.64 -10 (766.40)
305 509438EG8 LAKE CNTY OHIO HOSP 5.8052% 0.016126% 491,167.78 79.20 -10 (792.00)
306 709235GG4 PENNSYLVANIA ST UNIV 5.6823% 0.015784% 1,745,059.36 275.44 -10 (2,754.40)
307 097437KG1 BOISE CITY IDAHO SCH 5.6283% 0.015634% 497,209.50 77.73 -8 (621.84)
308 509438EG8 LAKE CNTY OHIO HOSP 5.8052% 0.016126% 982,335.56 158.41 -8 (1,267.28)
309 515300GD7 LANE CNTY OR SCH DIS 5.2596% 0.014610% 576,975.76 84.30 -8 (674.40)
310 792070AF1 ST LUCIE CNTY FLA PO 3.7272% 0.010353% 2,802,503.55 290.16 -4 (1,160.64)
311 149056AT0 CATAWBA CNTY NC HOSP 5.7058% 0.015850% 785,571.75 124.51 -1 (124.51)
312 616114AT1 MOORESVILLE N C GRAD 5.5259% 0.015350% 1,086,644.00 166.80 -1 (166.80)
---------------
(41,543.66)
===============
313
314
315
316
317
318
319
Computed on a Yield to Maturity or Yield to Call Basis............. 2,647,189.84
===============
320
321
322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
</TABLE>
<PAGE>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
CALCULATION OF YIELD QUOTATIONS AS OF JULY 31, 1993
Value of hypothetical pre-existing account
with exactly one share at the beginning
of the period...............................................$1.000000000
Value of same account (excluding capital changes)
at the end of the seven-day period.......................... 1.000405577
------------
Net change in account value.................................$0.000405577
============
Base Period Return:
Net change in account value divided by
beginning account value ($0.000405577 / 1.00000000) 0.000405577
============
Annualized Current Net Yield................................ 2.11% (a)
============
Effective Yield............................................. 2.14% (b)
============
Footnotes:
- ----------------------------------------------------------------------------
(a) Annualized Current Net Yield = (0.000405577 x (365/7) )
365/7
(b) Effective Yield = ( 0.000405577 + 1) -1
Exhibit 19(a)(i)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
hereby severally constitutes and appoints Otis F. Hilbert and Randall L.
Wetherille, and each of them singly, his or her true and lawful attorneys-in-
fact and agents, with power of substitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign and
affix the undersigned's name to 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 such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing necessary or
incidental to the performance and execution of the powers herein granted,
hereby ratifying anf confirming all that said attorneys-in-fact and agents, or
any of them or their substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amendment to
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Rolf F. Bjelland
- -------------------- Trustee and President August 26, 1993
Rolf F. Bjelland (Principal Executive
Officer)
/s/ Wade M. Voigt
- -------------------- Treasurer August 26, 1993
Wade M. Voigt (Principal Financial
and Accounting Officer)
/s/ Charles W. Arnason
- -------------------- Trustee August 26, 1993
Charles W. Arnason
/s/ Herbert F. Eggerding, Jr.
- -------------------- Trustee August 26, 1993
Herbert F. Eggerding, Jr.
/s/ Ruth E. Randall
- -------------------- Trustee August 26, 1993
Ruth E. Randall
Exhibit 19(a)(ii)
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
Power of Attorney of Director and Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned trustee and/or officer of
The Lutheran Brotherhood Family of Funds, a Delaware business trust, does
hereby make, constitute and appoint Otis F. Hilbert, Randall L. Wetherille and
James M. Odland, and each or any of them, the undersigned's true and lawful
attorneys-in-fact, with power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name
as such director and/or officer of such Company to a Registration Statement or
Registration Statements, on Form N-1A or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by such
Company with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, of shares of such Company,
and to file the same, with all exhibits thereto and other supporting
documents, with such Commission, granting unto such attorneys-in-fact, and
each of them, full power and authority to do and perform any and all acts
necessary or incidental to the performance and execution of the powers herein
expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 19th day of
October, 1993.
/s/ Connie M. Levi
- --------------------------
Connie M. Levi
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 61 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated December 12, 1997, relating to
the financial statements and financial highlights appearing in the October
31, 1997 Annual Report to Shareholders of the Lutheran Brotherhood Family of
Funds, which is also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings
"Financial Highlights" and "Independent Accountants" in the Prospectus and
under the heading "Independent Accountants" in the Statement of Additional
Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
December 30, 1997
[7 SOLID SQUARE BULLETS]
- -------------------------------------------
LUTHERAN BROTHERHOOD
- -------------------------------------------
FAMILY OF FUNDS
- -------------------------------------------
[ART OF 3D SQUARE WITH TREE, ACORN AND LEAF
ON EACH OF ITS THREE VISIBLE FACETS.]
Cross bar reads:
GROWTH [DIAMOND] INCOME [DIAMOND] STABILITY
Prospectus
December 30, 1997
Annual Report
October 31, 1997
[LUTHERAN BROTHERHOOD LOGO HERE]
Table of Contents
Lutheran Brotherhood Family of Funds
Prospectus and Annual Report
Our Message To You Page 1
A Guide to Your Prospectus and Annual Report Page 2
Economic and Market Overview Page 3
Portfolio Management Reviews Pages 4-19
Choosing Investments That are Right for You Page 20
AssetMatchSM Questionnaire Pages 21-24
LB Family of Funds Prospectus Page P-1 through P-52
Refer to Page 3 of the prospectus for
a more detailed list of prospectus contents.
LB Family of Funds Annual Report Page A-1 through A-58
[ART OF 3D SQUARE WITH TREE, ACORN AND LEAF
ON EACH OF ITS THREE VISIBLE FACETS.]
Our Message to You
Dear Shareholder:
Enclosed is your December 30, 1997, Lutheran Brotherhood Family of
Funds Prospectus and Annual Report for the fiscal year ended
October 31, 1997.
In the past year, investors earned strong returns from stocks and
bonds -- which far outpaced their historical averages. The ride was
not always a smooth one, however. Frequently, market rallies were
followed by temporary set backs as investors second-guessed the
future of economic growth, inflation, and interest rates.
Fortunately, the markets rebounded quickly when investors saw that
U.S. economic fundamentals remained strong.
Perhaps most unnerving was the correction that took place late
in October of 1997 -- when currency and economic problems in the Far
East jolted investors around the globe. The 7% drop in the Dow Jones
Industrial Average on October 27 was eerily reminiscent of the 23%
price plunge of October ten years earlier. In 1997, as in 1987,
however, stock prices rapidly regained the ground they'd lost.
Investors who braved the record-setting correction of 1987 have been
well rewarded: From their low in October 1987 to their high in
August 1997, stock prices gained more than 350%. We've provided more
information on current market and economic conditions in the pages
that follow.
Lutheran Brotherhood has recently taken several steps to help you
make the most of your investments. You may now choose from two
classes of mutual fund shares. Class A Shares have a reduced maximum
sales charge of 4%, which you pay when you make your investment.
Class B Shares have no up-front sales charge, but have a contingent
deferred sales charge that you pay if you redeem your shares in the
first five years. The amount of this charge declines over time --
from 5% for shares you sell within a year, to 0% for shares you sell
after five years.
Having shares with different types of charges should make it easier
to tailor your investments to your individual time horizon.
We've also developed two computer software programs that will help
you take the guesswork out of your financial planning. With Lutheran
Brotherhood's AssetMatchSM, program, you and your LBSC registered
representative can create a diversified mix of mutual funds
appropriate for your particular objectives, time horizon, and
tolerance for risk. And with the Lutheran Brotherhood Retirement
Planner program, available from your LBSC registered representative,
you can determine the income you'll need when you retire. You'll
also be able to determine if you're on course to meet that
retirement goal and what steps you can take to assure your goal is
achieved.
For more information regarding AssetMatch, the Lutheran Brotherhood
Retirement Planner, or the new share classes of the Lutheran
Brotherhood Family of Funds, please contact your LBSC registered
representative, or call us toll free at 1-800-328-4552. We will also
be happy to answer any questions you might have about the Lutheran
Brotherhood Family of Funds Annual Report.
Sincerely,
Sincerely,
/s/ Rolf F. Bjelland
Rolf F. Bjelland
President and Chairman
Lutheran Brotherhood Family of Funds
This page does not constitute part of the prospectus or annual
report.
A Guide to Your LB Family of Funds Prospectus
At first glance, a prospectus might seem intimidating and
difficult to understand. To make sure you don't overlook key
information included in the prospectus, here are a few tips:
Mutual fund goals and
objectives
The investment objectives of the mutual funds, as well as the
strategies that back these objectives, are stated in the prospectus.
You can also learn more about the specific types of investments that
are included in each fund's portfolio. It's important to make sure
the fund's goals and objectives match your own.
Associated risks
Investing always involves some level of risk. The risk a fund is
willing to assume is referred to as "Investment Risks" in the
prospectus. Re-examine your financial goals and make sure the fund's
risk tolerance matches your own.
Performance record
To learn about past performance of your LB Family of Funds
investments, refer to "Total Investment Return at Net Asset Value"
in the section "Financial Highlights." You will find a 10-year track
record, except in the case of newer funds. Keep in mind, past
performance is no guarantee of future results.
Summary of fund expenses
To help investors monitor mutual fund expenses, locate the table
listing sales and management fees.
Tax information
The LB Family of Funds Prospectus also contains the
policy and tax status regarding each fund's distributions.
Shareholder services
This section describes shareholder services and
how they work. If you have questions, call LBSC toll free or contact
your LBSC registered representative.
A new prospectus is issued each year, and it's important to review
the updates for revisions that may affect you. After reviewing your
prospectus, file it with your other financial documents for future
reference.
Looking for specifics?
Read the annual report
(Pages A1-A58)
The LB Family of Funds prospectus describes the types of investments
and general policies that portfolio managers must use in the day-to-
day management of the funds. The annual and semi-annual reports
provide you with specifics on how the portfolio managers are going
about the task. Following are a few important things to review:
Portfolio of Investments
(Pages A3-A43)
Here's where you find out exactly what your fund owns. This section
lists the individual securities held in the portfolio along with
their value. The individual securities are grouped by investment
category.
Portfolio Manager Reviews
(Pages 4-19)
Overview
This section describes the economic climate and market environment
of the preceding six- or 12-month period, and how those factors
affected fund performance. Portfolio managers also discuss specific
strategies used to deal with these market factors, and any resulting
changes in the fund's portfolio.
A fund portfolio composition chart is provided, showing the
categories of securities owned, by percentage, at the end of the
perio D. Also provided is a summary of the fund's top
holdings or credit ratings of securities held in the portfolio.
Fund Performance and Benchmark Comparisons
How much has your investment grown? The 10-year performance of each
fund and its corresponding market index are charted for your review.
Included are one-, five- and 10-year annualized total returns. For
newer funds without five- or 10-year performance, returns since
inception are reported. Keep in mind, past performance is not an
indicator of future results.
This page does not constitute part of
the prospectus or annual report.
Economic and Market Overview October 31, 1997
Prices for stocks and bonds increased strongly in the 12 months
ended October 31, 1997. During that time, economic growth and
corporate earnings remained healthy, while inflation and interest
rates eased. Despite occasional volatility, the Standard & Poor's
500 Index earned a total return of 32.09%, and the Lehman Brothers
Aggregate Bond Index returned 8.89%.
For much of the year, investors worried that economic growth would
accelerate enough to push inflation and interest rates higher.
Instead, while growth remained strong, inflation and long-term
interest rates fell. The only Federal Reserve interest rate increase
during the period came in March of 1997 -- a modest increase of
0.25% in the federal funds rate. This caused bond prices to resume
their advance, and the yield on 30-year U.S. Treasury bonds declined
to 6.15% by the end of October.
Strength at Home, Weakness Abroad
For U.S. stocks, this was the third consecutive year of total
returns that nearly tripled their historical yearly average. Stocks
benefited from further corporate earnings growth as well as strong
demand and reduced supply. Despite an active initial public
offerings market, mergers and stock buyback programs helped shrink
the supply of outstanding stock.
Returns were more modest for stocks overseas. Although stocks in
Europe advanced strongly on continued economic growth, stocks in
Japan suffered from ongoing economic woes --
aggravated by currency problems among its trading partners in
the Far East. These divergent performances produced a 12-month total
return of 4.92% for the Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index.
Sector Performance
During the year, individual market sectors took somewhat different
paths. At the end of 1996, concerns about slower economic growth and
earnings drove investors to stocks of large companies with proven
earnings. However, by the second quarter of 1997, with prices for
large-company stocks quite expensive, investors saw that economic
growth was continuing and turned to the better values of small- and
medium-company stocks. By the third quarter, stocks of smaller firms
were outperforming large-company shares.
By the end October, prices for U.S. Treasury bonds had outperformed
prices for corporate and municipal bonds. With close ties to company
earnings, price gains for corporate bonds were limited by investor
doubts about the sustainability of the economy. After outperforming
Treasuries when interest rates were rising, municipals
underperformed when falling interest rates caused greater supply
relative to demand. Municipals and corporates also lagged as the
flight to quality during October's foreign currency crisis caused
heavy demand for U.S. Treasuries from investors worldwide.
More Moderate Gains Likely
Although exports to the Far East only account for about 5% of total
U.S. goods and services, many American companies may experience a
decrease in earnings if those exports recede. Earnings gains may
also decelerate from slower U.S. economic growth.
Overall, however, the investment picture looks bright. Modest
economic growth should mean reasonable inflation and interest rates
- -- which would help sustain the current economic expansion. With the
U.S. budget in balance for the first time in many years, there is
now more money available for the private capital investments needed
to keep an expansion alive. The extra wealth accumulated from the
strong investment returns of recent years should also help support
new growth.
Of course, stock prices remain high versus future earnings. With
weaker earnings, stock prices may advance less strongly and remain
vulnerable to periodic corrections. Given the positive economic
backdrop, however, this may simply mean that stock market returns
are closer to their historical average of 10%, instead of the 20% to
30% returns of recent years. Inflation fears may occasionally weaken
bond prices in the year to come. However, lower budget deficits and
slower growth should keep inflation at bay, and leave interest rates
at or below today's levels. As a result, U.S. bonds should remain
attractive to investors here and abroad.
This page is part of the annual report.
LB Opportunity Growth Fund
[GRAPHIC OMITTED: PHOTO OF Michael A. Binger]
Michael A. Binger is a Chartered Financial Analyst and was named
portfolio manager for the LB Opportunity Growth Fund in October
1994. He has been with Lutheran Brotherhood since 1987. Prior to
managing this fund, Mike served as portfolio manager for Lutheran
Brotherhood's Convertible Securities Portfolio.
Investment Objective:
To seek long-term growth of capital by investing in small-company
stocks.
Fund Facts
Inception Date: 1/8/93
Shareholder
Accounts: 57,440
Total Assets
(in millions): $311.4
As stock prices rose in the past year, stocks of smaller companies
participated in the advance -- earning returns that were much higher
than their historical averages. Because investors were often
concerned about future earnings, however, they tended to favor
stocks of larger companies with proven earnings. This was especially
true late in 1996 and early in 1997. Then, as stocks of larger
companies grew more expensive, investors turned to the more
attractive values in stocks of smaller firms -- those with market
capitalizations of less than $1 billion. This helped the small-cap
sector rebound sharply.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Short-Term Securities 5.6%
Common Stocks 94.4%
[GRAPHIC OMITTED: Top 10 Holdings]
Top 10 Holdings % of Portfolio
FPA Medical Management, Inc. 2.2%
BMC Industries, Inc. 2.2%
Steiner Leisure Ltd. 2.0%
Cameron Ashley Building Products 2.0%
AXENT Technologies, Inc. 1.9%
Complete Management, Inc. 1.9%
ICN Pharmaceuticals, Inc. 1.7%
Signature Resorts, Inc. 1.7%
Atrix Laboratories, Inc. 1.6%
Memtec Ltd., ADR 1.5%
These holdings represent 18.7% of the Fund's total investment
portfolio.
While small-company stocks were out of favor, stocks with market
capitalizations under $250 million -- where the LB Opportunity
Growth Fund focuses its investments -- were hit especially hard. By
making minor adjustments to the Fund's portfolio to mitigate this
effect, while maintaining basic investment strategies that have
outperformed over time, we improved the Fund's performance
significantly in the second half of the reporting period.
Underperformance in the first half, however, caused the Fund to
underperform for the period as a whole.
For the 12 months ended October 31, 1997, the Fund had a total
return (based on NAV) of 7.52%. That compares to an average return
of 26.49% for small-company growth funds tracked by Lipper
Analytical Services and a return of 29.33% for the Russell 2000
Index.
Managing Volatility
During the year we continued to focus on industries with above-
average potential for long-term growth, and companies with unique
products, quality management and strong earnings. We also closely
re-examined every holding in the portfolio to assure none of these
companies were showing signs of long-term earnings problems. We
chose to remain overweighted in technology and health care stocks --
believing these sectors have among the best growth opportunities in
the American economy.
[GRAPHIC BAR CHART OMITTED: Top 10 Sectors]
Top 10 Sectors
Services 9.2%
Drug & Health Care 8.6%
Leisure & Entertainment 7.7%
Healthcare Management 7.1%
Real Estate Investment Trust 6.5%
Oil & Oil Service 6.1%
Computer Software 5.4%
Pollution Control 4.7%
Telecommunications Equipment 4.7%
Electronics 4.5%
These sectors represent 64.5% of the Fund's
total investment portfolio.
To further diversify the Fund in a volatile stock market, we traded
some technology and health care shares for stocks of financial and
energy firms. We made these purchases when prices were especially
attractive, concentrating on real estate investment trusts in the
financial sector and oil exploration and production companies in the
energy sector.
We also added investments in firms with market capitalizations over
$500 million, which should help further reduce the Fund's
volatility. This is a natural evolution for a small-company stock
fund with growing assets and should have little effect on the Fund's
potential for long-term growth.
[GRAPHIC WORM CHART OMITTED: Performance Through October 31, 1997]
Growth of $10,000 Invested Since 1/31/93
INSET BOX ON CHART READS:
LB Opportunity Growth Fund
Annualized Total Returns*
- -----------------------------------------------------
Net Asset Value
Since Inception
1/8/93 17.11%
1 Year 7.52%
Public Offering Price
Since Inception
1/8/93 16.13%
1 Year 3.20%
*See accompanying notes to Portfolio Management Reviews.
Lipper
Average
Small Co.
Growth
LBOGF Russell 2000 Stocks CPI
Month End Total Total Total Total
Date Value Value Value Value
- ----------- ------- ------- ------- -------
1/31/93 $10,000 $10,000 $10,000 $10,000
2/28/93 9,156 9,769 9,608 10,035
3/31/93 9,512 10,086 9,934 10,070
4/30/93 9,267 9,809 9,619 10,098
5/31/93 9,967 10,243 10,127 10,112
6/30/93 10,122 10,307 10,206 10,126
7/31/93 10,055 10,449 10,263 10,126
8/31/93 10,755 10,900 10,737 10,154
9/30/93 11,443 11,208 11,076 10,175
10/31/93 11,831 11,497 11,232 10,217
11/30/93 11,387 11,122 10,886 10,224
12/31/93 11,687 11,503 11,348 10,224
1/31/94 11,964 11,863 11,650 10,252
2/28/94 11,842 11,820 11,643 10,288
3/31/94 11,043 11,197 11,014 10,323
4/30/94 11,121 11,263 11,016 10,337
5/31/94 10,699 11,137 10,778 10,344
6/30/94 10,078 10,762 10,388 10,379
7/31/94 10,433 10,938 10,451 10,407
8/31/94 11,343 11,547 11,048 10,449
9/30/94 11,509 11,508 11,285 10,477
10/31/94 11,942 11,462 11,275 10,484
11/30/94 11,698 10,999 10,848 10,498
12/31/94 11,998 11,295 11,265 10,498
1/31/95 11,476 11,153 11,229 10,540
2/28/95 12,087 11,617 11,539 10,582
3/31/95 12,531 11,816 11,892 10,617
4/30/95 12,619 12,079 12,050 10,652
5/31/95 12,963 12,286 12,232 10,673
6/30/95 14,140 12,924 12,880 10,694
7/31/95 15,716 13,669 13,823 10,694
8/31/95 15,971 13,962 14,062 10,722
9/30/95 16,315 14,212 14,375 10,743
10/31/95 15,350 13,577 13,864 10,778
11/30/95 16,049 14,147 14,366 10,771
12/31/95 16,523 14,521 14,592 10,764
1/31/96 16,249 14,505 14,520 10,827
2/29/96 17,315 14,957 15,088 10,863
3/31/96 17,698 15,267 15,450 10,919
4/30/96 19,393 16,084 16,600 10,961
5/31/96 20,759 16,717 17,262 10,982
6/30/96 19,338 16,030 16,594 10,989
7/31/96 17,630 14,631 15,222 11,010
8/31/96 18,682 15,481 16,109 11,031
9/30/96 20,158 16,086 16,919 11,066
10/31/96 18,614 15,839 16,601 11,101
11/30/96 17,944 16,491 17,108 11,122
12/31/96 18,532 16,923 17,381 11,122
1/31/97 18,887 17,262 17,769 11,157
2/28/97 17,174 16,844 17,149 11,192
3/31/97 15,261 16,049 16,291 11,220
4/30/97 14,535 16,094 16,238 11,234
5/31/97 16,757 17,883 18,111 11,227
6/30/97 17,683 18,651 19,098 11,241
7/31/97 18,686 19,518 20,250 11,255
8/31/97 19,134 19,965 20,663 11,276
9/30/97 21,340 21,426 22,205 11,304
10/31/97 20,013 20,486 21,239 11,332
As you compare performance, please note that the LB Opportunity
Growth Fund's performance reflects the maximum 4% sales charge. The
performance of the Russell 2000 index does not reflect any such
charges. If you were to purchase any of the individual stocks
represented in this index, any sales charges you would pay would
reduce your total return as well.
Positioned for Further Market Fluctuations
If economic growth slows, or accelerates enough to drive interest
rates higher, smaller companies could find it especially hard to
meet their sales and earnings forecasts. The small-cap stock sector
could thus experience more volatility in the months ahead than the
stock market as a whole.
With its focus on buying positions at reasonable prices of quality
companies with niche products, we believe the LB Opportunity Growth
Fund is well positioned to weather such fluctuations. As the Fund
continues to grow, and adds holdings in larger firms for added
liquidity, it should be even better prepared for volatility. We will
continue to take advantage of any weakness in prices to add stocks
of companies with superior growth rates and low price-to-earnings
ratios.
LB Mid Cap Growth Fund
[GRAPHIC OMITTED: PHOTO OF Brian L. Thorkelson]
Brian L. Thorkelson is portfolio manager for the Lutheran Brotherhood
Mid Cap Growth Fund. He joined Lutheran Brotherhood in 1987, working
for five years as a bond trader and another five years as an equity
analyst for several Lutheran Brotherhood portfolios.
Investment Objective:
To seek long-term growth of capital by investing in common stocks of
medium-sized companies.
Fund Facts
Inception Date: 5/30/97
Shareholder
Accounts: 4,204
Total Assets
(in millions): $14.6
As the Fund was launched on May 30, 1997, stocks of medium-sized
companies were ending a period of lackluster performance and
beginning a strong rally that would take them through the summer and
early autumn. Strong economic factors such as growth in corporate
profits, low inflation and moderate interest rates combined with
healthy investor demand to push up prices of medium-capitalization
issues. Though the October market correction dealt a blow to
returns, the Fund still produced strong returns in its first five
months of operation.
From the inception date of May 30, 1997, through October 31, 1997,
the Fund had a total return (based on NAV) of 11.68%. That compares
to an average return of 13.20% for mid-cap growth funds tracked by
Lipper Analytical Services and a return of 14.15% for the Standard &
Poor's 400 Mid-Cap Index.
[GRAPHIC OMITTED: Top 10 Holdings]
Top 10 Holdings % of Portfolio
Outdoor Systems, Inc. 1.8%
MedPartners, Inc. 1.7%
Clear Channel Communications, Inc. 1.5%
Cambridge Technology Partners, Inc. 1.4%
Forest Laboratories, Inc. 1.4%
Southwest Airlines Co. 1.4%
PMI Group 1.3%
Adaptec, Inc. 1.3%
Borders Group, Inc. 1.3%
Avery Dennison Corp. 1.3%
These holdings represent 14.4% of the Fund's total investment
portfolio.
Strong Mid-Cap Sectors
In the second half of the period, energy, financial and technology
holdings performed particularly well for the Fund. Energy firms such
as Diamond Offshore and Cooper Cameron, which specialize in the
construction and servicing of offshore oil drilling rigs, were
especially strong, benefiting from new technology that is taking
exploration into deeper water in search of additional oil deposits.
The Fund's financial holdings, particularly those of regional banks
such as TCF Financial and Summit Bancorp, benefited from lower bond
yields and industry consolidation. Certain technology holdings were
also strong performers, especially computer software and services
holdings, such as Cambridge Technology Partners. Other segments of
the technology sector were somewhat lackluster, especially producers
of semi-conductors, who were negatively impacted by the currency
crisis in Asian countries. These countries represent a major market
for U.S. semi-conductors and should continue to be primary buyers of
exported U.S. technology when the crisis is resolved.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Short-Term Securities 14.4%
Common Stocks 85.6%
Strategies for a Young Fund
The Fund focuses on companies with strong growth in revenues and
earnings, market leadership positions within their industry, and
seasoned management teams. We'll maintain diversification across
most industries and stay relatively sector-neutral to our
competitive universe of mid-cap equity funds. We continue to like
sectors such as technology and health care because the United States
is the leading developer and exporter in these areas, representing
good potential for long-term growth.
If the U.S. economy continues to be strong and greater weakness
surfaces in foreign markets, we may give slightly more emphasis to
retail issues, which are not exposed to foreign economic woes.
However, a quick resolution to the economic problems in the Asian
markets might lead us to give greater emphasis to technology issues,
which would benefit from a healthy economy in the Pacific Rim.
[GRAPHIC BAR CHART OMITTED: Top 10 Sectors]
Top 10 Sectors
Services 13.1%
Bank & Finance 10.6%
Electronics 5.6%
Drugs & Health Care 5.5%
Retail 5.5%
Computers & Office Equipment 4.8%
Healthcare Management 4.6%
Mining & Metals 3.5%
Chemicals 3.5%
Media 3.3%
These sectors represent 60% of the Fund's
total investment portfolio.
A Good Source of Diversification
The Fund is comprised of leading medium-sized U.S. companies, such
as those represented by the Standard & Poor's 400 Mid-Cap index.
Historically, mid-cap stocks have provided somewhat less-volatile
returns than small-cap stocks, but greater return potential than
large-cap stocks. When used in conjunction with a variety of other
asset classes, the Fund should provide an excellent means of
diversification for the long-term, growth investor.
The LB Mid Cap Growth Fund was introduced on May 30, 1997.
Given its limited performance history, the growth of a $10,000
investment in the Fund is not illustrated in this report.
LB World Growth Fund
[GRAPHIC OMITTED: PHOTO OF MARTIN G. WADE]
Martin G. Wade is president of Rowe Price-Fleming, the investment
subadvisor for the LB World Growth Fund. He leads a team of 12
portfolio managers who have managed the assets of the LB World Growth
Fund since its inception in September of 1995. Martin has been
working in research and investment management since 1968 and has been
with Rowe Price Fleming since 1979.
Investment Objective:
To seek long-term growth of capital by investing primarily in common
stocks of established companies outside the United States.
Fund Facts
Inception Date: 9/5/95
Shareholder
Accounts: 17,312
Total Assets
(in millions): $75.1
Stock markets overseas had significantly divergent returns in the
year ended October 31, 1997. Although stocks advanced strongly in
Europe, they fell sharply in Japan and the Far East. This discrepancy
persisted for most of the year, but became greater near the end --
when foreign currency problems in Asia sent stocks tumbling there.
During the period, we underweighted the LB World Growth Fund in
Japanese stocks versus the Morgan Stanley Capital International
Europe, Australia, Far East (EAFE) Index. This -- plus positive
contributions from Latin American stocks, which are not represented
in the Index -- helped the Fund outperform its market benchmark.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Short-Term Securities 6.4%
Common Stocks & Warrants 93.1%
Preferred Stocks 0.5%
For the 12 months ended October 31, 1997, the LB World Growth Fund
had a total return (based on NAV) of 7.38%, compared with a return of
4.92% for the EAFE Index. The Fund underperformed the average return
for international funds tracked by Lipper Analytical Services, which
was 10.40% for the period. This was partly because the Fund had
somewhat higher positions in Southeast Asia than its peers. In
addition, whereas the Fund held growth stocks that lagged after a
long period of outperformance, other international funds focused on
stocks with strong ties to economic growth cycles -- many of which
performed well during the year.
[GRAPHIC OMITTED: Top 10 Holdings]
% of
Top 10 Holdings Country Portfolio
Royal Dutch Petroleum Netherlands 2.6%
National Westminster Bank United Kingdom 2.1%
Novartis AG Switzerland 2.1%
Wolters Kluwer Netherlands 2.0%
SmithKline Beecham plc United Kingdom 1.7%
Telecomunicacoes Brasilias
ADR (USD) Brazil 1.5%
Reed International plc United Kingdom 1.5%
Shell Transport & Trading United Kingdom 1.4%
Elsevier Netherlands 1.4%
Roche Holdings Switzerland 1.4%
These holdings represent 17.7% of the Fund's total investment portfolio.
Out of Harm's Way
When the reporting period began, Japanese stocks accounted for 22.6%
of Fund assets, versus 35% of the EAFE Index. Japanese stocks
performed well early in the period, helped by a boom in exports and a
strong service sector. However, an increase in Japan's sales tax
significantly weakened its economy and stock prices in the months
that followed. During this time we favored Japanese technology
companies and firms with strong export exposure.
Throughout the year, we invested a portion of the Fund's assets in
stocks from Latin America. Although these Latin American holdings
suffered during the October downturn in emerging markets, they
performed extremely well earlier in the year. During the period we
focused the Fund's Latin American investments in Brazil, with an
emphasis on large utility stocks like Telecomunicacoes Brasilias that
are at the center of national privatization reforms.
[GRAPHIC OMITTED: Top 10 Countries]
Top 10 Countries
Japan 21.3%
United Kingdom 16.6%
Netherlands 11.0%
France 7.9%
Switzerland 6.5%
Germany 5.0%
Italy 3.2%
Sweden 3.2%
Hong Kong 2.6%
Brazil 2.4%
These countries represent 79.7% of the
Fund's total investment portfolio.
For most of the period the Fund's weighting in Europe was similar to
the representation of European stocks in the EAFE Index. While
economies in the Far East faltered, economies in Europe made steady
progress -- helping European stocks perform strongly. As in the
United States, stocks in Europe have also benefited from a wave of
mergers and acquisitions. During the period, we continued to find
European stocks with strong potential for earnings growth at
attractive valuations, which added to the Fund's performance.
[GRAPHIC WORM CHART OMITTED: Performance Through October 31, 1997]
Growth of $10,000 Invested Since 9/30/95
INSET BOX ON CHART READS:
LB World Growth Fund
Annualized Total Returns*
- -----------------------------------------------------
Net Asset Value
Since Inception
9/5/95 8.79%
1 Year 7.38%
Public Offering Price
Since Inception
9/5/95 6.80%
1 Year 3.04%
*See accompanying notes to Portfolio Management Reviews.
Morgan
Stanley Lipper
Capital Average
International International
International Stocks
LBWGF EAFE Index Fund CPI
Month End Total Total Total Total
Date Value Value Value Value
- --------- ------- ------- ------- -------
9/30/95 $10,000 $10,000 $10,000 $10,000
10/31/95 9,430 9,734 9,790 10,033
11/30/95 9,508 10,008 9,893 10,026
12/31/95 9,817 10,413 10,203 10,020
1/31/96 10,041 10,458 10,413 10,078
2/29/96 10,108 10,495 10,443 10,111
3/31/96 10,265 10,721 10,625 10,163
4/30/96 10,567 11,035 10,957 10,202
5/31/96 10,522 10,834 10,899 10,222
6/30/96 10,634 10,898 10,975 10,228
7/31/96 10,298 10,582 10,581 10,248
8/31/96 10,444 10,607 10,691 10,268
9/30/96 10,679 10,892 10,919 10,300
10/31/96 10,612 10,783 10,829 10,333
11/30/96 11,093 11,214 11,290 10,352
12/31/96 11,135 11,073 11,320 10,352
1/31/97 10,977 10,688 11,247 10,385
2/28/97 11,090 10,865 11,394 10,418
3/31/97 11,068 10,907 11,421 10,444
4/30/97 11,135 10,967 11,449 10,457
5/31/97 11,869 11,683 12,144 10,450
6/30/97 12,378 12,331 12,702 10,463
7/31/97 12,705 12,533 13,039 10,477
8/31/97 11,531 11,599 12,078 10,496
9/30/97 12,299 12,251 12,839 10,522
10/31/97 11,395 11,311 11,862 10,548
As you compare performance, please note that the LB World Growth
Fund's performance reflects the maximum 4% sales charge. The
performance of the EAFE index does not reflect any such charges. If
you were to purchase any of the individual stocks represented in this
index, any sales charges you would pay would reduce your total return
as well.
A Good Balance
It is important for international investors to look past the market
turbulence of recent months to the long-term prospects for foreign
economies and stock prices. We believe that the LB World Growth Fund
has a good balance between established economies with quality
companies at reasonable valuations, and less-developed markets with
a higher ratio of risk and reward.
With improving growth, rising exports and stable currencies, we
believe stock valuations in Europe remain reasonable. We expect,
therefore, to maintain a large exposure to stock markets there. While
economic prospects in the Far East are less certain, attractive
valuations are beginning to emerge there. This may be especially true
in Japan, which hosts some of the world's most globally-competitive
companies, such as Sony, Canon and Mitsubishi. However, the long-term
outlook for economic growth and stock gains in that region remains
quite strong.
LB Fund
[GRAPHIC OMITTED: PHOTO OF JAMES M. WALLINE]
James M. Walline is a Chartered Financial Analyst and portfolio
manager for the LB Fund. He is a vice president of Lutheran
Brotherhood and has managed the Fund since 1994. He has been with
Lutheran Brotherhood Research Corp. since its inception in 1970.
Investment Objective:
To seek long-term growth of capital by investing in the stocks
of leading U.S. companies.
Fund Facts
Inception Date: 6/2/70
Shareholder
Accounts: 90,042
Total Assets
(in millions): $989.8
With strong gains in stock prices and changing outlooks for the
economy in the past year, investors were cautious, favoring stocks
with solid historical earnings. By maintaining a core group of
companies that dominate their respective industries, and a mix of
investments that could thrive in varying economic climates, the LB
Fund earned healthy returns for the 12 months ended October 31, 1997,
which was comparable with other funds in its class.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Short-Term Securities 1.7%
Common Stocks 98.3%
During that period, the Fund had a total return (based on NAV) of
26.99%. This compared to an average return of 28.26% for growth and
income funds tracked by Lipper Analytical Services. With a sizable
representation in stocks of smaller companies, which performed
especially well in the third quarter of 1997, the S&P 500 Index had a
return of 32.09% for the period.
[GRAPHIC OMITTED: Top 10 Holdings]
Top 10 Holdings % of Portfolio
Halliburton Co. 2.0%
Cisco Systems, Inc. 2.0%
Exxon Corp. 2.0%
Sara Lee Corp. 2.0%
U.S. Bancorp 2.0%
Merck & Co., Inc. 2.0%
Ameritech Corp. 2.0%
SBC Communications, Inc. 2.0%
Dover Corp. 2.0%
Amoco Corp. 2.0%
These holdings represent 20% of the Fund's total investment portfolio.
Strong Performers
For much of the year investors favored stocks of larger firms for
their more reliable earnings and greater liquidity. In the first half
of the period, the LB Fund enjoyed strong performances from leading
financial stocks like MBNA, major health care stocks like Abbott
Laboratories and Johnson & Johnson, and large technology stocks like
Microsoft. As stock prices rose, we traded stocks that had already
met our growth expectations for issues in the same industry sectors
that we believed to have better value.
In the second half of the period, the Fund earned strong returns from
energy stocks like Halliburton, drug stocks like Eli Lilly, Pfizer
and Warner Lambert, and technology stocks like Lucent Technologies.
With stock prices reaching record levels, we took several steps to
limit the Fund's risk. While this somewhat restrained the Fund's
advance during the summer, it helped fulfill the Fund's investment
objectives. We continued to emphasize stocks with attractive values.
With this in mind, we sold shares of Halliburton and Boeing and
bought shares of Household International -- a financial services firm
with a broad range of operations. When stock prices weakened in
August and October, we took the opportunity to add to many existing
positions whose long-term prospects remained strong.
[GRAPHIC BAR CHART OMITTED: Top 10 Sectors]
Top 10 Sectors
Bank & Finance 15.3%
Oil & Oil Service 10.1%
Drugs & Health Care 9.9%
Conglomerates 6.9%
Leisure & Entertainment 5.9%
Household Products 5.8%
Telecommunications Equipment 5.1%
Food & Beverage 5.0%
Retail 5.0%
Telephone & Telecommunications 5.0%
These sectors represent 74% of the Fund's
total investment portfolio.
Growth at a Reasonable Price
With sustained economic growth and low inflation, stock prices for
large companies should continue to rise -- even though they are now
quite high. We expect, therefore, to remain fully invested and
maintain industry sector weightings that are similar to those for the
S&P 500 Index. To achieve those weightings, we will periodically
rebalance the Fund's holdings as some sectors outperform others.
As before, we will focus on companies that provide good value to the
Fund. We will also maintain our emphasis on leading companies within
industry sectors -- looking for firms with excellent long-term growth
prospects that can be purchased at a reasonable price.
[GRAPHIC WORM CHART OMITTED: Performance Through October 31, 1997]
Growth of $10,000 Invested Since 4/30/87
INSET BOX ON CHART READS:
LB Fund
Annualized Total Returns*
- -----------------------------------------------------
Net Asset Value
10 Years 14.26%
5 Years 15.81%
1 Year 26.99%
Public Offering Price
10 Years 13.80%
5 Years 14.87%
1 Year 21.92%
*See accompanying notes to Portfolio Management Reviews.
Lipper
Average
S & P 500 Growth &
LBF Stock Index Income CPI
Month End Total Total Total Total
Date Value Value Value Value
-------- ------- ------- ------- -------
10/31/87 $10,000 $10,000 $10,000 $10,000
11/30/87 9,025 9,173 9,434 10,014
12/31/87 9,649 9,872 10,039 10,012
1/31/88 9,867 10,300 10,447 10,038
2/29/88 10,189 10,761 10,929 10,064
3/31/88 9,858 10,434 10,763 10,107
4/30/88 9,893 10,564 10,852 10,159
5/31/88 9,907 10,632 10,864 10,194
6/30/88 10,300 11,129 11,368 10,237
7/31/88 10,182 11,100 11,292 10,281
8/31/88 9,897 10,708 11,019 10,324
9/30/88 10,281 11,167 11,401 10,393
10/31/88 10,512 11,491 11,595 10,428
11/30/88 10,351 11,308 11,429 10,437
12/31/88 10,541 11,508 11,625 10,454
1/31/89 11,275 12,362 12,293 10,506
2/28/89 11,021 12,034 12,122 10,549
3/31/89 11,314 12,321 12,371 10,610
4/30/89 11,853 12,977 12,877 10,680
5/31/89 12,265 13,475 13,310 10,740
6/30/89 12,158 13,409 13,243 10,766
7/31/89 13,292 14,634 14,139 10,792
8/31/89 13,742 14,905 14,437 10,810
9/30/89 13,700 14,845 14,371 10,844
10/31/89 12,883 14,513 13,959 10,896
11/30/89 13,313 14,794 14,168 10,923
12/31/89 13,345 15,150 14,363 10,940
1/31/90 12,376 14,147 13,545 11,053
2/28/90 12,485 14,304 13,719 11,105
3/31/90 12,839 14,692 14,012 11,165
4/30/90 12,618 14,340 13,670 11,183
5/31/90 13,976 15,708 14,731 11,209
6/30/90 14,061 15,615 14,713 11,270
7/31/90 13,989 15,576 14,598 11,313
8/31/90 12,846 14,153 13,441 11,417
9/30/90 12,168 13,467 12,785 11,512
10/31/90 12,160 13,424 12,588 11,582
11/30/90 12,798 14,276 13,325 11,608
12/31/90 13,086 14,674 13,712 11,608
1/31/91 13,728 15,328 14,377 11,677
2/28/91 14,611 16,397 15,316 11,695
3/31/91 14,877 16,801 15,671 11,712
4/30/91 14,958 16,857 15,684 11,729
5/31/91 15,643 17,559 16,312 11,764
6/30/91 14,772 16,763 15,622 11,799
7/31/91 15,533 17,564 16,277 11,816
8/31/91 16,003 17,959 16,650 11,851
9/30/91 15,736 17,661 16,500 11,903
10/31/91 16,069 17,921 16,752 11,920
11/30/91 15,484 17,176 16,092 11,955
12/31/91 17,374 19,142 17,684 11,964
1/31/92 17,115 18,807 17,680 11,981
2/28/92 17,294 19,026 17,979 12,024
3/31/92 16,855 18,657 17,668 12,085
4/30/92 16,975 19,228 17,945 12,102
5/31/92 17,132 19,294 18,057 12,120
6/30/92 16,722 19,011 17,694 12,163
7/31/92 17,232 19,812 18,285 12,189
8/31/92 16,917 19,386 17,939 12,224
9/30/92 17,154 19,612 18,153 12,259
10/31/92 17,489 19,703 18,267 12,302
11/30/92 18,234 20,345 18,941 12,319
12/31/92 18,381 20,600 19,227 12,311
1/31/93 18,735 20,790 19,444 12,371
2/28/93 18,795 21,051 19,588 12,415
3/31/93 19,339 21,497 20,094 12,458
4/30/93 19,012 21,002 19,726 12,493
5/31/93 19,486 21,529 20,187 12,510
6/30/93 19,551 21,599 20,250 12,528
7/31/93 19,381 21,535 20,232 12,528
8/31/93 19,953 22,331 20,972 12,562
9/30/93 19,920 22,159 20,960 12,588
10/31/93 20,123 22,640 21,257 12,640
11/30/93 19,600 22,400 20,968 12,649
12/31/93 19,978 22,680 21,425 12,649
1/31/94 20,689 23,467 22,094 12,684
2/28/94 20,125 22,808 21,663 12,727
3/31/94 19,147 21,818 20,755 12,770
4/30/94 19,192 22,117 20,950 12,788
5/31/94 19,407 22,442 21,152 12,796
6/30/94 18,875 21,892 20,669 12,840
7/31/94 19,442 22,634 21,238 12,875
8/31/94 20,145 23,547 22,049 12,927
9/30/94 19,805 22,967 21,559 12,961
10/31/94 20,101 23,503 21,792 12,970
11/30/94 19,282 22,631 20,990 12,987
12/31/94 19,296 22,963 21,213 12,987
1/31/95 19,764 23,576 21,516 13,039
2/28/95 20,323 24,477 22,323 13,091
3/31/95 20,687 25,209 22,897 13,135
4/30/95 21,294 25,963 23,458 13,178
5/31/95 21,993 26,962 24,215 13,204
6/30/95 22,714 27,590 24,724 13,230
7/31/95 23,725 28,526 25,535 13,230
8/31/95 23,461 28,583 25,680 13,265
9/30/95 24,345 29,786 26,474 13,291
10/31/95 24,391 29,700 26,180 13,334
11/30/95 25,519 30,980 27,332 13,326
12/31/95 25,479 31,578 27,810 13,317
1/31/96 26,195 32,673 28,567 13,395
2/29/96 26,516 32,954 28,947 13,438
3/31/96 26,652 33,277 29,317 13,508
4/30/96 27,172 33,783 29,745 13,560
5/31/96 27,642 34,618 30,304 13,586
6/30/96 27,481 34,753 30,262 13,595
7/31/96 26,154 33,230 28,967 13,621
8/31/96 26,861 33,922 29,758 13,647
9/30/96 28,263 35,825 31,126 13,690
10/31/96 28,686 36,835 31,755 13,733
11/30/96 30,775 39,605 33,880 13,759
12/31/96 29,867 38,821 33,460 13,759
1/31/97 31,746 41,270 34,882 13,803
2/28/97 31,693 41,572 35,087 13,846
3/31/97 30,455 39,859 33,817 13,881
4/30/97 32,311 42,254 35,068 13,898
5/31/97 33,926 44,794 37,218 13,890
6/30/97 35,365 46,805 38,666 13,907
7/31/97 37,980 50,531 41,570 13,924
8/31/97 35,850 47,691 40,027 13,950
9/30/97 37,536 50,319 42,049 13,985
10/31/97 36,428 48,658 40,539 14,020
As you compare performance, please note that the LB Fund's
performance reflects the maximum 4% sales charge. The performance of
the S&P 500 index does not reflect any such charges. If you were to
purchase any of the individual stocks represented in this index, any
sales charges you would pay would reduce your total return as well.
LB High Yield Fund
[GRAPHIC OMITTED: PHOTO OF THOMAS N. HAAG]
Thomas N. Haag, an assistant vice president of Lutheran Brotherhood,
is a Chartered Financial Analyst and portfolio manager for the LB
High Yield Fund. He has managed the Fund since January 1992, and has
been with Lutheran Brotherhood since 1986.
Investment Objective:
To seek high current income and growth of capital by investing
primarily in high-yielding ("junk") corporate bonds.
Fund Facts
Inception Date: 4/3/87
Shareholder
Accounts: 57,840
Total Assets
(in millions): $862.9
In an environment of falling interest rates and positive economic
growth, the returns for high-yield corporate bonds far outpaced those
of other income-oriented securities in the past year.
High-yielding corporate bonds performed strongly during most of the
year, though they were hit hard when bond prices fell from February
to April, and when foreign economic problems rocked U.S. stocks in
October.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Common Stocks and Stock Warrants 3.0%
Short-Term Securities 2.7%
Corporate Bonds 80.9%
Convertible Preferred Stocks 4.5%
Non-Convertible Preferred Stocks 8.9%
Among the best performers were zero-coupon bonds and bonds of media
and telecommunications companies, where the LB High Yield Fund has
been heavily invested for some time. By holding these issues, and
keeping the average maturity of its investments on the long side, the
Fund earned a competitive return for the 12 months ended October 31,
1997.
Over that time the Fund earned a total return (based on NAV) of
14.43%. That compares with an average return of 14.47% for high-yield
bond funds tracked by Lipper Analytical Services, and a return of
13.72% for the Lehman Brothers High-Yield Index.
Adding Stability
We've invested a large part of the Fund in media and
telecommunications issues because we believe deregulation in that
industry offers these securities the potential for strong
performance. The somewhat lower average credit quality and longer
average maturities of these issues make them more vulnerable to price
corrections, but also give them stronger upside price potential.
[GRAPHIC OMITTED: Top 10 Industries]
Top 10 Industries
Broadcasting 10.7%
Telecommunications 8.8%
Bank & Finance 8.3%
Telephone &
Telecommunications 8.2%
Oil & Gas 5.4%
Paper & Forest Products 3.8%
Publishing & Printing 2.9%
Leisure & Entertainment 2.9%
Hospital Management 2.8%
Retail (Food) 2.7%
These industries represent 56.5% of the Fund's total
investment portfolio.
During the spring and summer, we took advantage of rebounding prices
in the bond market to trim the Fund's media and telecommunications
issues. This, we hoped, would reduce volatility in the Fund's share
price if the outlook for interest rates and the broader financial
markets remained uncertain. In order to give the Fund added
stability, we purchased debt of firms with higher credit ratings and
slightly shorter maturities. This included issues of financial and
energy companies, as well as companies whose earnings are tied to
economic growth. Despite these changes, the Fund remained heavily
committed to the media and telecommunications sectors, as well as to
investments with longer maturities.
Good Returns With Less Volatility
If the economy remains healthy and inflation and interest rates
remain stable, we believe the LB High Yield Fund should perform well
in the coming year. High-yield corporate bonds should thrive in this
environment -- especially those of firms with earnings tied to the
economy. We've recently added debt from firms in "light cyclical"
industries that can benefit even if economic growth slows.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: MOODY'S BOND QUALITY
RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 0.0%
Aa 0.0%
A 0.0%
Baa 2.9%
Ba 13.1%
B 63.0%
Caa 11.5%
Ca 0.0%
C 0.0%
Not Rated 9.5%
We continue to favor the extra return potential from media and
telecommunications issues and may add investments there if prices
become more attractive. Conversely, if their prices rise
significantly, we may take further profits in those issues. In the
meantime, we will maintain positions in higher-quality issues. We
think these investments, combined with a continued emphasis on
yields, should help the Fund earn healthy returns with somewhat less
volatility.
[GRAPHIC WORM CHART OMITTED: Performance Through October 31, 1997]
Growth of $10,000 Invested Since 4/30/87
INSET BOX ON CHART READS:
LB High Yield Fund
Annualized Total Returns*
- -----------------------------------------------------
Net Asset Value
10 Years 11.44%
5 Years 12.09%
1 Year 14.43%
Public Offering Price
10 Years 10.98%
5 Years 11.18%
1 Year 9.90%
*See accompanying notes to Portfolio Management Reviews.
Lipper
Lehman High Average
LBHYLD Yield Index High Current CPI
Month End Total Total Total Total
Date Value Value Value Value
- ---------- ------- ----------- ------------ -------
10/31/87 $10,000 $10,000 $10,000 $10,000
11/30/87 9,901 10,288 10,234 10,014
12/31/87 10,080 10,536 10,322 10,012
1/31/88 10,452 10,888 10,641 10,038
2/28/88 10,788 11,241 10,934 10,064
3/31/88 10,663 11,124 10,890 10,107
4/30/88 10,678 11,208 10,956 10,159
5/31/88 10,649 11,225 10,985 10,194
6/30/88 10,897 11,389 11,208 10,237
7/31/88 10,965 11,464 11,320 10,281
8/31/88 10,931 11,447 11,332 10,324
9/30/88 11,045 11,591 11,434 10,393
10/31/88 11,160 11,731 11,574 10,428
11/30/88 11,160 11,801 11,589 10,437
12/31/88 11,324 11,856 11,649 10,454
1/31/89 11,551 12,065 11,851 10,506
2/28/89 11,614 12,091 11,900 10,549
3/31/89 11,519 11,997 11,860 10,610
4/30/89 11,442 12,047 11,853 10,680
5/31/89 11,697 12,281 12,023 10,740
6/30/89 11,992 12,433 12,224 10,766
7/31/89 11,950 12,417 12,241 10,792
8/31/89 12,022 12,459 12,249 10,810
9/30/89 11,773 12,250 12,056 10,844
10/31/89 11,288 11,960 11,700 10,896
11/30/89 11,219 11,936 11,642 10,923
12/31/89 11,020 11,955 11,558 10,940
1/31/90 10,683 11,698 11,261 11,053
2/28/90 10,425 11,457 10,987 11,105
3/31/90 10,469 11,757 11,115 11,165
4/30/90 10,471 11,737 11,108 11,183
5/31/90 10,816 11,964 11,352 11,209
6/30/90 10,949 12,253 11,581 11,270
7/31/90 11,143 12,583 11,821 11,313
8/31/90 10,717 11,867 11,338 11,417
9/30/90 10,241 11,001 10,767 11,512
10/31/90 9,880 10,423 10,304 11,582
11/30/90 10,038 10,748 10,345 11,608
12/31/90 10,200 10,808 10,377 11,608
1/31/91 10,258 11,106 10,523 11,677
2/28/91 11,008 12,321 11,278 11,695
3/31/91 11,532 13,046 11,840 11,712
4/30/91 11,952 13,581 12,294 11,729
5/31/91 12,059 13,606 12,371 11,764
6/30/91 12,402 14,008 12,632 11,799
7/31/91 12,748 14,457 13,008 11,816
8/31/91 12,935 14,789 13,253 11,851
9/30/91 13,140 14,995 13,475 11,903
10/31/91 13,613 15,496 13,905 11,920
11/30/91 13,821 15,576 14,034 11,955
12/31/91 13,881 15,800 14,157 11,964
1/31/92 14,524 16,357 14,719 11,981
2/28/92 14,930 16,761 15,070 12,024
3/31/92 15,201 16,968 15,304 12,085
4/30/92 15,333 17,033 15,414 12,102
5/31/92 15,573 17,273 15,639 12,120
6/30/92 15,662 17,435 15,797 12,163
7/31/92 15,933 17,699 16,080 12,189
8/31/92 16,151 17,931 16,284 12,224
9/30/92 16,316 18,113 16,452 12,259
10/31/92 16,020 17,858 16,177 12,302
11/30/92 16,300 18,083 16,417 12,319
12/31/92 16,674 18,289 16,635 12,311
1/31/93 17,358 18,821 17,087 12,371
2/28/93 17,568 19,153 17,417 12,415
3/31/93 17,907 19,400 17,762 12,458
4/30/93 17,978 19,568 17,902 12,493
5/31/93 18,283 19,801 18,185 12,510
6/30/93 18,847 20,217 18,607 12,528
7/31/93 18,997 20,413 18,791 12,528
8/31/93 19,149 20,585 18,930 12,562
9/30/93 19,141 20,638 18,989 12,588
10/31/93 19,741 21,055 19,414 12,640
11/30/93 19,814 21,156 19,539 12,649
12/31/93 20,153 21,419 19,828 12,649
1/31/94 20,747 21,883 20,300 12,684
2/28/94 20,675 21,826 20,261 12,727
3/31/94 19,909 21,001 19,609 12,770
4/30/94 19,604 20,859 19,324 12,788
5/31/94 19,681 20,869 19,369 12,796
6/30/94 19,693 20,934 19,342 12,840
7/31/94 19,533 21,112 19,307 12,875
8/31/94 19,677 21,262 19,318 12,927
9/30/94 19,585 21,264 19,318 12,961
10/31/94 19,648 21,315 19,299 12,970
11/30/94 19,175 21,046 19,041 12,987
12/31/94 19,087 21,202 19,063 12,987
1/31/95 19,174 21,490 19,218 13,039
2/28/95 19,904 22,227 19,741 13,091
3/31/95 20,108 22,467 19,920 13,135
4/30/95 20,594 23,038 20,406 13,178
5/31/95 21,012 23,683 20,859 13,204
6/30/95 21,126 23,842 20,924 13,230
7/31/95 21,791 24,142 21,292 13,230
8/31/95 21,883 24,217 21,350 13,265
9/30/95 22,071 24,515 21,604 13,291
10/31/95 22,188 24,667 21,777 13,334
11/30/95 22,454 24,884 21,922 13,326
12/31/95 22,787 25,275 22,256 13,317
1/31/96 23,333 25,720 22,719 13,395
2/29/96 23,932 25,740 22,912 13,438
3/31/96 23,699 25,722 22,827 13,508
4/30/96 23,822 25,779 23,007 13,560
5/31/96 24,049 25,933 23,187 13,586
6/30/96 23,862 26,149 23,217 13,595
7/31/96 23,675 26,269 23,342 13,621
8/31/96 24,065 26,553 23,713 13,647
9/30/96 24,857 27,193 24,335 13,690
10/31/96 24,772 27,402 24,466 13,733
11/30/96 25,009 27,942 24,919 13,759
12/31/96 25,284 28,143 25,215 13,759
1/31/97 25,584 28,419 25,467 13,803
2/28/97 25,913 28,888 25,923 13,846
3/31/97 25,099 28,457 25,407 13,881
4/30/97 25,096 28,756 25,613 13,898
5/31/97 26,059 29,371 26,271 13,890
6/30/97 26,769 29,780 26,697 13,907
7/31/97 27,689 30,599 27,391 13,924
8/31/97 27,773 30,528 27,446 13,950
9/30/97 28,618 31,133 28,088 13,985
10/31/97 28,347 31,161 27,979 14,020
As you compare performance, please note that the LB High Yield Fund's
performance reflects the maximum 4% sales charge. The performance of
the Lehman High Yield index does not reflect any such charges. If you
were to purchase any of the individual bonds represented in this
index, any sales charges you would pay would reduce your total return
as well.
LB Income Fund
[GRAPHIC OMITTED: PHOTO OF CHARLES E. HEEREN]
Charles E. Heeren, a vice president of Lutheran Brotherhood, is a
Chartered Financial Analyst and portfolio manager for the LB Income
Fund. He has managed the Fund since January 1986, and has been with
LB since 1976.
Investment Objective:
To seek high current income while preserving principal by investing
in investment-grade bonds and other income-producing securities.
Fund Facts
Inception Date: 6/1/72
Shareholder
Accounts: 55,281
Total Assets
(in millions): $778.0
When economic expectations change, and interest rates fluctuate, the
spreads between yields of different fixed-income securities
alternately shrink and widen. Over the past year, we realigned the
mix of securities in the LB Income Fund to make the most of these
changes -- adding sizable investments in corporate bonds. This, plus
an emphasis on longer maturities, helped the Fund earn a solid return
that was comparable to returns for its market benchmark and other
funds with similar investment objectives.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
U.S. Government 7.5%
Common Stocks 0.5%
Preferred Stocks 1.8%
Short-Term Securities 9.0%
Mortgage-Backed Securities 13.7%
Corporate Bonds 47.8%
Asset-Backed Securities 15.2%
Foreign Government Bonds 4.5%
For the 12 months ended October 31, 1997, the LB Income Fund earned a
total return (based on NAV) of 8.05%. That compares with an average
return of 8.52% for high-quality corporate bond funds tracked by
Lipper Analytical Services. Over the same time, the Lehman Aggregate
Bond Index had a return of 8.89%.
[GRAPHIC OMITTED: Top 10 Holdings]
% of
Top 10 Holdings Security Portfolio
Government National
Mortgage Association Mortgage-backed 5.4%
Federal National Mortgage
Association Mortgage-backed 4.4%
U.S. Treasury Bonds U.S. Government 3.4%
U.S. Treasury Bonds U.S. Government 2.9%
Deutsche Floorplan
Receivables Master Trust,
Series 1994-1-A Asset-backed 2.5%
Chase Manhattan Credit
Card, Series
1996-4, Class A Asset-backed 2.4%
General Electric Capital
Corp., Debentures Corporate bonds 2.2%
World Omni Auto Lease Trust Asset-backed 2.1%
World Financial Network
Credit Card
Master Trust, Series 1996-B Asset-backed 1.9%
Associates Corp. of North
America, Sr. Notes Corporate bonds 1.8%
These holdings represent 29% of the Fund's total investment
portfolio.
Seizing Opportunities in Corporates
At the start of the period, the Fund benefited from large investments
in shorter-term, asset-backed securities, which provided attractive
yields while interest rates were falling. When new inflation concerns
made bond prices more attractive between December 1996 and February
1997, we traded some of the Fund's U.S. Treasury bonds for longer-
term corporate securities -- whose prices were especially appealing.
Although we trimmed corporate bond holdings in March and April, when
it looked like bond prices might fall further, we purchased
additional corporates in the months that followed.
Throughout this time we favored the debt of financial firms and
utilities. At times, we bought corporate issues with lower credit
ratings, whose prices were particularly attractive, feeling these
issues could benefit from rating upgrades as economic growth
continued. As always, we maintained a well-diversified portfolio in
terms of credit quality, asset mix, and maturities.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: MOODY'S BOND QUALITY
RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 43.7%
Aa 9.4%
A 24.6%
Baa 20.5%
Ba 1.8%
B 0.0%
Caa 0.0%
Ca 0.0%
C 0.0%
Not Rated 0.0%
Until October, the corporates that we bought greatly enhanced the
Fund's return. Because their performance is linked to returns for
stocks, however, corporates were hit hard when foreign economic
troubles sent U.S. stock prices lower. As often happens, even
corporates with good prospects were hurt in the decline. Believing
corporates of higher quality were oversold and should soon recover,
we recently added these to the portfolio as we found attractive
investment opportunities.
[GRAPHIC WORM CHART OMITTED: Performance Through October 31, 1997]
Growth of $10,000 Invested Since 4/30/87
INSET BOX ON CHART READS:
LB Income Fund
Annualized Total Returns*
- -----------------------------------------------------
Net Asset Value
10 Years 8.96%
5 Years 6.76%
1 Year 8.05%
Public Offering Price
10 Years 8.52%
5 Years 5.90%
1 Year 3.77%
*See accompanying notes to Portfolio Management Reviews.
LUTHERAN BROTHERHOOD INCOME FUND
Lehman Agg. Lipper Average
LBINC Bond Index Corp. Debt A CPI
Month End Total Total Total Total
Date Value Value Value Value
- ---------- ------- ----------- -------------- -------
10/31/87 $10,000 $10,000 $10,000 $10,000
11/30/87 9,753 10,080 10,119 10,014
12/31/87 9,951 10,217 10,249 10,012
1/31/88 10,318 10,577 10,603 10,038
2/29/88 10,447 10,703 10,742 10,064
3/31/88 10,347 10,602 10,624 10,107
4/30/88 10,306 10,545 10,566 10,159
5/31/88 10,241 10,474 10,502 10,194
6/30/88 10,547 10,727 10,734 10,237
7/31/88 10,506 10,670 10,699 10,281
8/31/88 10,577 10,697 10,719 10,324
9/30/88 10,828 10,940 10,944 10,393
10/31/88 11,029 11,146 11,120 10,428
11/30/88 10,948 11,010 11,014 10,437
12/31/88 11,035 11,022 11,077 10,454
1/31/89 11,215 11,181 11,220 10,506
2/28/89 11,105 11,100 11,153 10,549
3/31/89 11,140 11,148 11,195 10,610
4/30/89 11,365 11,381 11,388 10,680
5/31/89 11,646 11,680 11,656 10,740
6/30/89 12,065 12,035 11,997 10,766
7/31/89 12,253 12,292 12,200 10,792
8/31/89 12,097 12,110 12,040 10,810
9/30/89 12,148 12,172 12,082 10,844
10/31/89 12,355 12,471 12,333 10,896
11/30/89 12,436 12,589 12,420 10,923
12/31/89 12,407 12,623 12,438 10,940
1/31/90 12,245 12,473 12,264 11,053
2/28/90 12,286 12,513 12,275 11,105
3/31/90 12,283 12,522 12,283 11,165
4/30/90 12,132 12,407 12,141 11,183
5/31/90 12,442 12,774 12,484 11,209
6/30/90 12,603 12,980 12,681 11,270
7/31/90 12,737 13,159 12,836 11,313
8/31/90 12,506 12,982 12,615 11,417
9/30/90 12,540 13,090 12,660 11,512
10/31/90 12,652 13,256 12,797 11,582
11/30/90 12,922 13,541 13,083 11,608
12/31/90 13,112 13,753 13,287 11,608
1/31/91 13,272 13,923 13,423 11,677
2/28/91 13,465 14,042 13,568 11,695
3/31/91 13,578 14,138 13,661 11,712
4/30/91 13,772 14,291 13,829 11,729
5/31/91 13,886 14,374 13,897 11,764
6/30/91 13,870 14,367 13,872 11,799
7/31/91 14,036 14,567 14,046 11,816
8/31/91 14,336 14,881 14,382 11,851
9/30/91 14,655 15,183 14,696 11,903
10/31/91 14,756 15,352 14,826 11,920
11/30/91 14,876 15,493 14,957 11,955
12/31/91 15,373 15,953 15,492 11,964
1/31/92 15,195 15,736 15,251 11,981
2/28/92 15,259 15,838 15,327 12,024
3/31/92 15,251 15,750 15,250 12,085
4/30/92 15,312 15,863 15,329 12,102
5/31/92 15,603 16,163 15,639 12,120
6/30/92 15,856 16,386 15,867 12,163
7/31/92 16,236 16,720 16,285 12,189
8/31/92 16,383 16,889 16,415 12,224
9/30/92 16,603 17,090 16,619 12,259
10/31/92 16,333 16,863 16,336 12,302
11/30/92 16,337 16,866 16,333 12,319
12/31/92 16,603 17,134 16,606 12,311
1/31/93 16,942 17,463 16,963 12,371
2/28/93 17,301 17,769 17,346 12,415
3/31/93 17,360 17,844 17,408 12,458
4/30/93 17,478 17,969 17,523 12,493
5/31/93 17,481 17,992 17,529 12,510
6/30/93 17,810 18,318 17,918 12,528
7/31/93 17,968 18,422 18,052 12,528
8/31/93 18,320 18,744 18,467 12,562
9/30/93 18,381 18,795 18,523 12,588
10/31/93 18,463 18,865 18,608 12,640
11/30/93 18,212 18,704 18,372 12,649
12/31/93 18,284 18,805 18,451 12,649
1/31/94 18,521 19,059 18,729 12,684
2/28/94 18,103 18,727 18,317 12,727
3/31/94 17,559 18,265 17,837 12,770
4/30/94 17,406 18,119 17,637 12,788
5/31/94 17,356 18,117 17,583 12,796
6/30/94 17,242 18,077 17,523 12,840
7/31/94 17,613 18,437 17,835 12,875
8/31/94 17,604 18,459 17,838 12,927
9/30/94 17,277 18,188 17,560 12,961
10/31/94 17,205 18,171 17,511 12,970
11/30/94 17,218 18,131 17,476 12,987
12/31/94 17,396 18,256 17,600 12,987
1/31/95 17,737 18,618 17,901 13,039
2/28/95 18,124 19,061 18,307 13,091
3/31/95 18,246 19,177 18,432 13,135
4/30/95 18,525 19,446 18,683 13,178
5/31/95 19,319 20,198 19,465 13,204
6/30/95 19,467 20,346 19,598 13,230
7/31/95 19,323 20,301 19,510 13,230
8/31/95 19,587 20,547 19,755 13,265
9/30/95 19,760 20,746 19,955 13,291
10/31/95 20,048 21,016 20,236 13,334
11/30/95 20,362 21,331 20,550 13,326
12/31/95 20,670 21,629 20,856 13,317
1/31/96 20,778 21,772 20,954 13,395
2/29/96 20,297 21,393 20,520 13,438
3/31/96 20,075 21,244 20,352 13,508
4/30/96 19,947 21,125 20,199 13,560
5/31/96 19,912 21,082 20,159 13,586
6/30/96 20,168 21,365 20,395 13,595
7/31/96 20,207 21,423 20,436 13,621
8/31/96 20,099 21,386 20,387 13,647
9/30/96 20,481 21,758 20,747 13,690
10/31/96 20,962 22,241 21,202 13,733
11/30/96 21,372 22,622 21,594 13,759
12/31/96 21,127 22,411 21,363 13,759
1/31/97 21,192 22,481 21,401 13,803
2/28/97 21,257 22,537 21,464 13,846
3/31/97 20,943 22,287 21,200 13,881
4/30/97 21,213 22,621 21,490 13,898
5/31/97 21,407 22,836 21,673 13,890
6/30/97 21,725 23,108 21,937 13,907
7/31/97 22,355 23,732 22,580 13,924
8/31/97 22,106 23,530 22,327 13,950
9/30/97 22,455 23,878 22,664 13,985
10/31/97 22,649 24,224 22,956 14,020
As you compare performance, please note that the LB Income Fund's
performance reflects the maximum 4% sales charge. The performance of
the Lehman Aggregate Bond index does not reflect any such charges. If
you were to purchase any of the individual bonds represented in this
index, any sales charges you would pay would reduce your total return
as well.
A More Defensive Approach
If economic growth slows in coming months, and inflation remains at
bay, interest rates should continue to fall. If the U.S. economy
remains healthy, as we expect, corporate bonds should perform well.
We expect, therefore, to maintain sizable holdings in that sector.
Given current conditions, we'll adopt a more defensive strategy in
the corporates we choose. With the recent turmoil abroad, we'll focus
on larger companies with less exposure to foreign economies. We may
also choose debt from industries whose performance is less dependent
on U.S. economic growth cycles. If it looks like economic growth is
slowing significantly, we would likely upgrade the quality of the
corporates we own while reducing the Fund's total corporate exposure.
LB Municipal Bond Fund
[GRAPHIC OMITTED: PHOTO OF JANET I. GRANGAARD]
Janet I. Grangaard, an assistant vice president of Lutheran Brotherhood,
is a Chartered Financial Analyst and portfolio manager for the LB
Municipal Bond Fund. She has managed the Fund since January 1994, and has
been with Lutheran Brotherhood since 1988.
Investment Objective:
To seek long-term high current income exempt from federal income tax by
investing in municipal bonds.
Fund Facts
Inception Date: 12/3/76
Shareholder
Accounts: 21,806
Total Assets
(in millions): $591.9
Municipal bonds performed well in the past year, benefiting from positive
economic growth that improved the credit quality of issuers, as well as
from falling interest rates. By focusing on issues that offered a good
balance of price appreciation potential and yield, we helped the LB
Municipal Bond Fund earn strong returns that were competitive with its
market benchmark and other funds with similar objectives.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
General Obligation 16.9%
Health Care 10.7%
Utility 11.7%
Pollution Control 3.9%
Water & Sewer 8.2%
Housing 2.0%
Transportation 8.9%
Education 3.4%
Other 11.7%
Escrowed 22.6%
For the 12 months ended October 31, 1997, the Fund earned a total return
(based on NAV) of 8.28%. That compares to returns of 8.49% for the Lehman
Municipal Bond Index and an average return of 8.13% for municipal bond
funds tracked by Lipper Analytical Services.
[GRAPHIC OMITTED: TOP 10 STATES]
% of
Top 10 States Portfolio
California 10.8%
Texas 10.0%
New York 5.9%
Washington 5.7%
Colorado 5.4%
Ohio 4.7%
Minnesota 4.1%
Michigan 3.6%
New Jersey 3.5%
Florida 3.3%
These holdings represent 57% of the
Fund's total investment portfolio.
Adding Yield and Appreciation
In the first half of the period, when there was greater fluctuation in
market interest rates, municipal bonds outperformed U.S. Treasuries.
Demand for municipals was strong at this time, while municipal supplies
were shrinking. While continuing to focus on municipals with strong credit
quality, we added issues with higher coupons. These issues helped maintain
the Fund's tax-free income and performed well against other municipals
when interest rates rose.
After adding longer-term issues to pick up extra yield when rates fell at
the end of 1996, we reduced these positions at the start of 1997, when it
looked like rates would rise. As market fluctuations adjusted the spreads
between yields for different types of municipals, we traded holdings that
were becoming less attractive for others with better value. Since the
yields for lower-quality bonds were not strong enough to offset the added
risk involved with those issues, we continued to emphasize higher-quality
bonds.
In the second half of the period, falling rates spurred an increase in
municipal bond supply as many issuers took advantage of the low rates to
refinance older, higher-cost debt. The use of U.S. Treasury bonds for
these advanced refundings improved the credit quality of the issuers'
outstanding municipal debt, enhancing price appreciation for many of the
Fund's holdings. This was offset in part, however, by a degree of price
restraint resulting from increased supply of new municipal issues. Late in
the period, increased demand for Treasuries in the wake of foreign
economic concerns caused Treasuries to outpace municipals.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: MOODY'S BOND QUALITY
RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 69.3%
Aa 14.0%
A 8.5%
Baa 8.2%
Ba 0.0%
B 0.0%
Caa 0.0%
Ca 0.0%
C 0.0%
Not Rated 0.0%
To make the most of this market, we took profits in certain refunded
municipals that had enjoyed strong price gains and purchased issues with
longer maturities that have yet to be refunded. Because prices for longer-
term issues tend to rise more when interest rates fall, our emphasis on
longer maturities improved the price gains of Fund shares. While
continuing to emphasize issues of good credit quality, we looked for
individual issues whose yields were especially attractive.
Continued Focus on Value
If the economy grows moderately in coming months, and we find attractive
opportunities, we may add issues of slightly lower credit quality to help
maintain the Fund's yield. If significantly slower growth seems likely,
and credit spreads remain tight, we would stick with the higher-quality
issues that currently dominate the Fund's portfolio.
Given the chance for further declines in interest rates, we plan to keep
the average investment maturity at, or slightly longer than, the Fund's
benchmark index. As before, we will be highly selective in choosing
investments and emphasize issues that provide especially strong long-term
value to the Fund.
[GRAPHIC WORM CHART OMITTED: Growth of $10,000]
(October 31, 1987 - October 31, 1997)
Lipper Average
LB Lehman General
Mumicipal Municipal Municipal Consumer
Month End Bond Bond Debts Price
Date Fund Index Funds Index
- ----------- --------- ----------- -------------- --------
10/31/87 10000 10000 10000 10000
11/30/87 9846 10261 10260 10014
12/31/87 10060 10410 10448 10012
1/31/88 10403 10780 10863 10038
2/29/88 10517 10895 10976 10064
3/31/88 10308 10768 10761 10107
4/30/88 10396 10850 10819 10159
5/31/88 10368 10819 10837 10194
6/30/88 10589 10977 11022 10237
7/31/88 10626 11048 11089 10281
8/31/88 10664 11058 11129 10324
9/30/88 10877 11258 11340 10393
10/31/88 11079 11456 11576 10428
11/30/88 10982 11351 11469 10437
12/31/88 11145 11467 11642 10454
1/31/89 11309 11704 11819 10506
2/28/89 11238 11570 11721 10549
3/31/89 11237 11543 11714 10610
4/30/89 11516 11816 11998 10680
5/31/89 11725 12062 12221 10740
6/30/89 11838 12226 12380 10766
7/31/89 11979 12392 12507 10792
8/31/89 11863 12271 12373 10810
9/30/89 11804 12234 12332 10844
10/31/89 11962 12383 12482 10896
11/30/89 12165 12600 12678 10923
12/31/89 12266 12703 12764 10940
1/31/90 12102 12644 12627 11053
2/28/90 12190 12756 12752 11105
3/31/90 12203 12760 12747 11165
4/30/90 12066 12668 12584 11183
5/31/90 12352 12944 12911 11209
6/30/90 12503 13058 13034 11270
7/31/90 12698 13250 13249 11313
8/31/90 12432 13058 12961 11417
9/30/90 12473 13066 12980 11512
10/31/90 12672 13302 13168 11582
11/30/90 12965 13570 13475 11608
12/31/90 13070 13624 13533 11608
1/31/91 13256 13807 13699 11677
2/28/91 13331 13927 13778 11695
3/31/91 13346 13932 13806 11712
4/30/91 13535 14118 14008 11729
5/31/91 13628 14243 14134 11764
6/30/91 13574 14229 14090 11799
7/31/91 13783 14403 14293 11816
8/31/91 13944 14593 14476 11851
9/30/91 14189 14782 14662 11903
10/31/91 14299 14915 14793 11920
11/30/91 14309 14957 14814 11955
12/31/91 14661 15279 15163 11964
1/31/92 14667 15314 15153 11981
2/28/92 14640 15319 15174 12024
3/31/92 14639 15325 15180 12085
4/30/92 14805 15461 15320 12102
5/31/92 15008 15644 15534 12120
6/30/92 15266 15906 15817 12163
7/31/92 15794 16384 16377 12189
8/31/92 15513 16223 16115 12224
9/30/92 15557 16328 16179 12259
10/31/92 15382 16168 15888 12302
11/30/92 15737 16458 16293 12319
12/31/92 15973 16626 16493 12311
1/31/93 16128 16819 16680 12371
2/28/93 16720 17427 17334 12415
3/31/93 16609 17243 17131 12458
4/30/93 16766 17417 17316 12493
5/31/93 16848 17514 17415 12510
6/30/93 17162 17807 17714 12528
7/31/93 17166 17830 17714 12528
8/31/93 17543 18201 18107 12562
9/30/93 17743 18408 18321 12588
10/31/93 17858 18443 18358 12640
11/30/93 17656 18281 18165 12649
12/31/93 18045 18667 18526 12649
1/31/94 18245 18880 18739 12684
2/28/94 17728 18391 18241 12727
3/31/94 16900 17642 17444 12770
4/30/94 16979 17792 17507 12788
5/31/94 17141 17947 17664 12796
6/30/94 17011 17837 17549 12840
7/31/94 17321 18164 17860 12875
8/31/94 17380 18227 17905 12927
9/30/94 17144 17959 17615 12961
10/31/94 16799 17640 17280 12970
11/30/94 16477 17320 16922 12987
12/31/94 16859 17701 17335 12987
1/31/95 17372 18208 17850 13039
2/28/95 17931 18738 18380 13091
3/31/95 18122 18953 18545 13135
4/30/95 18139 18976 18544 13178
5/31/95 18749 19581 19122 13204
6/30/95 18502 19411 18914 13230
7/31/95 18630 19595 19035 13230
8/31/95 18865 19844 19244 13265
9/30/95 19010 19969 19362 13291
10/31/95 19313 20259 19658 13334
11/30/95 19708 20595 20035 13326
12/31/95 19923 20793 20258 13317
1/31/96 20071 20951 20353 13395
2/29/96 19900 20808 20192 13438
3/31/96 19568 20542 19871 13508
4/30/96 19465 20484 19782 13560
5/31/96 19453 20476 19786 13586
6/30/96 19653 20699 19972 13595
7/31/96 19830 20888 20151 13621
8/31/96 19820 20883 20135 13647
9/30/96 20116 21176 20423 13690
10/31/96 20343 21415 20644 13733
11/30/96 20736 21807 21007 13759
12/31/96 20608 21715 20915 13759
1/31/97 20647 21757 20917 13803
2/28/97 20829 21957 21099 13846
3/31/97 20554 21665 20824 13881
4/30/97 20690 21847 20995 13898
5/31/97 20997 22175 21295 13890
6/30/97 21206 22412 21525 13907
7/31/97 21833 23033 22173 13924
8/31/97 21577 22816 21909 13950
9/30/97 21914 23088 22174 13985
10/31/97 22028 23235 22310 14020
Footnote reads:
As you compare performance, please note that the LB Municipal Bond Fund's
performance reflects the maximum 4% sales charge. The performance of the
Lehman Municipal Bond index does not reflect any such charges. If you were
to purchase any of the individual bonds represented in this index, any
sales charges you would pay would reduce your total return as well.
INSET BOX ON CHART READS:
LB Municipal Bond Fund
Annualized Total Returns*
Net Asset Value
10 Years 8.66%
5 Years 7.45%
1 Year 8.28%
Public Offering Price
10 Years 8.22%
5 Years 6.57%
1 Year 3.93%
*See accompanying notes to Portfolio Management Reviews.
LB Money Market Fund
[GRAPHIC OMITTED: PHOTO OF GAIL R. ONAN]
Gail R. Onan, assistant vice president of Lutheran Brotherhood Research
Corp., is portfolio manager for the LB Money Market Fund. She has managed
the Fund since January 1994, and has been with Lutheran Brotherhood since
1969.
Investment Objective:
To seek current income with stability of principal by investing in
high-quality, short-term debt securities.**
Fund Facts
Inception Date: 2/1/79
Shareholder
Accounts: 52,814
Total Assets
(in millions): $469.2
Unlike other sectors of the fixed-income market, money market fund yields
trended upward over the past year but fluctuated with economic
uncertainty. However, Treasury bills, which are a very visible indicator
of short-term rates, but a small portion of most money market funds,
bucked that trend. Having started the period at 5.20%, the annualized
yield for three-month U.S. Treasury bills rose to 5.44% after the Federal
Reserve raised short-term interest rates in March, then trended downward
- -- ending the period almost unchanged at 5.21% on October 31, 1997.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Commercial Paper 82.8%
Certificates of Deposit 4.1%
Medium Term Notes 1.1%
Variable Rate Notes 10.9%
Bank Notes 1.1%
During this time we adjusted the asset mix and maturities of the LB Money
Market Fund to take advantage of the changes in yields and changes in the
spreads between yields of different money market instruments. These
strategies helped the Fund earn a total return of 4.74% for the 12 months
ended October 31, 1997.
Staying Limber
For the first half of the period, the possibility of rising short-term
interest rates encouraged us to select shorter maturities -- keeping
liquidity high so that we might invest more quickly in higher-yielding
issues as they came to market. We achieved this flexibility, without
losing yield, by balancing issues having maturities of 30 days or less
with those having maturities of six to 12 months. We also used floating-
rate issues, whose coupons reset frequently, decreasing the Fund's
exposure to interest rate risk.
To further enhance yield, we bought taxable municipal paper issued by
state and local governments for commercial projects with credit
enhancements from major banks. Because fewer analysts track these short-
term instruments, they are often available at prices and yields that are
particularly attractive.
As the year progressed, we added more taxable paper to the portfolio.
Although interest rates remained stable, we did not increase investments
in longer maturities -- feeling they did not offer enough additional yield
to compensate for the additional interest rate risk. Toward the end of the
period, as the average maturity of our market benchmark lengthened, we
allowed the Fund's maturities to shorten. We felt this would let us take
advantage of opportunities to add yield that typically occur at the end of
a calendar year. As part of our strategy, we allowed investments in asset-
backed commercial paper to mature, so that we might emphasize year-end
opportunities in that sector.
[GRAPHIC OMITTED: TOP 10 COMMERCIAL PAPER HOLDINGS]
Top 10 Commercial % of
Paper Holdings Industry Portfolio
Harvard University Education 3.6%
Oyster Creek Fuel Corp. Banking-Foreign 2.0%
General Electric Capital Corp. Finance-Commercial 1.9%
United Parcel Service of America, Inc. Transportation 1.6%
Port of Corpus Christi Authority of
Nueces County, Texas U.S. Municipal 1.5%
Cargill, Inc. Food & Beverage 1.5%
Yale University Education 1.5%
City of New York Government Bonds,
Fiscal 1995, Series B U.S. Municipal 1.5%
Du Pont (E.I.) de Nemours and Co. Industrial 1.4%
U.S. Prime Property, Inc. Banking-Foreign 1.1%
Footnote reads:
These holdings represent 17.6% of the Fund's total investment portfolio.
Throughout the year we enjoyed strong returns from U.S. dollar-denominated
investments of foreign issuers, which were available in good supply at
attractive prices and yields. However, none of these instruments
represented issuers in the Far East, assuring that the Fund had no
exposure to the currency problems occurring there in October.
[GRAPHIC OMITTED: LB MONEY MARKET FUND PERFORMANCE]
LB Money Market Fund
Performance as of October 31, 1997
Annualized Total Returns*
Net Asset Value
10 Years 5.11%
5 Years 3.88%
1 Year 4.74%
Seven-Day Yields ***
Current 4.74%
Effective 4.85%
Locking in Higher Yields
As we approach the end of the calendar year, we will add longer maturities
to the Fund's portfolio to enhance its yield. This should provide stronger
yields in early 1998 if interest rates continue unchanged. We expect to
keep the Fund's investment mix largely the same -- focusing on taxable
municipal paper, letters of credit, asset-backed commercial paper, and
foreign instruments related to issuers outside the Far East. As always, we
will keep the portfolio focused on very high-quality issues and well
diversified in terms of asset mix and maturities.
Footnotes
*The annualized total return reflects the change in share price, the
reinvestment of all dividends and capital gains, and the effect of
compounding. Since performance varies, the annualized total return, which
assumes a steady rate of growth, differs from the Fund's actual total
return for the years indicated. POP returns have been adjusted for the
maximum 4% sales charge. NAV returns do not include a sales charge. Sales
charges do not apply to the LB Money Market Fund. All returns represent
past performance. The value of an investment fluctuates so that shares,
when redeemed, may be worth more or less than the original investment.
World Growth Fund, Mid Cap Growth Fund, LB Fund, High Yield Fund, Income
Fund, Municipal Bond Fund, and Money Market Fund are subject to a partial
voluntary waiver of advisory fees by the funds' investment advisor, which
has the effect of improving the funds' performances. The waiver of fees
may be discontinued at any time.
**Investments in the LB Money Market Fund are neither guaranteed nor
insured by the U.S. Government and there is no assurance that the Fund
will maintain a stable net asset value.
***Seven-day yields of the LB Money Market Fund refer to the income
generated by an investment in the Fund over a specified seven-day period.
Effective yields reflect the reinvestment of income. Yields are subject to
daily fluctuation and should not be considered an indication of future
results.
This report must be preceded or accompanied by a prospectus of the
Lutheran Brotherhood Family of Funds.
Choosing Investments That are Right for You
What's the best investment for you? Financial experts agree that the
answer doesn't lie in just one investment, but rather in a
diversified portfolio of investments based on your personal
financial needs and goals.
The remarkable growth of mutual funds over the years attests to the
fact that many consider mutual funds to be among the best
investments available today. By investing in a mutual fund, you're
automatically diversified among a number of different securities.
For example, if you buy shares of a stock mutual fund, you're
investing in the stocks of many different companies, representing
many different industries.
You can further diversify your portfolio by investing among
different asset classes, e.g., stocks, bonds and money market
instruments. This kind of diversification is often referred to as
portfolio or asset allocation.
Studies have shown that the performance of a portfolio depends
largely on how you allocate your assets.
Consult a professional
Determining the right asset allocation plan can be challenging, but
you can rely on the knowledge and experience of your LBSC registered
representative. He or she can walk you through Lutheran
Brotherhood's AssetMatchSM program, which is designed to help you
develop (or update) a personal investment strategy that's on track
with your needs and goals--at no cost to you.
Take the first step
To get your asset allocation program underway, complete the enclosed
AssetMatch questionnaire and forward it to your LBSC registered
representative. The AssetMatch questionnaire, which is confidential,
helps assess your risk tolerance, goals and time horizon. Your LBSC
registered representative uses these variables to help identify the
best way to reach each of your investment objectives.
This page does not constitute part of
the prospectus or annual report.
Lutheran Brotherhood
AssetMatchSM Questionnaire
Completing this confidential questionnaire is the first step in the
Lutheran Brotherhood AssetMatch program. The questions below help
assess your risk tolerance, liquidity needs, investment preferences
and time horizon. An LBSC registered representative uses the
AssetMatch software to analyze your information and presents a
diversified mix of investments.
This proposal serves as a starting point for you and your
representative, helping to determine a mix of investments that best
matches your investment style and helps to achieve your investment
objective. Since every investment objective requires its own
investment strategy, you should complete a separate questionnaire
for each of your investment objectives (e.g., college funding,
retirement, etc.).
Questionnaire and scoring system developed in conjunction with
Ibbotson Associates, Chicago.
Name Date Investment Objective
-------------- ---------- ---------------
Mark your answers by checking the appropriate boxes.
Risk Tolerance
1. The risk of an investment suffering a decline in value (having a
negative return) is often a primary concern for investors. To
achieve higher returns, however, an investor must be willing to
accept greater short-term risk. The following table illustrates
five hypothetical $10,000 investments. For each investment, the
expected value at the end of one year is shown along with the
probability of suffering a decline in that year. Given your
investment objective, in which of the five hypothetical
investments would you be most comfortable investing?
Probability of
Expected value investment value
of $10,000 being less than
Investment after one year $10,000 after one year
[] A $10,600 0.5%
[] B $10,800 5%
[] C $11,000 12%
[] D $11,200 17%
[] E $11,400 21%
2. Inflation can greatly erode the return on your investments. For
example, in a typical year with a 3.5% inflation rate, an
investment with a 6% return before inflation would have a real
return of only 2.5%. Please specify which of the following best
summarizes your attitude regarding investments and inflation.
[] A. I prefer investment returns that are expected to be
substantially higher than inflation over the long run, and I
am willing to accept large short-term fluctuations in
investment value (and a greater potential for loss) to achieve
this goal.
[] B. I prefer an investment that is expected to moderately exceed
inflation over the long run, and I am willing to accept
moderate short-term fluctuations in investment value (and a
moderate potential for loss) to achieve this goal.
[] C. I prefer to minimize short-term fluctuations in investment
value and potential for loss as much as possible, even if it
means that my investment is expected to only keep pace with or
slightly exceed inflation.
This page does not constitute part of
the prospectus or annual report.
3. To achieve higher-than-average returns, an investor must be
willing to accept significant short-term volatility in investment
value. However, when making investment decisions, investors
should consider that holding investments over longer time periods
tends to lessen the impact of short-term volatility.
The graph below shows the probable best and worst case annualized
returns for four hypothetical investments over both one- and
five-year holding periods. Which of the following would you be
most comfortable holding for your current investment goal?
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
[GRAPHIC OMITTED: VERTICAL BAR CHART
PROBABLE BEST AND WORST CASE ANNUALIZED RETURNS]
Probable Best and Worst Case Annualized Returns
!!!!!!!!!!!!!!PLOT POINTS TO COME!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
[] A. Investment A
[] B. Investment B
[] C. Investment C
[] D. Investment D
4. If my investments are declining in value, and similar investments
in the marketplace are also declining in value, I would move my
money into investments that are currently experiencing better
performance.
[] A. Strongly agree
[] B. Agree
[] C. Not sure
[] D. Disagree
[] E. Strongly disagree
5. Which of the following best describes your attitude toward
declines in investment value?
[] A. I check the prices of my investments at least several times a
month so I can sell quickly if they begin to decline in value.
[] B. Although daily declines in the value of my investments make me
uncomfortable, I will not immediately sell. If my investments
suffer a substantial decline over a full quarter, however, I
am likely to sell.
[] C. I realize there may be substantial day-to-day changes in the
value of my investments. Although I focus on quarterly
performance trends, I usually wait an entire year before
making any changes.
[] D. Even if my investment suffered significant declines over a
given year (in a down market), I would continue to follow a
consistent, long-term investment plan and retain my
investment.
This page does not constitute part of
the prospectus or annual report.
6. The graph below shows the returns of a hypothetical mutual fund
over the past 20 years. Its recent losses have been largely
consistent with the overall market. If you owned this mutual
fund, given its historical and current return (in year 20), what
action would you now take?
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
[GRAPHIC OMITTED: VERTICAL BAR CHART]
Hypothetical mutual fund over the past 20 years
!!!!!!!!!!!!!!PLOT POINTS TO COME!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
[] A. Although it would cause me to realize a loss, I would
immediately pull out of the investment to prevent further
declines.
[] B. I would sell some of the investment to protect myself from
further declines.
[] C. Based on its previous long-term performance, I would continue
to hold the investment with the expectation of higher future
returns.
[] D. I would contribute more funds to the investment now that the
price per share is lower.
7. Which of the following best describes your attitude toward
long-term investing?
[] A. I am primarily concerned with protecting the value of my
account. Therefore, I am willing to accept the lower returns
of conservative investments which have minimal chance for
loss.
[] B. I am willing to bear some risk in an effort to achieve higher
returns, but prefer the majority of my investments to be
invested in low-risk assets.
[] C. I am concerned with minimizing risk and achieving higher
returns because they are of equal importance to me. Therefore,
I am willing to accept moderate volatility in the value of my
investments in order to achieve moderate returns.
[] D. I wish to achieve moderately high returns on my investments.
Therefore, I am willing to accept significant short-term
volatility.
[] E. I am primarily concerned with maximizing investment returns.
Therefore, I am willing to accept large and sometimes dramatic
fluctuations in the value of my investments.
8. You have acquired $20,000 to invest toward your investment
objective and have only two investment options. Which of the
following would you be more likely to select given the likely
performance of your $20,000 investment after one year?
[] A. Investment X:
70% chance of gaining $3,000
30% chance of losing $1,000
[] B. Investment Y:
100% chance of gaining $1,500
This page does not constitute part of
the prospectus or annual report.
Time Horizon
9. Given your investment objective, when do you expect to begin
making withdrawals?
[] A. Under 3 years
[] B. 3-5 years
[] C. 6-8 years
[] D. 9-11 years
[] E. 12-15 years
[] F. 16 or more years
10. Once withdrawals begin, over how long of a period do you expect
the withdrawals to continue?
[] A. Lump-sum withdrawal
[] B. 1-3 years
[] C. 4-6 years
[] D. 7-9 years
[] E. 10-15 years
[] F. 16 or more years
Taxes
The following question only needs to be answered if your investment
will be subject to current taxation.
11. Income from municipal bonds is exempt from federal, and
possibly, state and local taxes. Investors with a federal
marginal tax rate of 28% or higher can receive significant
benefits by investing in municipal bonds rather than fully taxed
government or corporate bonds. For example, a tax-free yield of
6% in a 31% tax bracket is equivalent to a fully taxable yield
of 8.7%.
Given your federal marginal tax rate (15%, 28%, 31%, 36% or
39.6%), which would you prefer to invest in?
[] A. Municipal bonds
[] B. Government or corporate bonds
Thank you for taking the time to complete this confidential
questionnaire. To continue the AssetMatch process, either:
(bullet) Call an LBSC registered representative to set up an
appointment, or
(bullet) Mail your completed questionnaire to an
LBSC registered representative for an AssetMatch analysis.
(To be contacted about a no-cost consultation, complete the
following)
I can be reached at:----------------------------------
Best time to call:--------------------- [] AM [] PM
Determining the right mix of assets to achieve your investment
objective can be a difficult task. But it doesn't have to be. The
answers you've provided, along with the help of AssetMatch and an
LBSC registered representative, can make things easier and eliminate
the guesswork.
LBSC registered representative name, address and phone number
Investment products are distributed by Lutheran Brotherhood
Securities Corp., 625 Fourth Avenue South, Minneapolis, MN 55415.
This page does not constitute part of
the prospectus or annual report.
[LUTHERAN BROTHERHOOD LOGO HERE]
LUTHERAN BROTHERHOOOD
A Family of Financial Services for Lutherans
[7 SOLID SQUARE BULLETS]
- -------------------------------------------
LUTHERAN BROTHERHOOD
- -------------------------------------------
FAMILY OF FUNDS
- -------------------------------------------
[ART OF 3D SQUARE WITH TREE, ACORN AND LEAF
ON EACH OF ITS THREE VISIBLE FACETS.]
Cross bar reads:
GROWTH [DIAMOND] INCOME [DIAMOND] STABILITY
Annual Report
October 31, 1997
[LUTHERAN BROTHERHOOD LOGO HERE]
LUTHERAN BROTHERHOOOD
SECURITIES CORP.
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402-3795
Price Waterhouse LLP
[GRAPHIC OMITTED: Price Waterhouse logo]
Report of Independent Accountants
To the Trustees and Shareholders of the
Lutheran Brotherhood Family of Funds
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Lutheran Brotherhood Opportunity Growth Fund, Lutheran Brotherhood Mid
Cap Growth Fund, Lutheran Brotherhood World Growth Fund, Lutheran
Brotherhood Fund, Lutheran Brotherhood High Yield Fund, Lutheran
Brotherhood Income Fund, Lutheran Brotherhood Municipal Bond Fund and
Lutheran Brotherhood Money Market Fund (constituting Lutheran
Brotherhood Family of Funds) at October 31, 1997, the results of their
operations for the year or period then ended, the changes in each of
their net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform our audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
October 31, 1997 by correspondence with the custodian and brokers and
the application of alternative auditing procedures where confirmation
from brokers were not received, provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
December 12, 1997
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
Portfolio of Investments
October 31, 1997
Shares Value
- -------------- ------------
<S> <C>
COMMON STOCKS - 94.4% (a)
Automotive - 0.5%
30,200 Aftermarket Technology Corp. $ 611,550(b)
39,500 Group 1 Automotive, Inc. 515,969(b)
20,300 Stoneridge, Inc. 329,875(b)
------------
1,457,394
------------
Bank & Finance - 4.1%
92,700 Annaly Mortgage Management, Inc. 1,100,813(b)
415 Charter One Financial, Inc. 24,122
138,900 Cityscape Financial Corp. 212,691(b)
44,700 Delta Financial Corp. 815,775(b)
51,200 Dime Bancorp, Inc. 1,228,800
53,600 IMC Mortgage Co. 931,300(b)
90,000 Imperial Credit Commercial
Mortgage Investment Corp. 1,485,000(b)
82,500 New Century Financial Corp. 1,320,000(b)
9,000 PAULA Financial 227,250(b)
93,900 Resource Bancshares Mortgage Group, Inc. 1,255,913
266,300 Southern Pacific Funding Corp. 3,495,188(b)
27,400 Sovereign Bancorp, Inc. 486,350
24,800 Sterling Financial Corp. 527,000(b)
------------
13,110,202
------------
Broadcasting - 0.4%
18,600 Emmis Broadcasting Corp.,
Class A 823,050(b)
40,300 Four Media Co. 357,663(b)
------------
1,180,713
------------
Building Products & Materials - 4.0%
361,700 Cameron Ashley Building Products 6,284,538(b)
188,300 Dayton Superior Corp., Class A 3,318,788(b)
128,000 Watsco, Inc. 3,008,000(b)
------------
12,611,326
------------
Computer Software - 5.4%
81,800 Activision, Inc. 1,196,325(b)
263,300 AXENT Technologies, Inc. 6,154,638(b)
57,000 Cognicase, Inc. 719,625(b)
37,000 Electronic Arts, Inc. 1,253,375(b)
103,400 Infinity Financial Technology, Inc. 1,589,775
10,000 Logility, Inc. 146,250(b)
93,600 Macromedia, Inc. 971,100(b)
20,200 Mercury Interactive Corp. 454,500(b)
86,100 MicroProse, Inc. 559,650(b)
13,800 Midway Games, Inc. 288,938(b)
52,900 Rational Software Corp. 482,713(b)
180,800 Softquad International, Inc. 361,600(b)
73,700 Summit Design, Inc. 1,068,650(b)
41,200 Viasoft, Inc. 1,689,200(b)
------------
16,936,339
------------
Computers & Office
Equipment - 1.2%
52,100 Harbinger Corp. 1,549,975(b)
34,400 Premiere Technologies, Inc. 1,169,600(b)
30,100 Stratus Computer, Inc. 1,064,788(b)
------------
3,784,363
------------
Containers & Packaging - 0.1%
12,000 Ivex Packaging Corp. 253,500(b)
------------
Drugs & Health Care - 8.6%
85,400 ADAC Labs, Inc. 1,665,300(b)
270,600 Atrix Laboratories, Inc. 5,107,575(b)
265,700 DepoTech Corp. 3,686,588(b)
287,700 Eclipse Surgical
Technologies, Inc. 2,571,319(b)
111,600 ICN Pharmaceuticals, Inc. 5,370,750
177,300 IRIDEX Corp. 1,795,163(b)
86,300 Isis Pharmaceuticals, Inc. 1,418,556(b)
103,200 Kendle International, Inc. 1,548,000(b)
291,400 Matritech, Inc. 1,966,950(b)
31,550 Miravant Medical Technologies 1,514,400(b,d)
16,200 STERIS Corp. 643,950(b)
------------
27,288,551
------------
Electrical Equipment - 0.5%
80,600 OSI Systems, Inc. 1,047,800(b)
23,000 Power-One, Inc. 428,375(b)
------------
1,476,175
------------
Electronics - 4.5%
111,800 Cypress Semiconductor Corp. 1,257,750(b)
111,000 ESS Technology, Inc. 1,345,875(b)
143,100 Faroudja, Inc. 1,287,900(b)
162,500 FSI International, Inc. 2,803,125(b)
145,600 Integrated Silicon Solution 1,456,000(b)
43,600 International Manufacturing
Services, Inc. 474,150(b)
70,500 Kulicke & Soffa Industries, Inc. 1,815,375(b)
192,500 S3, Inc. 1,708,438(b)
37,600 Semitool, Inc. 648,600(b)
38,000 Speedfam International, Inc. 1,410,750(b)
------------
14,207,963
------------
Food & Beverage - 0.1%
9,200 American Italian Pasta Co. 193,200(b)
------------
Healthcare Management - 7.1%
77,400 American Oncology
Resources, Inc. 1,131,975(b)
20,000 AmeriPath, Inc. 330,000(b)
103,300 Capstone Pharmacy
Services, Inc. 1,097,563(b)
342,600 Complete Management, Inc. 5,952,675(b)
291,600 FPA Medical Management, Inc. 7,034,850(b)
305,300 Home Health Corp. of
America, Inc. 3,281,975(b)
122,200 Renex Corp. 947,050(b)
417,300 U.S. Diagnostic Labs, Inc. 2,764,613(b)
------------
22,540,701
------------
Hospital Management - 1.8%
180,950 Horizon Health Corp. 4,229,706(b)
103,100 PhyMatrix Corp. 1,520,725(b)
------------
5,750,431
------------
Industrial - 0.9%
48,200 Innovative Valve
Technologies, Inc. 843,500(b)
84,800 TETRA Technologies, Inc. 1,955,700(b)
------------
2,799,200
------------
Leisure & Entertainment - 7.7%
195,100 Cannondale Corp. 4,316,587(b)
106,150 Fairfield Communities, Inc. 4,663,966(b)
201,450 Signature Resorts, Inc. 5,262,881(b)
174,500 Silverleaf Resorts, Inc. 3,795,375(b)
235,200 Steiner Leisure Ltd. 6,350,400(b)
------------
24,389,209
------------
Machinery & Equipment - 1.4%
141,100 Denison International plc 2,663,262(b)
12,300 Industrial Distribution
Group, Inc. 238,312(b)
153,700 Miller Industries, Inc. 1,556,212(b)
------------
4,457,786
------------
Manufacturing - 3.0%
212,000 BMC Industries, Inc. 6,823,750
198,200 Zomax Optical Media, Inc. 2,700,475(b)
------------
9,524,225
------------
Mining & Metals - 1.9%
169,300 Battle Mountain Gold Co. 1,036,962
80,600 Cambior, Inc. 634,725
201,500 Dayton Mining Corp. 503,750(b)
20,500 Getchell Gold Corp. 738,000(b)
84,600 Greenstone Resources Ltd. 676,800(b)
76,600 Homestake Mining Co. 947,925
161,200 Meridian Gold, Inc. 654,875(b)
60,400 Placer Dome, Inc. 936,200
------------
6,129,237
------------
Natural Gas - 0.9%
80,300 The Meridian Resource Corp. 1,048,919(b)
19,300 TransTexas Gas Corp. 366,700(b)
44,000 United Meridian Corp. 1,493,250(b)
------------
2,908,869
------------
Oil & Oil Service - 6.1%
62,500 Barrett Resources Corp. 2,199,219(b)
162,200 Domain Energy Corp. 2,797,950(b)
84,100 Eagle Geophysical, Inc. 1,471,750(b)
123,300 Forcenergy, Inc. 4,022,663(b)
159,700 Lomak Petroleum, Inc. 2,964,431
40,400 Nuevo Energy Co. 1,674,075(b)
27,500 Ocean Energy, Inc. 1,698,125(b)
61,160 Swift Energy Co. 1,586,337(b)
44,600 Vintage Petroleum, Inc. 1,020,225
------------
19,434,775
------------
Paper & Forest Products - 0.2%
58,500 Stone Container Corp. 705,656(c)
------------
Pollution Control - 4.7%
117,500 Allied Waste Industries, Inc. 2,394,062(b)
322,400 IDM Environmental Corp. 2,176,200(b)
147,600 Memtec Ltd., ADR 4,870,800(d)
321,900 Recycling Industries, Inc. 1,931,400(b)
89,600 U.S. Filter Corp. 3,595,200(b)
------------
14,967,662
------------
Real Estate Investment
Trusts - 6.5%
76,200 American General
Hospitality Corp. 2,076,450
39,100 Apartment Investment &
Management Co. 1,385,606
63,200 First Industrial Realty
Trust, Inc. 2,188,300
61,500 Glimcher Realty Trust 1,364,531(b)
68,600 Great Lakes REIT, Inc. 1,286,250
32,000 Highwoods Properties, Inc. 1,104,000
126,300 InnKeepers USA Trust 2,107,631
105,200 Kilroy Realty Corp. 2,787,800
135,810 Patriot American Hospitality, Inc. 4,481,730
22,000 SL Green Realty Corp. 551,375
61,400 Sunstone Hotel Investors, Inc. 1,078,338
------------
20,412,011
------------
Restaurants - 1.4%
139,000 Apple South, Inc. 2,588,875
116,700 Buffets, Inc. 1,225,350(b)
228,000 New World Coffee 527,250(b)
------------
4,341,475
------------
Retail - 4.1%
28,000 Gadzooks, Inc. 696,500(b)
34,300 Hot Topic, Inc. 578,812(b)
258,700 Lithia Motors, Inc. 4,494,912(b)
164,400 Movie Gallery, Inc. 637,050(b)
71,800 Paul Harris Stores, Inc. 1,319,325(b)
169,600 Sunglass Hut International 1,356,800(b)
72,900 The Children's Place Retail
Stores, Inc. 437,400(b)
164,300 Travis Boats & Motors, Inc. 3,142,237(b)
184,700 West Coast Entertainment Corp. 404,031(b)
------------
13,067,067
------------
Services - 9.2%
131,300 Alternative Resources Corp. 3,249,675(b)
124,500 Coach USA, Inc. 3,703,875(b)
8,900 CORESTAFF, Inc. 220,275(b)
191,500 Corporate Express, Inc. 2,812,656(b)
115,700 Cotelligent Group, Inc. 2,371,850(b)
100,000 F.Y.I., Inc. 2,575,000(b)
106,600 Gartner Group, Inc. 3,011,450
25,000 Mac-Gray Corp. 368,750(b)
49,100 OfficeMax, Inc. 656,712(b)
23,900 Personal Group of
America, Inc. 829,031(b)
95,000 PMT Services, Inc. 1,531,875(b)
106,000 Professional Staff plc 1,656,250(b)
46,700 SPR, Inc. 805,575(b)
25,000 Syntel, Inc. 350,000(b)
129,700 US Office Products Company 4,053,125(b)
50,000 Vestcom International, Inc. 906,250(b)
------------
29,102,349
------------
Telecommunications
Equipment - 4.7%
84,800 Aspect Telecommunications
Corp. 2,035,200(b)
100,000 DSC Communications Corp. 2,437,500(b)
41,000 Gilat Satellite Networks Ltd. 1,332,500(b)
169,500 Larscom, Inc. 1,695,000(b)
207,600 Orckit Communications Ltd. 3,684,900(b)
128,900 Pairgain Technologies, Inc. 3,641,425(b)
------------
14,826,525
------------
Telephone &
Telecommunications - 2.9%
155,900 Aerial Communications, Inc. 1,325,150(b)
28,800 American Communications 324,000(b)
16,000 ITC DeltaCom, Inc. 308,000(b)
51,800 LCC International, Inc., Class A 971,250(b)
124,800 LCI International, Inc. 3,229,200(b)
84,600 STAR Telecommunications, Inc. 1,956,375(b)
67,600 STARTEC Global
Communications Corp. 1,005,550(b)
------------
9,119,525
------------
Textiles & Apparel - 0.5%
155,300 Chaus (Bernard), Inc. 106,768(b)
52,500 Cutter & Buck, Inc. 938,437(b)
30,800 Tefron Ltd. 590,975(b)
------------
1,636,180
------------
Total Common Stocks
(cost $270,674,159) 298,612,609
------------
Principal
Amount
- --------------
SHORT-TERM SECURITIES - 5.6% (a)
Commercial Paper - 1.9%
$6,200,000 Disney (Walt) Co., 5.67%,
Due 11/3/1997 6,198,047
------------
U. S. Government Agency - 3.7%
11,700,000 Federal Home Loan Bank
Consolidated Discount Notes,
5.63%, Due 11/3/1997 11,696,340
------------
Total Short-Term Securities
(at amortized cost) 17,894,387
------------
Total Investments
(cost $288,568,546) $316,506,996(e)
============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Opportunity Growth Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock and
had no separate value at October 31, 1997.
(d) At October 31, 1997, securities valued at $6,382,800 were held in
escrow to cover open call options written as follows:
Number of Exercise Expiration
Issue Contracts Price Date Value
- ---------------- ------------ --------- ---------- ---------
Memtec Ltd., ADR 1,476 $30 11/22/97 $387,450
Miravant Medical
Technologies 136 50 11/22/97 30,600
Miravant Medical
Technologies 179 60 11/22/97 16,222
--------- --------
Total 1,791 $434,272
========= ========
(e) At October 31, 1997, the aggregate cost of securities for federal
income tax purposes was $289,569,868 and the net unrealized
appreciation of investments based on that cost was $26,937,128 which
is comprised of $52,612,193 aggregate gross unrealized appreciation
and $25,675,065 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
Portfolio of Investments
October 31, 1997
Shares Value
- -------------- ------------
<S> <C>
COMMON STOCKS - 85.6% (a)
Aerospace - 1.4%
1,770 Precision Castparts Corp. $ 104,098(c)
1,920 Sunstrand Corp. 104,400
------------
208,498
------------
Airlines - 1.4%
6,450 Southwest Airlines Co. 210,431
------------
Automotive - 1.4%
3,590 AutoZone, Inc. 106,129(b)
2,410 Tower Automotive, Inc. 100,919(b)
------------
207,048
------------
Bank & Finance - 10.6%
5,730 City National Corp. 172,258
1,530 Crestar Financial Corp. 72,388(c)
1,550 Donaldson, Lufkin &
Jenrette, Inc. 108,888
5,080 Firstar Corp. 183,515(c)
2,300 Long Island Bancorp, Inc. 102,350
920 Mercantile Bancorporation, Inc. 44,678
3,400 PMI Group 205,488
4,325 Reinsurance Group of America 169,486
1,380 Salomon, Inc. 107,209
4,410 Summit Bancorp 188,252
2,870 TCF Financial Corp. 163,231
2,190 UNUM Corp. 106,763
------------
1,624,506
------------
Chemicals - 3.5%
4,850 Avery Dennison Corp. 193,091
7,150 Crompton & Knowles Corp. 180,538
3,230 Cytec Industries, Inc. 157,463(b)
------------
531,092
------------
Computer Software - 2.8%
2,200 Adobe Systems, Inc. 105,050
4,900 Autodesk, Inc. 181,300
2,300 BMC Software, Inc. 138,863(b)
------------
425,213
------------
Computers & Office
Equipment - 4.8%
6,370 Boise Cascade Office
Products Corp. 121,030(b)
3,030 Digital Equipment Corp. 151,689(b)
3,950 Security Dynamics
Technologies, Inc. 133,806(b)
2,720 Shared Medical Systems Corp. 148,920
4,100 Waters Corp. 180,400(b)
------------
735,845
------------
Conglomerates - 1.2%
7,070 Whitman Corp. 185,588
------------
Drugs & Health Care - 5.5%
1,200 Arrow International, Inc. 43,200
4,700 Forest Laboratories, Inc. 217,375(b)
8,020 Rexall Sundown, Inc. 175,438(b)
3,250 Spine-Tech, Inc. 101,156(b)
3,100 STERIS Corp. 123,225(b)
5,610 Watson Pharmaceuticals, Inc. 178,118(b)
------------
838,512
------------
Electric Utilities - 0.9%
4,410 Pacific Enterprises 144,152(c)
------------
Electronics - 5.6%
4,050 Adaptec, Inc. 196,172(b)
2,650 Adtran, Inc. 95,400(b)
5,760 Anixter International, Inc. 108,720(b)
3,290 Thermo Instrument
Systems, Inc. 118,646(b)
2,620 Unitrode Corp. 70,249(b)
6,810 Vishay Intertechnology, Inc. 163,014(b)
3,560 VLSI Technology, Inc. 105,465(b)
------------
857,666
------------
Healthcare Management - 4.6%
7,610 Humana, Inc. 159,810(b)
10,010 MedPartners, Inc. 254,629(b)
3,130 Pediatrix Medical Group, Inc. 132,243(b)
5,097 Total Renal Care Holdings, Inc. 157,041(b)
------------
703,723
------------
Hospital Management - 1.6%
5,720 Health Management
Associates, Inc. 139,425(b)
2,350 Universal Health Services, Inc. 103,547(b)
------------
242,972
------------
Leisure & Entertainment - 1.9%
2,930 Mattel, Inc. 113,904
4,550 Promus Hotel Corp. 178,587(b)
------------
292,491
------------
Machinery & Equipment - 0.9%
3,000 Lear Corp. 144,187(b)
------------
Media - 3.3%
3,570 Clear Channel
Communications, Inc. 235,620(b)
8,750 Outdoor Systems, Inc. 269,062(b)
------------
504,682
------------
Mining & Metals - 3.5%
3,450 British Steel plc (ADR) 93,581
4,840 Homestake Mining Co. 59,895
4,050 Mueller Industries, Inc. 178,959(b)
1,640 Newmont Mining, Inc. 57,400
3,570 Titanium Metals Corp. 111,562(b)
710 UCAR International, Inc. 26,625(b)
------------
528,022
------------
Oil & Oil Service - 1.6%
1,170 Cooper Cameron Corp. 84,532(b)
1,270 Diamond Offshore
Drilling, Inc. 79,057
1,820 Reading & Bates Corp. 77,122(b)
------------
240,711
------------
Pollution Control - 1.3%
5,200 USA Waste Services, Inc. 192,400(b)
------------
Publishing & Printing - 0.8%
4,740 Banta Corp. 123,833
------------
Real Estate Investment
Trusts - 1.5%
3,460 First Industrial Realty Trust, Inc. 119,803
4,730 Glimcher Realty Trust 104,947
------------
224,750
------------
Restaurants - 1.4%
5,690 Outback Steakhouse, Inc. 153,986(b)
1,960 Papa John's International, Inc. 57,942(b)
------------
211,928
------------
Retail - 5.5%
7,520 Borders Group, Inc. 195,050(b)
2,350 Consolidated Stores Corp. 93,706(b)
1,700 Dayton Hudson Corp. 107,100
3,780 General Nutrition Companies 119,070(b)
700 Lands' End, Inc. 22,094(b)
5,130 Office Depot, Inc. 105,806(b)
1,560 Tiffany & Co. 61,620
4,350 US Office Products Company 135,937(b)
------------
840,383
------------
Services - 13.1%
4,620 ABR Information Services, Inc. 108,570(b)
6,360 AccuStaff, Inc. 181,657(b)
4,580 Budget Group, Inc. 160,300(b)
5,970 Cambridge Technology
Partners, Inc. 217,905(b)
3,570 Coach USA, Inc. 106,207(b)
4,320 Culligan Water
Technologies, Inc. 184,140(b)
5,040 Equifax, Inc. 156,555
2,790 Galileo International, Inc. 70,099
3,000 Norrell Corp. 87,375
5,310 Sterling Commerce, Inc. 176,226(b)
2,650 Stewart Enterprises, Inc. 109,975
8,160 SunGard Data Systems, Inc. 192,780(b)
3,860 Sylvan Learning Systems, Inc. 162,602(b)
3,300 Wackenhut Corrections Corp. 94,875(b)
------------
2,009,266
------------
Telecommunications
Equipment - 3.2%
4,910 ADC Telecommunications, Inc. 162,644(b)
2,700 ANTEC Corp. 42,525(b)
7,490 DSC Communications Corp. 182,569(b)
3,750 Pairgain Technologies, Inc. 105,937(b)
------------
493,675
------------
Telephone &
Telecommunications - 2.3%
1,220 Century Telephone Enterprises 51,774
7,040 LCI International, Inc. 182,160 (b)
2,810 Telephone and Data
Systems, Inc. 119,425
------------
353,359
------------
Total common Stocks
(cost $13,182,639) 13,074,933
------------
Principal
Amount
- --------------
SHORT-TERM SECURITIES - 14.4% (a)
$2,210,000 Federal Home Loan Mortgage,
Discount Notes, 5.65%,
Due 11/3/1997 2,209,306
------------
Total Investments
(cost $15,391,945) $ 15,284,239(d)
============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of
total investments of the Lutheran Brotherhood Mid Cap
Growth Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock
and had no separate value at October 31, 1997.
(d) At October 31, 1997, the aggregate cost of securities for
federal income tax purposes was $15,405,178 and the net
unrealized depreciation of investments based on that cost was
$120,939 which is comprised of $436,548 aggregate gross
unrealized appreciation and $557,487 aggregate gross unrealized
depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
Portfolio of Investments
October 31, 1997
<S> <C> <C>
Shares
Value
-------------- ---------
- -----
ARGENTINA - 1.0% (a)
COMMON STOCKS
2,003 Banco de Galicia Buenos
Aires "B" ADR (USD) $
48,541
2,600 Banco Frances del Rio de la
Plata ADR (USD)
64,025
19,286 Naviera Perez "B"
120,803
910 Telecom Argentina Stet "B"
4,553
460 Telecom Argentina Stet "B"
ADR (USD)
11,644
4,690 Telefonica de Argentina
ADR (USD)
131,906
10,287 YPF Sociedad Anonima
ADR (USD)
329,184
----------
- ----
Total Argentina
710,656
----------
- ----
AUSTRALIA - 2.0% (a)
COMMON STOCKS
27,343 Australia Gas & Light
182,675
8,000 Australia & New Zealand
Banking Group Ltd.
55,810
17,318 Boral Ltd.
45,549
2,000 Brambles Industries Ltd.
38,454
14,936 Broken Hill Proprietary
148,103
548 Commonwealth Bank of
Australia
6,301
14,000 Commonwealth Instalment
Receipt Trustee Ltd.
103,476
31,000 John Fairfax Holdings Ltd.
68,454
5,252 Lend Lease Corp.
107,554
6,151 National Australia Bank Ltd.
84,135
19,358 National Mutual Holdings Ltd.
33,353
27,076 News Corp.
129,671
17,000 Publishing & Broadcasting
98,631
10,342 St. George Bank Ltd.
62,650
12,000 Western Mining
42,617
16,000 Westpac Banking
93,167
14,500 Woodside Petroleum
122,468
----------
- ----
1,423,068
----------
- ----
PREFERRED STOCKS
8,667 News Corp.
38,460
----------
- ----
Total Australia
1,461,528
----------
- ----
AUSTRIA - 0.01% (a)
COMMON STOCKS
60 EVN Energie-Versorgung
Niederoesterreich AG
6,963
----------
- ----
BELGIUM - 1.3% (a)
COMMON STOCKS
601 Credit Communal
Holding/Dexia
65,668
530 Generale de Banque S.A.
216,791
35 Generale de Banque S.A.,
VVPR (reduced tax) Strips
15
1,350 Kredietbank
566,460
25 UCB
86,384
----------
- ----
Total Belgium
935,318
----------
- ----
BRAZIL - 2.4% (a)
COMMON STOCKS
470 Brazil Fund (USD)
10,134
7,270 Centrais Eletricas Brasileiras S.A.
ADR (USD)
147,218
2,950 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar GDR (USD)
54,575
500 Companhia Energetica Brasilia
(USD)
19,875
450 Companhia Energetica de Sao
Paulo ADR (USD)
8,550(b)
5,828 Companhia Energetica Minas
Gerais ADR (USD)
231,663
1,000 Companhia Siderurgica
Nacional (ADR)
36,250
10,883 Telecomunicacoes Brasilias
ADR (USD)
1,104,625
29,910 Usinas Siderurgicas de Minas
Gerais ADR (USD)
211,613
----------
- ----
Total Brazil
1,824,503
----------
- ----
CANADA - 0.3% (a)
COMMON STOCKS
4,980 Alcan Aluminum
141,695
1,870 Royal Bank of Canada
100,045
----------
- ----
Total Canada
241,740
----------
- ----
CHILE - 0.4% (a)
COMMON STOCKS
1,950 Chilectra ADR (USD)
50,700
1,516 Chilgener ADR (USD)
41,311
1,912 Compania de
Telecomunicaciones de Chile
(ADR)
53,058
3,695 Empresa Nacional de Electric
ADR (USD)
74,362
2,039 Enersis S.A. ADR (USD)
67,287
1,160 Santa Isabel (ADR)
21,460
----------
- ----
Total Chile
308,178
----------
- ----
CHINA - 0.2% (a)
COMMON STOCKS
7,400 Huaneng Power International
"N" ADR (USD)
162,800(b)
----------
- ----
CZECH REPUBLIC - 0.04% (a)
COMMON STOCKS
250 SPT Telecom a.s.
28,820(b)
----------
- ----
DENMARK - 0.3% (a)
COMMON STOCKS
1,020 Den Danske Bank
115,166
190 Tele Danmark "B"
11,161
930 Unidanmark "A"
62,861
----------
- ----
Total Denmark
189,188
----------
- ----
FINLAND - 0.3% (a)
COMMON STOCKS
2,670 Oy Nokia "A"
233,285
----------
- ----
FRANCE - 7.9% (a)
COMMON STOCKS
435 Accor
80,993
2,340 Alcatel Alsthom
282,346
1,520 Assurances Generales de
France
79,976
2,480 AXA
169,826
630 Canal Plus
109,655
407 Carrefour
212,382
2,360 Cie de St. Gobain
338,765
1,638 Credit Commercial de France
92,801
190 Credit Local de France
19,072
457 Credit Local De France
45,872
690 Credit Local de France -
Dexia France
69,260
8,000 Eaux Cie Generale
933,385
630 GTM Entrepose
39,319
753 Guilbert S.A.
98,298
510 Havas S.A.
33,598
1,740 Lapeyre
101,656
649 Legrand
120,838
231 L'Oreal
81,856
503 Pathe S.A.
90,254
1,119 Pinault Printemps Redoute
511,753
760 Primagaz
56,655
3,393 Sanofi
322,345
6,112 Schneider S.A.
326,355
1,276 Societe Generale
174,757
3,030 Societe Nationale Elf Aquitaine
375,057
415 Sodexho
206,987
2,080 Television Francaise
193,639
6,723 Total "B"
745,932
----------
- ----
Total France
5,913,632
----------
- ----
GERMANY - 5.0% (a)
COMMON STOCKS
1,470 Allianz AG
327,463
6,618 Bayer
232,271
5,400 Bayerische Hypotheken - und
Wechse - Bank
223,982
1,476 Bayerische Vereinsbank AG
85,625
1,600 Bilfinger & Berger Bau AG
57,454
100 Buderas
48,498
2,410 Commerzbank AG
81,787
6,623 Deutsche Bank
433,388
6,785 Deutsche Telekom
127,135
7,322 Gehe AG
382,283
2,640 Hoechst AG
100,466
200 Hornbach Baumarkt
5,929
264 Mannesmann
111,493
1,470 Rhoen Klinikum
140,707
1,040 SAP AG
298,341
3,871 Siemens AG
238,260
8,330 Veba
464,389
110 Veba International, Finance
Warrants Expiring 4/6/98
37,011(b)
123 Volkswagen
72,710
----------
- ----
3,469,192
----------
- ----
PREFERRED STOCKS
610 Fielmann
14,332
410 Fresenius AG
69,213
710 Hornbach Holdings AG
47,778
40 Krones
13,575
524 SAP AG
156,094
----------
- ----
300,992
----------
- ----
Total Germany
3,770,184
----------
- ----
HONG KONG - 2.6% (a)
COMMON STOCKS
14,000 China Light & Power Co. Ltd.
73,699
40,000 Doa Heng Bank Ltd.
92,091
149,217 First Pacific
94,087
44,000 Guoco Group
96,178
13,000 Henderson Land
Development Ltd.
71,965
102,625 Hong Kong Land Holdings
(USD)
233,985
73,000 Hutchison Whampoa
505,141
99,090 New World
Development Co. Ltd.
348,606
6,000 Sun Hung Kai Properties Ltd.
44,235
37,000 Swire Pacific "A"
197,646
84,000 Wharf Holdings
171,661
----------
- ----
Total Hong Kong
1,929,294
----------
- ----
ITALY - 3.2% (a)
COMMON STOCKS
4,000 Assicurazioni Generali
89,427
16,000 Banca Commerciale Italiana
43,662
13,842 Banca Fideuram
52,735
111,302 Credito Italiano
296,827
81,458 Ente Nazionale Idrocarburi
458,051
18,010 IMI SpA
161,058
3,278 Industrie Natuzzi SpA ADR
(USD)
73,345
14,000 Italgas
49,823
8,589 Mediolanum SpA
144,080
5,000 Rinascente
37,064
134,896 Telecom Italia Mobile
500,382
13,784 Telecom Italia Mobile RNC
28,252
72,983 Telecom Italia SpA
457,383
----------
- ----
Total Italy
2,392,089
----------
- ----
JAPAN - 21.3% (a)
COMMON STOCKS
1,210 Advantest Corp.
100,037
12,000 Alps Electric
134,607
17,000 Amada
90,403
37,000 Canon
897,715
10,000 Citizen Watch Co.
63,814
15,000 Dai Nippon Screen
Manufacturing Co. Ltd.
121,645
3,000 Daifuku
22,484
19,000 Daiichi Pharmaceutical
269,963
29,000 Daiwa House
279,518
39 DDI Corp.
130,270
57 East Japan Railway
277,067
5,300 Fanuc
214,026
37,000 Hitachi
284,379
22,000 Hitachi Zosen
48,442
2,000 Honda Motor Co.
67,304
7,000 Inax
30,478
8,000 Ishihara Sangyo Kaisha
16,419(b)
9,000 Ito-Yokado
447,196
16,000 Kao Corp.
223,349
10,000 Kokuyo
235,978
21,000 Komatsu
112,198
8,000 Komori
146,240
15,000 Kumagai Gumi
14,707
20,000 Kuraray
179,477
12,000 Kyocera
686,996
13,000 Makita
182,551
19,000 Marui
320,482
35,000 Matsushita Electric Industrial
587,453
19,000 Mitsubishi
162,609
96,000 Mitsubishi Heavy Industries
471,425
11,000 Mitsubishi Paper Mills
29,157
52,000 Mitsui Fudosan
587,619
6,000 Mitsui Petrochemical Industries
22,185
9,000 Murata Manufacturing
364,936
4,000 National House Industrial
43,540
66,000 NEC
723,889
31,000 Nippon Denso
669,713
4,000 Nippon Hodo
23,565
141,000 Nippon Steel
290,553
27 Nippon Telegraph & Telecom
228,833
35,000 Nomura Securities
407,146
11,000 Pioneer Electronic
180,972
2,000 Sangetsu Co. Ltd.
32,405
23,000 Sankyo
758,704
2,700 Sega Enterprises
66,406
31,000 Sekisui Chemical
243,930
19,000 Sekisui House
162,609
3,100 Seven-Eleven Japan
231,824
32,000 Sharp
248,608
19,350 Shin-Etsu Chemical
472,696
5,000 Shiseido Co. Ltd.
68,135
8,200 Sony
680,665
38,000 Sumitomo
271,541
51,000 Sumitomo Electric
673,785
10,000 Sumitomo Forestry
72,289
8,000 TDK
663,398
46,000 Teijin
150,976
8,000 Tokio Marine & Fire Insurance
79,767
4,300 Tokyo Electronics
214,375
8,000 Tokyo Steel Manufacturing
56,502
17,000 Toppan Printing
213,295
10,000 Uny Co.
162,027
3,150 Yurtec
21,253
----------
- ----
Total Japan
15,936,530
----------
- ----
MALAYSIA - 0.2% (a)
COMMON STOCKS
72,000 Commerce Asset Holdings
BHD
56,157
28,000 Time Engineering BHD
12,095
28,000 United Engineers
66,357
----------
- ----
Total Malaysia
134,609
----------
- ----
MEXICO - 1.5% (a)
COMMON STOCKS
15,620 Cementos de Mexico
ADR (USD)
121,055
13,267 Cemex "B"
58,226
9,857 Cifra "B" ADR (USD)
19,868
20,745 Gruma "B"
81,149(b)
3,561 Gruma S.A. GDR (USD)
55,196(b)
423 Grupo Financiero Banamex
Accival "L"
773
18,000 Grupo Financiero Banamex "B"
35,592
36,760 Grupo Industrial Maseca "B"
35,511
740 Grupo Televisa GDR (USD)
22,940(b)
23,799 Kimberly-Clark Mexico "A"
104,307
5,980 Panamerican Beverages "A"
ADR (USD)
185,381
7,920 Telefonos de Mexico "L"
ADR (USD)
342,540
4,800 TV Azteca S.A. ADR (USD)
91,800(b)
----------
- ----
Total Mexico
1,154,338
----------
- ----
NETHERLANDS - 11.0% (a)
COMMON STOCKS
22,156 ABN Amro Holdings N.V.
446,201
547 Akzo Nobel
96,384
1,370 Baan Co. N.V.
96,071(b)
2,507 Baan Co. N.V.
177,549(b)
6,439 CSM
293,842
66,004 Elsevier
1,036,890
6,620 Fortis Amev N.V.
260,163
2,408 Gucci Group N.V. (USD)
87,591
20,155 ING Groep N.V.
846,064
6,129 ING Groep N.V.,
Stock Warrants
63,105(b)
4,511 Koninklijke Ahold NV
115,476
5,480 Koninklijke Nutricia
Verenigde Bedrijven NV
156,652
1,942 Koninklijke PTT Nederland
74,219
940 Otra N.V.
15,009
7,390 Polygram
420,219
36,040 Royal Dutch Petroleum
1,906,417
11,480 Unilever NV
610,217
12,061 Wolters Kluwer
1,480,990
----------
- ----
Total Netherlands
8,183,059
----------
- ----
NEW ZEALAND - 0.4% (a)
COMMON STOCKS
23,000 Air New Zealand Ltd.
48,691
11,600 Carter Holt Harvey
20,224
18,550 Fletcher Challenge Building
56,018
11,250 Fletcher Challenge Energy
50,435
54,739 Fletcher Challenge Forests
Division
52,829
12,500 Fletcher Challenge Paper
20,547
17,000 Telecom Corp. of New Zealand
82,352
----------
- ----
Total New Zealand
331,096
----------
- ----
NORWAY - 2.1% (a)
COMMON STOCKS
1,200 Bergesen "A"
35,085
13,060 Norsk Hydro
721,562
8,540 Orkla "A"
787,001
1,460 Saga Petroleum "B"
25,947
----------
- ----
Total Norway
1,569,595
----------
- ----
PANAMA - 0.03% (a)
COMMON STOCKS
585 Banco Latinoamericano de
Exportaciones S.A. "E"
23,254
----------
- ----
PERU - 0.1% (a)
COMMON STOCKS
1,320 Credicorp Ltd.
23,677
3,328 Telefonica de Peru S.A.
ADR (USD)
65,728
----------
- ----
Total Peru
89,405
----------
- ----
PORTUGAL - 0.5% (a)
COMMON STOCKS
5,479 Jeronimo Martins
358,308
----------
- ----
RUSSIA - 0.02% (a)
COMMON STOCKS
860 Gazprom ADR (USD)
19,242
----------
- ----
SINGAPORE - 0.8% (a)
COMMON STOCKS
7,000 City Developments Ltd.
29,333
42,000 DBS Land
71,467
4,800 Oversea - Chinese Banking
Corp. Ltd.
26,667
18,800 Overseas Union Bank
62,667
33,000 Singapore Land
93,867
15,000 Singapore Press
206,667
17,000 United Overseas Bank
93,905
----------
- ----
Total Singapore
584,573
----------
- ----
SOUTH KOREA - 0.2% (a)
COMMON STOCKS
15,643 Korea Equity Fund (USD)
128,077
----------
- ----
SPAIN - 2.0% (a)
COMMON STOCKS
3,150 Banco Bilbao Vizcaya S.A.
84,234
2,880 Banco Popular Espanol S.A.
170,064
9,793 Banco Santander SA
274,328
2,131 Centros Comerciales Pryca
33,839
1,682 Corporacion Bancaria de
Espana S.A.
93,425
9,820 Endesa S.A.
184,964
2,179 Gas Natural SDG, S.A.
100,959
13,280 Iberdrola
158,845
3,124 Repsol S.A.
130,999
10,042 Telefonica de Espana
274,055
----------
- ----
Total Spain
1,505,712
----------
- ----
SWEDEN - 3.2% (a)
COMMON STOCKS
14,050 ABB AB
164,138
45,076 Astra AB
698,115
7,700 Atlas Copco "B"
228,741
4,020 Electrolux "B"
332,768
2,460 Esselte "B"
53,536
2,010 Granges AB
32,874(b)
11,400 Hennes & Mauritz AB
466,508
5,690 Nordbanken AB
178,527
660 Sandvik "A"
20,003
7,570 Sandvik "B"
230,438
1,370 Scribona "B"
18,108
----------
- ----
Total Sweden
2,423,756
----------
- ----
SWITZERLAND - 6.5% (a)
COMMON STOCKS
426 ABB AG
555,222
1,154 Adecco S.A.
366,742
1,210 Credit Suisse Group
170,450
655 Nestle
922,917
994 Novartis AG
1,556,752
116 Roche Holdings
1,019,375
1,120 Schwizerischer Bankverein
301,146
----------
- ----
Total Switzerland
4,892,604
----------
- ----
THAILAND - 0.1% (a)
COMMON STOCKS
4,100 Advanced Information Service
plc (Foreign Registered)
22,686
2,000 Siam Cement
16,673
----------
- ----
Total Thailand
39,359
----------
- ----
UNITED KINGDOM - 16.6% (a)
COMMON STOCKS
26,000 Abbey National
413,532
30,706 Argos plc
327,133
77,000 Asda Group
200,240
33,000 BG plc
145,058
19,000 British Petroleum
279,245
57,100 Cable & Wireless
456,006
40,400 Cadbury Schweppes
406,687
50,400 Caradon plc
160,661
21,000 Centrica plc
29,507(b)
18,000 Compass Group
190,257
26,000 David S. Smith
99,457
21,000 Electrocomponents
163,832
3,000 GKN
67,294
42,500 Glaxo Wellcome
911,270
5,000 Heywood Williams Group
20,133
16,000 Hillsdown Holdings
45,098
11,000 John Laing "A"
68,746
65,000 Kingfisher
935,682
111,000 National Westminster Bank
1,595,994
40,000 Rank Group plc
223,476
110,000 Reed International plc
1,087,938
22,000 Rolls Royce
78,988
23,800 RTZ
306,666
49,000 Safeway plc
319,179
10,000 Sears
9,899
149,000 Shell Transport & Trading
1,056,811
134,200 SmithKline Beecham plc
1,272,121
30,000 T & N
126,649
32,000 Tesco
256,226
113,000 Tomkins
580,133
44,500 United News & Media
559,949
----------
- ----
Total United Kingdom
12,393,867
----------
- ----
VENEZUELA - 0.1% (a)
COMMON STOCKS
1,290 Compania Anonima Nacional
Telefonos de Venezuela
ADR (USD)
56,438
----------
- ----
Principal
Amount
--------------
SHORT-TERM
SECURITIES - 6.4% (a)
U.S. Government Agency
$4,800,000 Federal Home Loan Bank
Discount Notes, 5.63%,
due 11/3/1997
4,798,499
----------
- ----
Total Investments $
74,730,499(d)
==============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments
of the
Lutheran Brotherhood World Growth Fund.
(b) Currently non-income producing.
(c) Security Classification:
Cost Value % of Portfolio
------------ ----------- --------------
<S> <C> <C> <C>
Common Stocks
& Warrants $64,371,323 $69,592,548 93.1%
Preferred Stocks 322,416 339,452 0.5%
Short-Term 4,798,499 4,798,499 6.4%
----------- ----------- ------
Total Investments $69,492,238 $74,730,499 100.0%
=========== =========== ======
(d) At October 31, 1997, the aggregate cost of securities for federal income tax
purposes
was $69,676,427 and the net unrealized appreciation of investments based on
that cost was
$5,054,072 which is comprised of $10,904,612 aggregate gross unrealized
appreciation and
$5,850,540 aggregate gross unrealized depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
(GDR) - Global Depository Receipts
(USD) - Denominated in U.S. Dollars
The accompanying notes are an integral part of the financial statements.
</TABLE>
LUTHERAN BROTHERHOOD FUND
Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Shares Value
- ------------ ------------
<S> <C> <C>
COMMON STOCKS - 98.3% (a)
Airlines - 1.0%
299,000 Southwest Airlines Co. $ 9,754,875
------------
Automotive - 0.9%
144,300 General Motors Corp. 9,262,256
------------
Bank & Finance - 15.3%
191,150 American International Group, Inc. 19,509,247
204,400 Bank of New York Co., Inc. 9,619,575
81,600 Chase Manhattan Corp. 9,414,600
149,700 Citicorp 18,721,856
264,700 Federal Home Loan Mortgage Corp. 10,025,513
200,500 Federal National Mortgage Association 9,711,719
87,000 Household International, Inc. 9,852,750
114,000 Lehman Brothers Holdings, Inc. 5,365,125
371,250 MBNA Corp. 9,768,516
164,400 MGIC Investment Corp. 9,915,375
316,900 NationsBank Corp. 18,974,388
194,300 U.S. Bancorp 19,757,881
------------
150,636,545
------------
Chemicals - 4.0%
131,000 Air Products & Chemicals, Inc. 9,956,000
172,900 E.I. du Pont de Nemours and Co. 9,833,688
228,100 Monsanto Co. 9,751,275
219,800 Praxair, Inc. 9,575,038
------------
39,116,001
------------
Computer Software - 3.9%
130,600 Computer Associates International, Inc. 9,737,863
74,700 Microsoft Corp. 9,711,000(b)
279,750 Oracle Corp. 10,009,805(b)
213,900 Parametric Technology Corp. 9,438,338(b)
------------
38,897,006
------------
Computers & Office Equipment - 2.0%
159,200 Hewlett Packard Co. 9,820,650
99,800 International Business Machines 9,786,638
------------
19,607,288
------------
Conglomerates - 6.9%
537,500 AlliedSignal, Inc. 19,350,000
290,700 Dover Corp. 19,622,250
275,800 Honeywell, Inc. 18,771,638
266,900 Thermo Electron Corp. 9,958,706(b)
------------
67,702,594
------------
Drugs & Health Care - 9.9%
155,800 Abbott Laboratories 9,552,488
422,800 Becton, Dickinson & Co. 19,475,225
111,200 Bristol-Myers Squibb Co. 9,757,800
144,800 Eli Lilly & Co. 9,683,500
173,100 Johnson & Johnson 9,931,613
221,200 Merck & Co., Inc. 19,742,100
137,100 Pfizer, Inc. 9,699,825
68,800 Warner-Lambert Co. 9,851,300
------------
97,693,851
------------
Electric Utilities - 2.4%
189,100 Entergy Corp. 4,621,131
190,700 FPL Group, Inc. 9,856,806
421,900 Southern Co. 9,677,331
------------
24,155,268
------------
Electrical Equipment - 2.0%
302,400 General Electric Co. 19,523,700
------------
Electronics - 3.9%
207,000 Adaptec, Inc. 10,026,562(b)
372,800 Atmel Corp. 9,646,200(b)
244,500 Intel Corp. 18,826,500
------------
38,499,262
------------
Food & Beverage - 5.0%
343,500 Coca-Cola Co. 19,407,750
270,600 PepsiCo, Inc. 9,961,462
390,900 Sara Lee Corp. 19,984,762
------------
49,353,974
------------
Healthcare Management - 0.1%
55,300 Oxford Health Plans, Inc. 1,427,431(b)
------------
Household Products - 5.8%
138,800 Avon Products, Inc. 9,091,400
144,600 Colgate Palmolive Co. 9,362,850
219,800 Gillette Co. 19,575,937
285,900 Procter & Gamble Co. 19,441,200
------------
57,471,387
------------
Leisure & Entertainment - 5.9%
203,600 Carnival Cruise Lines, Inc. 9,874,600
236,600 Disney (Walt) Co. 19,460,350
138,700 HFS, Inc. 9,778,350(b)
141,400 Marriot International, Inc. 9,862,650
249,100 Mattel, Inc. 9,683,762
------------
58,659,712
------------
Machinery & Equipment - 1.0%
183,800 Deere & Co. 9,672,475
------------
Mining & Metals - 1.0%
137,300 Aluminum Co. of America 10,022,900
------------
Oil & Oil Service - 10.1%
214,000 Amoco Corp. 19,621,125
121,400 Chevron Corp. 10,068,612
325,300 Exxon Corp. 19,985,619
335,400 Halliburton Co. 19,998,225
268,000 Mobil Corp. 19,513,750
245,600 Unocal Corp. 10,131,000
------------
99,318,331
------------
Restaurants - 1.0%
208,600 McDonald's Corp. 9,347,887
24,490 Tricon Global Restaurants, Inc. 742,353(b)
------------
10,090,240
------------
Retail - 5.0%
163,300 CVS Corp. 10,012,331
229,800 Federated Department Stores 10,111,200(b)
312,000 Kroger Co. 10,179,000(b)
168,200 Safeway, Inc. 9,776,625(b)
273,200 Wal-Mart Stores, Inc. 9,596,150
------------
49,675,306
------------
Services - 1.1%
348,800 First Data Corp. 10,137,000
------------
Telecommunications Equipment - 5.1%
243,700 Cisco Systems, Inc. 19,991,016(b)
119,074 Lucent Technologies, Inc. 9,816,163
159,400 Motorola, Inc. 9,842,950
189,000 Tellabs, Inc. 10,206,000(b)
------------
49,856,129
------------
Telephone & Telecommunications - 5.0%
303,700 Ameritech Corp. 19,740,500
308,700 SBC Communications, Inc. 19,641,037
288,500 WorldCom, Inc. 9,700,812(b)
------------
49,082,349
------------
Total Common Stock
(Cost $737,132,579) 969,615,880
------------
Principal
Amount
- ------------
SHORT-TERM SECURITIES - 1.7% (a)
Commercial Paper - 1.0%
$10,000,000 Associates Corp. of North America,
5.72%, Due 11/3/1997 $ 9,996,822
------------
U.S. Government Agency - 0.7%
4,000,000 U.S. Treasury Bills, 4.72%,
Due 11/13/1997 3,993,707
3,025,000 U.S. Treasury Bills, 5.135%,
Due 11/6/1997 3,022,843
------------
Total U.S. Government Agency 7,016,550
------------
Total Short-Term Securities
(at amortized cost) 17,013,372
------------
Total Investments
(cost $754,145,951) $986,629,252(c)
============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Fund.
(b) Currently non-income producing.
(c) At October 31, 1997, the aggregate cost of securities for federal
income tax purposes was $754,415,106 and the net unrealized
appreciation of investments based on that cost was $232,214,146
which is comprised of $244,826,778 aggregate gross unrealized
appreciation and $12,612,632 aggregate gross unrealized
depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Principal
Maturity
Amount
Rate Date Value
- -------------
- ---- -------- -------
CORPORATE BONDS - 80.9% (a)
Aerospace - 0.3%
<S> <C>
<C> <C> <C>
$ 2,800,000 Stellex Industries, Inc., Sr. Subordinated Notes
9.5% 11/1/2007 $ 2,786,000
- --------------
Airlines - 0.9%
2,800,000 Northwest Airlines, Inc., Notes
8.7% 3/15/2007 2,957,651
2,000,000 Northwest Airlines, Inc., Notes
8.375% 3/15/2004 2,070,874
2,000,000 U.S. Air, Inc., Sr. Secured Equipment Trust, Series 1993-A-3
10.375% 3/1/2013 2,225,000
- --------------
7,253,525
- --------------
Automotive - 0.7%
4,000,000 Chief Auto Parts, Inc., Sr. Notes
10.5% 5/15/2005 3,920,000
3,600,000 Exide Corp., Convertible Sr. Subordinated Notes
2.9% 12/15/2005 2,277,000
- --------------
6,197,000
- --------------
Bank & Finance - 8.3%
3,450,000 AmeriCredit Corp., Sr. Notes
9.25% 2/1/2004 3,467,250
3,250,000 Chevy Chase Savings Bank, Subordinated Debentures
9.25% 12/1/2005 3,298,750
3,200,000 Delta Financial Corp., Sr. Notes
9.5% 8/1/2004 3,216,000
5,200,000 Dollar Financial Group, Inc., Sr. Notes, Series A
10.875% 11/15/2003 5,590,000
4,400,000 Emergent Group, Inc., Sr. Notes
10.75% 9/15/2004 4,334,000
8,150,000 First Nationwide Holdings, Inc., Sr. Notes
12.5% 4/15/2003 9,250,250
2,598,000 HomeSide, Inc., Sr. Secured Second Priority Bonds, Series B
11.25% 5/15/2003 3,091,620
5,200,000 Integon Capital I, Capital Securities, Series B
10.75% 2/15/2027 6,630,000
4,700,000 Mego Mortgage Corp., Sr. Subordinated Notes
12.5% 12/1/2001 4,723,500
2,200,000 Residential Reinsurance Ltd., Notes
Zero Coupon 12/15/2008 2,260,500
3,600,000 Riggs Capital Trust II, Trust Preferred Securities, Series C
8.875% 3/15/2027 3,838,324
3,200,000 Southern Pacific Funding, Sr. Notes
11.5% 11/1/2004 3,220,000
1,340,000 Trizec Finance Ltd., Sr. Notes
10.875% 10/15/2005 1,525,925
5,200,000 Veritas Holdings GMBH, Sr. Notes
9.625% 12/15/2003 5,408,000
5,000,000 Williams Scotsman, Inc., Sr. Notes
9.875% 6/1/2007 5,125,000
5,200,000 Wilshire Financial Services Group, Inc., Notes
13.0% 1/1/2004 5,421,000
- --------------
70,400,119
- --------------
Broadcasting - 10.7%
3,500,000 American Telecasting, Inc., Sr. Discount Notes
Zero Coupon 8/15/2005 1,207,500
2,000,000 American Telecasting, Inc., Sr. Discount Notes
Zero Coupon 6/15/2004 730,000
2,400,000 Australis Holdings Pty Ltd., Sr. Discount Notes
Zero Coupon 11/1/2002 1,692,000
7,092,703 Australis Media Ltd., Sr. Discount Notes
Zero Coupon 5/15/2003 5,177,673
5,100,000 Cablevision Industries, Debentures, Series B
9.25% 4/1/2008 5,536,193
4,000,000 CS Wireless Systems, Inc., Sr. Discount Notes, Series B
Zero Coupon 3/1/2006 1,180,000
3,550,000 Diamond Cable Co., Sr. Discount Notes
Zero Coupon 9/30/2004 3,106,250
1,600,000 Echostar DBS Corp., Sr. Secured Notes
12.5% 7/1/2002 1,708,000
5,200,000 EchoStar Satellite Broadcasting Corp., Sr.
Secured Discount Notes
Zero Coupon 3/15/2004 4,134,000
6,455,298 Falcon Holdings Group L.P., Sr. Subordinated Notes, Series B
11.0% 9/15/2003 6,745,786
8,100,000 Groupo Televisa S.A., Sr. Notes
11.875% 5/15/2006 8,869,500
5,500,000 Intermedia Capital Partners, Sr. Notes
11.25% 8/1/2006 5,995,000
4,100,000 International CableTel, Inc., Convertible Subordinated Notes
7.0% 6/15/2008 3,992,375
400,000 International CableTel, Inc., Convertible Subordinated Notes
7.25% 4/15/2005 443,500
4,200,000 International CableTel, Inc., Sr. Notes, Series A
Zero Coupon 4/15/2005 3,407,250
3,200,000 Jacor Communications, Inc., Convertible
Liquid Yield Option Notes
Zero Coupon 6/12/2011 1,976,000
2,800,000 NTL, Inc., Sr. Notes, Series B
10.0% 2/15/2007 2,898,000
4,000,000 Olympus Communications, L.P., Sr. Notes
10.625% 11/15/2006 4,360,000
5,200,000 Rogers Cablesystems Ltd., Sr. Secured Second Priority Notes
9.625% 8/1/2002 5,473,000
1,100,000 Rogers Cantel, Inc., Sr. Secured Notes
8.3% 10/1/2007 1,091,750
500,000 Rogers Cantel, Inc., Sr. Subordinated Notes
8.8% 10/1/2007 496,250
6,000,000 Rogers Communications, Inc., Convertible Debentures
2.0% 11/26/2005 3,637,500
2,000,000 Rogers Communications, Inc., Sr. Notes
9.125% 1/15/2006 2,030,000
2,625,000 Scott Cable Communications, Debentures
15.0% 4/15/2001 2,454,375
583,887 Scott Cable Communications, Jr. Subordinated Notes,
Payment-In-Kind
16.0% 7/18/2002 102,180
4,600,000 Sinclair Broadcast Group, Sr. Subordinated Notes
9.0% 7/15/2007 4,600,000
700,000 UIH Australia/Pacific, Inc., Sr. Discount Notes
Zero Coupon 5/15/2006 495,250
3,100,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series B
Zero Coupon 5/15/2006 2,193,250
4,800,000 United International Holdings, Inc., Sr. Discount Notes
Zero Coupon 11/15/2099 3,960,000
3,100,000 Wireless One, Inc., Sr. Notes
13.0% 10/15/2003 1,565,500
- --------------
91,258,082
- --------------
Building Products & Materials - 1.4%
4,700,000 Atrium Companies, Inc., Sr. Subordinated Notes
10.5% 11/15/2006 4,923,250
4,400,000 CEMEX S.A. de C.V., Notes
12.75% 7/15/2006 4,939,000
2,400,000 Nortek, Inc., Sr. Notes
9.125% 9/1/2007 2,424,000
- --------------
12,286,250
- --------------
Chemicals - 0.4%
3,200,000 Sovereign Specialty Chemicals, Inc., Sr. Subordinated Notes
9.5% 8/1/2007 3,264,000
- --------------
Computers & Office Equipment - 1.4%
3,250,000 Dictaphone Corp., Sr. Subordinated Notes
11.75% 8/1/2005 2,908,750
3,000,000 Unisys Corp., Sr. Notes
12.0% 4/15/2003 3,375,000
4,800,000 Unisys Corp., Sr. Notes
11.75% 10/15/2004 5,448,000
- --------------
11,731,750
- --------------
Construction & Home Building - 1.2%
6,400,000 Peters (J.M.) Co., Inc., Sr. Notes
12.75% 5/1/2002 6,624,000
3,600,000 The Fortress Group, Inc., Sr. Notes
13.75% 5/15/2003 4,014,000
- --------------
10,638,000
- --------------
Containers & Packaging - 1.3%
3,350,000 Radnor Holdings Corp., Sr. Notes
10.0% 12/1/2003 3,484,000
650,000 Radnor Holdings Corp., Sr. Notes, Series B
10.0% 12/1/2003 676,000
2,191,000 Silgan Holdings, Inc., Subordinated Debentures,
Payment-In-Kind
13.25% 7/15/2006 2,486,785
1,900,000 Vicap, S.A. de C.V., Sr. Guaranteed Notes
10.25% 5/15/2002 1,909,500
2,800,000 Vicap, S.A. de C.V., Sr. Guaranteed Notes
11.375% 5/15/2007 2,884,000
- --------------
11,440,285
- --------------
Drugs & Health Care - 0.7%
2,900,000 ICN Pharmaceuticals, Inc., Sr. Notes
9.25% 8/15/2005 3,059,500
2,450,000 Owens & Minor, Inc., Sr. Subordinated Notes
10.875% 6/1/2006 2,676,625
- --------------
5,736,125
- --------------
Electric Utilities - 2.3%
1,600,000 AES Corp., Sr. Subordinated Notes
8.5% 11/1/2007 1,580,000
1,400,000 CMS Energy Corp., Sr. Notes
7.625% 11/15/2004 1,400,315
4,800,000 CMS Energy Corp., Sr. Unsecured Notes
8.125% 5/15/2002 4,929,811
3,400,000 Espirito Santo Centrais Eletricas S.A.-ELCELSA, Sr. Notes
10.0% 7/15/2007 3,153,500
1,750,000 Midland Cogen Venture Fund II, Secured Lease Obligation
Bonds, Series A
11.75% 7/23/2005 2,088,475
3,000,000 Midland Cogen Venture Fund II, Subordinated Secured Lease
Obligation Bonds
13.25% 7/23/2006 3,787,533
2,800,000 Panda Global Energy Co., Sr. Secured Notes
12.5% 4/15/2004 2,702,000
- --------------
19,641,634
- --------------
Electrical Equipment - 2.0%
3,200,000 EV International, Inc., Sr. Subordinated Notes, Series A
11.0% 3/15/2007 3,216,000
2,000,000 Jordan Telecommunication Products, Sr. Notes
9.875% 8/1/2007 2,040,000
3,600,000 Protection One Alarm Monitoring, Convertible Sr.
Subordinated Notes
6.75% 9/15/2003 4,189,500
3,200,000 Protection One Alarm Monitoring, Sr. Subordinated
Discount Notes
Zero Coupon 6/30/2005 3,408,000
4,000,000 Telex Communications, Inc., Unsecured Sr. Notes
10.5% 5/1/2007 3,980,000
- --------------
16,833,500
- --------------
Food & Beverage - 2.5%
3,200,000 Ameriserve Food Distribution, Inc., Sr. Notes
8.875% 10/15/2006 3,208,000
3,000,000 Cott Corp., Sr. Notes
8.5% 5/1/2007 3,045,000
6,000,000 Fresh Del Monte Corp., Sr. Notes, Series B
10.0% 5/1/2003 6,360,000
6,000,000 Gorges/Quik-to-Fix Foods, Sr. Subordinated Notes, Series B
11.5% 12/1/2006 6,285,000
2,400,000 Southern Foods Group, L.P., Sr. Subordinated Notes
9.875% 9/1/2007 2,484,000
- --------------
21,382,000
- --------------
Hospital Management - 2.8%
3,100,000 Integrated Health Services, Inc., Sr. Subordinated Notes
9.25% 1/15/2008 3,177,500
4,400,000 Merit Behavioral Care Corp., Sr. Subordinated Notes
11.5% 11/15/2005 5,082,000
2,800,000 PhyMatrix Corp., Convertible Subordinated Debentures
6.75% 6/15/2003 2,478,000
3,000,000 Rotech Medical Corp., Convertible Subordinated Debentures
5.25% 6/1/2003 2,996,250
2,700,000 Tenet Healthcare Corp., Sr. Subordinated Notes
8.625% 1/15/2007 2,774,250
4,800,000 Unison HealthCare Corp., Sr. Notes
13.0% 11/1/2006 4,056,000
3,600,000 Vencor, Inc., Sr. Subordinated Notes
8.625% 7/15/2007 3,519,000
- --------------
24,083,000
- --------------
Household Products - 1.7%
5,150,000 BPC Holding Corp., Sr. Secured Notes, Series B
12.5% 6/15/2006 5,690,750
5,200,000 E&S Holdings Corp., Sr. Subordinated Notes, Series B
10.375% 10/1/2006 4,446,000
4,000,000 Simmons Co., Sr. Subordinated Notes
10.75% 4/15/2006 4,140,000
- --------------
14,276,750
- --------------
Industrial - 0.7%
2,800,000 Allied Holdings, Inc., Sr. Notes
8.625% 10/1/2007 2,863,000
2,800,000 Navistar Financial Corp., Sr. Subordinated Notes, Series B
9.0% 6/1/2002 2,898,000
- --------------
5,761,000
- --------------
Leisure & Entertainment - 2.9%
7,800,000 AMF Group, Inc., Sr. Subordinated Discount Notes, Series B
Zero Coupon 3/15/2006 5,928,000
2,000,000 CapStar Hotel Company, Sr. Subordinated Notes
8.75% 8/15/2007 2,022,500
2,000,000 CapStar Hotel Company, Convertible Subordinated Notes
4.75% 10/15/2004 2,062,500
4,800,000 HMH Properties, Inc., Sr. Notes
8.875% 7/15/2007 4,920,000
2,000,000 IMAX Corp., Sr. Notes
10.0% 3/1/2001 2,110,000
3,900,000 Lodgenet Entertainment, Sr. Notes
10.25% 12/15/2006 4,017,000
3,600,000 Signature Resorts, Inc., Sr. Subordinated Notes
9.75% 10/1/2007 3,654,000
- --------------
24,714,000
- --------------
Mining & Metals - 1.4%
3,150,000 Altos Hornos de Mexico, Bonds, Series B
11.875% 4/30/2004 3,220,875
5,000,000 CSN Iron Panama, Guaranteed Notes
9.125% 6/1/2007 4,225,000
4,400,000 Westmin Resources Ltd., Sr. Notes
11.0% 3/15/2007 4,686,000
- --------------
12,131,875
- --------------
Oil & Gas - 5.4%
6,800,000 Abraxas Petroleum Corp., Sr. Notes, Series B
11.5% 11/1/2004 7,412,000
3,800,000 Belden & Blake Corp., Sr. Subordinated Notes
9.875% 6/15/2007 3,895,000
3,900,000 Benton Oil & Gas, Sr. Notes
9.375% 11/1/2007 3,900,000
3,600,000 Coho Energy, Inc., Sr. Subordinated Notes
8.875% 10/15/2007 3,555,000
2,800,000 Cross Timbers Oil Co., Sr. Subordinated Notes
8.75% 11/1/2009 2,814,000
3,200,000 National Energy Group, Inc., Sr. Notes
10.75% 11/1/2006 3,328,000
2,750,000 National Energy Group, Inc., Sr. Notes, Series C
10.75% 11/1/2006 2,860,000
2,750,000 Perez Companc S.A., Notes
8.125% 7/15/2007 2,509,375
3,850,000 Petroleum Heat & Power Co., Inc., Subordinated Debentures
12.25% 2/1/2005 3,850,000
3,400,000 Pride Petroleum Services, Inc., Sr. Notes
9.375% 5/1/2007 3,638,000
4,000,000 Snyder Oil Corp., Sr. Subordinated Notes
8.75% 6/15/2007 4,000,000
4,000,000 Southwest Royalties, Inc., Sr. Notes
10.5% 10/15/2004 3,990,000
- --------------
45,751,375
- --------------
Paper & Forest Products - 3.8%
3,900,000 Ainsworth Lumber Co. Ltd., Sr. Secured Notes,
Payment-In-Kind
12.5% 7/15/2007 3,958,500
2,800,000 APP Finance (II) Mauritius Ltd., Guaranteed Preferred
Securities, Series B
12.0% 2/15/2004 2,611,000
3,100,000 APP International Finance, Guaranteed Secured Notes
11.75% 10/1/2005 3,107,750
5,200,000 Fonda Group, Inc., Sr. Subordinated Notes, Series B
9.5% 3/1/2007 4,966,000
3,950,000 FSW International Finance Co. B.V., Guaranteed Secured Notes
12.5% 11/1/2006 3,495,750
5,400,000 National Fiberstock Corp., Sr. Notes Series B
11.625% 6/15/2002 5,697,000
2,800,000 Pindo Deli Finance Mauritius, Guaranteed Sr. Notes
10.75% 10/1/2007 2,604,000
3,950,000 Tembec Finance Corp., Sr. Notes
9.875% 9/30/2005 4,167,250
2,000,000 Tjiwi Kimia Financial Mauritius, Guaranteed Sr. Notes
10.0% 8/1/2004 1,805,000
- --------------
32,412,250
- --------------
Pollution Control - 0.4%
3,000,000 Norcal Waste Systems, Inc., Sr. Notes, Series B
13.25% 11/15/2005 3,450,000
- --------------
Publishing & Printing - 2.9%
1,800,000 ITT PubliMedia BV, Sr. Subordinated Notes
9.375% 9/15/2007 1,845,000
2,500,000 K-III Communications Corp., Sr. Notes
10.25% 6/1/2004 2,675,000
5,500,000 MDC Communications Corp., Sr. Subordinated Notes
10.5% 12/1/2006 5,898,750
7,200,000 Neodata Services, Inc., Sr. Notes, Series B
12.0% 5/1/2003 7,830,000
3,500,000 News America Holdings, Inc., Convertible
Liquid Yield Option Notes
Zero Coupon 3/11/2013 1,566,250
750,000 News America Holdings, Inc., Subordinated Notes
Zero Coupon 3/31/2002 536,250
4,150,000 Sullivan Graphics, Inc., Sr. Subordinated Notes
12.75% 8/1/2005 4,170,750
- --------------
24,522,000
- --------------
Retail - 1.4%
2,600,000 County Seat Stores, Inc., Units
12.75% 11/1/2004 2,639,000
2,250,000 F & M Distributors, Inc., Sr. Subordinated Notes
11.5% 4/15/2003 33,750
2,600,000 J Crew Group, Sr. Discount Notes
Zero Coupon 10/15/2008 1,417,000
4,000,000 Lifestyle Furnishings International Ltd., Sr. Subordinated Notes
10.875% 8/1/2006 4,440,000
3,200,000 TravelCenters of America, Inc., Sr. Subordinated Notes
10.25% 4/1/2007 3,344,000
- --------------
11,873,750
- --------------
Retail: Food - 2.7%
4,000,000 Fleming Companies, Inc., Sr. Subordinated Notes
10.625% 7/31/2007 4,240,000
1,200,000 Jitney-Jungle Stores of America, Sr. Subordinated Notes
10.375% 9/15/2007 1,242,000
2,700,000 Jitney-Jungle Stores of America, Sr. Notes
12.0% 3/1/2006 3,037,500
4,100,000 Pueblo Xtra International, Inc., Sr. Notes, Series C
9.5% 8/1/2003 3,997,500
4,750,000 Ralphs Grocery Co., Sr. Notes
10.45% 6/15/2004 5,225,000
5,000,000 Smith's Food & Drug Centers, Pass Through Certificates
8.64% 7/2/2012 5,375,000
- --------------
23,117,000
- --------------
Services - 1.3%
2,000,000 Discovery Zone, Inc., Units
13.5% 8/1/2002 2,120,000
5,900,000 KinderCare Learning Centers, Inc., Sr. Subordinated Notes
9.5% 2/15/2009 5,826,250
2,800,000 Unicco Service/Finance, Sr. Subordinated Notes
9.875% 10/15/2007 2,786,000
- --------------
10,732,250
- --------------
Telecommunications - 8.8%
6,400,000 Clearnet Communications, Inc., Sr. Discount Notes
Zero Coupon 12/15/2005 4,928,000
4,000,000 Comcast Cellular Holdings, Inc., Sr. Notes
9.5% 5/1/2007 4,140,000
2,000,000 GST Equipment Funding, Inc., Sr. Secured Notes
13.25% 5/1/2007 2,280,000
1,060,000 GST Telecommunications, Inc., Sr. Subordinated Notes
Zero Coupon 12/15/2005 1,060,000
3,850,000 GST USA, Inc., Sr. Discount Notes
Zero Coupon 12/15/2005 2,752,750
4,600,000 Hyperion Telecommunications, Sr. Discount Notes, Series B
Zero Coupon 4/15/2003 3,151,000
3,950,000 IntelCom Group (U.S.A.), Inc., Sr. Discount Notes
Zero Coupon 5/1/2006 2,918,063
6,000,000 Ionica plc, Sr. Notes
13.5% 8/15/2006 6,450,000
3,900,000 IXC Communications, Inc., Sr. Notes, Series B
12.5% 10/1/2005 4,446,000
6,800,000 Microcell Telecommunications, Inc., Sr. Discount Notes
Zero Coupon 6/1/2006 4,556,000
8,400,000 Millicom International Cellular, Sr. Discount Notes
Zero Coupon 6/1/2006 6,363,000
3,200,000 NEXTLINK Communications LLC, Sr. Discount Notes
12.5% 4/15/2006 3,648,000
2,400,000 ORBCOMM Global, L.P., Sr. Notes
14.0% 8/15/2004 2,526,000
6,000,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes
Zero Coupon 2/1/2005 5,040,000
3,500,000 Phonetel Technologies, Inc., Sr. Notes
12.0% 12/15/2006 3,596,250
6,000,000 RSL Communications Ltd., Units
12.25% 11/15/2006 6,570,000
3,100,000 USA Mobile Communications, Inc., Sr. Notes
14.0% 11/1/2004 3,425,500
6,800,000 Viatel, Inc., Sr. Discount Notes
Zero Coupon 1/15/2005 5,202,000
2,500,000 WinStar Communications, Inc., Sr. Discount Notes
Zero Coupon 10/15/2005 1,787,500
- --------------
74,840,063
- --------------
Telephone & Telecommunications - 8.2%
3,200,000 American Communications Services, Inc., Sr. Notes
13.75% 7/15/2007 3,600,000
2,400,000 Globalstar LP/Capital Corp., Sr. Notes
10.75% 11/1/2004 2,322,000
2,750,000 Hermes Europe Railtel B.V., Sr. Notes
11.5% 8/15/2007 2,956,250
2,700,000 HighwayMaster Communications, Inc., Units
13.75% 9/15/2005 2,659,500
1,600,000 Hyperion Telecommunications, Inc., Sr. Secured Notes
12.25% 9/1/2004 1,704,000
3,000,000 Intermedia Communication, Sr. Notes
8.875% 11/1/2007 2,955,000
800,000 Iridium LLC/Capital Corp., Sr. Notes
11.25% 7/15/2005 748,000
2,800,000 Iridium LLC/Capital Corp., Sr. Notes, Series A
13.0% 7/15/2005 2,842,000
3,150,000 Iridium LLC/Capital Corp., Sr. Notes, Series B
14.0% 7/15/2005 3,323,250
2,750,000 James Cable Partners, L.P., Sr. Notes
10.75% 8/15/2004 2,880,625
5,600,000 Knology Holdings, Inc., Units
Zero Coupon 10/15/2007 2,996,000
5,600,000 McCaw International Ltd., Sr. Discount Notes
Zero Coupon 4/15/2007 3,444,000
4,000,000 MGC Communications, Inc., Units
13.0% 10/1/2004 3,960,000
2,400,000 Netia Holdings BV, Sr. Discount Notes
Zero Coupon 11/1/2007 1,362,000
3,600,000 Nextel Communications, Inc., Sr. Discount Notes
Zero Coupon 9/15/2007 2,106,000
4,000,000 Nextel Communications, Inc., Sr. Discount Notes
Zero Coupon 10/31/2007 2,230,000
2,000,000 NEXTLINK Communications, Inc., Sr. Notes
9.625% 10/1/2007 2,010,000
1,950,000 Price Communications Wireless, Sr. Subordinated Notes
11.75% 7/15/2007 2,101,125
3,200,000 Primus Telecommunications Group, Inc., Units
11.75% 8/1/2004 3,408,000
2,400,000 Telegroup, Inc., Sr. Discount Notes
Zero Coupon 11/1/2004 1,878,000
3,550,000 Teletrac, Inc., Units
14.0% 8/1/2007 3,603,250
9,600,000 UNIFI Communications, Inc., Sr. Notes
14.0% 3/1/2004 9,072,000
4,800,000 USN Communications, Inc., Units
Zero Coupon 8/15/2004 3,504,000
2,000,000 Winstar Communications, Inc., Unsecured Sr. Notes
Zero Coupon 10/15/2005 2,350,000
- --------------
70,015,000
- --------------
Textiles & Apparel - 1.5%
2,700,000 Anvil Knitwear, Inc., Sr. Notes, Series B
10.875% 3/15/2007 2,781,000
1,700,000 Brazos Sportswear, Inc., Sr. Notes
10.5% 7/1/2007 1,683,000
2,800,000 CMI Industries, Inc., Sr. Subordinated Notes
9.5% 10/1/2003 2,744,000
2,800,000 Delta Mills, Inc., Sr. Notes
9.625% 9/1/2007 2,828,000
2,800,000 Dyersburg Corp., Sr. Subordinated Notes
9.75% 9/1/2007 2,870,000
- --------------
12,906,000
- --------------
Transportation - 0.9%
6,150,000 Equimar Shipholdings Ltd., First Priority Mortgage Notes
9.875% 7/1/2007 5,934,750
3,000,000 TFM, S.A. de C.V., Sr. Discount Debentures
Zero Coupon 6/15/2009 1,837,500
- --------------
7,772,250
- --------------
Total Corporate Bonds (cost $667,272,410)
689,206,833
- --------------
Shares
--------
PREFERRED STOCKS - 13.4% (a)
Convertible - 4.5%
41,000 AES Trust II, Convertible Preferred Stock
1,968,000
34,000 Big Flower Trust I, Convertible Preferred Stock
1,670,250
40,000 CalEnergy Capital Trust III, Convertible Preferred Stock
1,930,000
85,000 Echostar Communications Corp., Convertible Preferred Stock,
Series C 4,250,000
40,000 Evergreen Media Corp., Convertible Preferred Stock
2,475,000
114,500 Granite Broadcasting Corp., Convertible Preferred Stock
5,954,000
60,000 Host Marriott Financial Trust, Convertible Preferred Stock
3,915,000
30,000 Intermedia Communication, Convertible Preferred Stock
705,000
10,000 Lomak Financing Trust, Convertible Preferred Stock
508,750
58,500 Network Imaging Corp., Convertible Preferred Stock, Series A
416,813
39,000 Sinclair Broadcast Group, Inc., Convertible Preferred Stock
1,945,125
36,000 TIMET Capital Trust I, Convertible Preferred Stock
1,899,000
100,000 USX Corp. (Marathon Group), Convertible Preferred Stock
2,175,000
74,600 WorldCom, Inc., Convertible Preferred Stock
8,728,200
- --------------
38,540,138
- --------------
Non-Convertible - 8.9%
2,300 American Communication Services, Payment-in-Kind Preferred Stock
2,173,500
27,000 Benedek Communications Corp., Sr. Exchangeable Preferred Stock
3,321,000
18,433 Cablevision Systems Corp., Preferred Stock
2,032,238
40,454 Cablevision Systems Corp., Redeemable Exchangeable Preferred
Stock, Series H 4,581,416
28,000 California Federal Bank, Non-cumulative Preferred Stock
3,213,000
29,646 Chancellor Media Corp., Payment-In-Kind Preferred Stock
3,387,056
60,000 Chevy Chase Capital Corp., Non-cumulative Exchangeable Preferred
Stock, Series A 3,127,500
36,616 Communications & Power Industries, Inc., Exchangeable Preferred
Stock, Series B 3,872,142
5,150 Consolidated Hydro, Inc., Preferred Stock
518,863(b,d)
1,400 Echostar Communications Corp., Exchangeable Payment-In-Kind
Preferred Stock 1,442,000
45,500 Grand Union Holdings Corp., Cumulative Preferred Stock, Series A
0(b,d)
276,736 Harvard Industries, Inc., Exchangeable Payment-In-Kind Preferred
Stock 345,920
2,000 Hyperion Telecommunications, Inc., Payment-In-Kind Preferred
Stock 1,947,500
4,550 ICG Communications, Inc., Preferred Stock
5,198,375
2,008 Intermedia Communications, Inc., Preferred Stock
2,371,950
2,000 IXC Communications, Inc., Payment-In-Kind Preferred Stock
2,300,000
1,200 J Crew Group, Preferred Stock
1,188,000
10,000 Jitney-Jungle Stores of America, Sr. Exchangeable Preferred
Stock, Class A 1,490,000
93,000 K-III Communications Corp., Exchangeable Preferred Stock
2,464,500
25,778 K-III Communications Corp., Exchangeable Preferred Stock, Series
B 2,790,467
17,000 K-III Communications Corp., Preferred Stock
1,678,750
40,500 K-III Communications Corp., Preferred Stock, Series D
4,181,625
64,799 NEXTLINK Communications, Inc., Payment-In-Kind Preferred Stock
4,017,538
3,033 Paxson Communications Corp., Payment-In-Kind Preferred Stock
3,199,815
160,000 Petroleum Heat & Power Co., Inc., Exchangeable Preferred Stock,
Series B 3,880,000
122,500 River Bank America, Preferred Stock
2,909,375
28,000 SFX Broadcasting, Inc., Payment-In-Kind Preferred Stock
3,199,000
5,200,000 SIG Capital Trust I, Preferred Stock
5,148,000
- --------------
75,979,530
- --------------
Total Preferred Stocks (cost $114,974,405)
114,519,668
- --------------
COMMON STOCKS & STOCK WARRANTS - 3.0% (a,b)
11,700 American Communications Services, Stock Warrants
994,500
2,400 American Telecasting, Inc., Stock Warrants
1,200
26,000 American Telecasting, Inc., Stock Warrants
13,000
125,000 Arch Communications Group, Common Stock
953,125
2,400 Australis Holdings Pty Ltd., Stock Warrants
24
9,400 Australis Media Ltd., Stock Warrants
94
104,000 Bell & Howell Co., Common Stock
2,866,500
23,925 Clearnet Communications, Inc., Stock Warrants
143,550
1,890 Communications & Power Industries, Inc., Common Stock
283,500
9,270 Consolidated Hydro, Inc., Stock Warrants
0(d)
2,233 CS Wireless Systems, Inc., Common Stock
2
20,000 Echostar Communications Corp., Class A Common Stock
380,000
112,013 Gaylord Container Corp., Class A Common Stock
742,086
154,623 Gaylord Container Corp., Stock Warrants
1,034,041
29,811 Grand Union Co., Stock Warrants
298(d)
14,905 Grand Union Co., Stock Warrants
149(d)
70,000 Harvard Industries, Inc., Class B Common Stock
70,000
9,200 Hyperion Telecommunications, Stock Warrants
690,000
110,000 IntelCom Group Communications, Inc., Common Stock
2,530,000
50,335 IntelCom Group (U.S.A.), Inc., Stock Warrants
704,690
4,100 Intermedia Communications of Florida, Stock Warrants
287,000
10,200 Ionica plc, Stock Warrants
2,397,000
2,000 Iridium World Communications, Stock Warrants
250,000
32,180 JPS Textiles Group, Common Stock, Class A
322(d)
70,000 Magellan Health Services, Common Stock
2,016,875
5,600 McCaw International Ltd., Stock Warrants
1,400
143,834 Memorex Telex N.V., ADR, Common Stock
2,158
3,981 Memorex Telex N.V., ADR, Stock Warrants
0(d)
27,200 Microcell Telecommunications, Inc., Stock Warrants
272
27,200 Microcell Telecommunications, Inc., Stock Warrants
516,800
268,000 MobileMedia Corp., Class A Common Stock
120,600
1,500 NEXTEL Communications, Stock Warrants
1,500
3,086 NEXTEL Communications, Stock Warrants
370
80,000 NEXTLINK Communications, Inc., Stock Warrants
800
26,250 PageMart Nationwide, Inc., Common Stock
272,344
121,000 Pagemart Wireless, Inc., Class A Common Stock
1,179,750
39,500 Plantronics, Inc., Common Stock
1,456,563
105,000 Powertel, Inc., Common Stock
1,909,687
19,360 Protection One Alarm Monitoring, Stock Warrants
232,320
6,000 RSL Communications Ltd., Stock Warrants
540,000
20,000 Triangle Wire & Cable, Inc., Stock Warrants
0(d)
9,600 UNIFI Communications, Inc., Stock Warrants
192,000
87,000 United International Holdings, Inc., Class A Common Stock
1,076,625
20,100 United International Holdings, Inc., Stock Warrants
221,100
192,533 Viatel, Inc., Common Stock
1,275,531
4,545 Wherehouse Entertainment, Inc., Stock Warrants, Class B
11,362
4,545 Wherehouse Entertainment, Inc., Stock Warrants, Class C
6,817
26,181 Wherehouse Entertainment, Inc., Stock Warrants, Class A
248,719
92,000 Wireless One, Inc., Common Stock
310,500
13,800 Wireless One, Inc., Stock Warrants
138
- --------------
Total Common Stocks & Stock Warrants (cost $27,673,541)
25,935,312
- --------------
Principal
Maturity
Amount
Rate Date
---------
- ------ ----------
SHORT-TERM SECURITIES - 2.7% (a)
Commercial Paper - 2.4%
$ 20,600,000 BP America, Inc.
5.67% 11/3/1997 20,593,511
- --------------
U. S. Government Agency - 0.3%
1,800,000 Federal Home Loan Bank, Consolidated Discount Notes
5.63% 11/3/1997 1,799,437
- --------------
Total Short-Term Securities (at amortized cost)
22,392,948
- --------------
Total Investments (cost $832,313,304)
$ 852,054,761(f)
==============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments
of the Lutheran Brotherhood High Yield Fund.
(b) Currently non-income producing.
(c) Currently non-income producing and in default.
(d) Denotes restricted securities. These securities have been valued from the
date of acquisition through October 31, 1997,
by obtaining quotations from brokers who are active with the issues. The
following table indicates the acquisition date
and cost of restricted securities the Fund owned as of October 31, 1997:
<CAPTION>
Acquisition
Security
Date Cost
------------------------------------------------------------------------
- -- ----------- ------------
<S>
<C> <C>
Consolidated Hydro, Inc., Preferred Stock
3/29/1994 $2,440,822
Consolidated Hydro, Inc., Stock Warrants
2/8/1994 22,776
Grand Union Co., Stock Warrants
6/20/1995 2,981
Grand Union Co., Stock Warrants
6/20/1995 5,962
Grand Union Holdings Corp., Cumulative Preferred Stock, Series A
6/14/1993 5,218,975
JPS Textiles Group, Common Stock, Class A
1/13/1994 1,281,065
Memorex Telex N. W., ADR, Stock Warrants
3/25/1994 7,962
Triangle Wire & Cable, Inc., Stock Warrants
1/3/1992 1,998
(e) Includes stock rights that automatically traded with the stock and had no
separate value at October 31, 1997.
(f) At October 31, 1997, the aggregate cost of securities for federal income tax
purposes was $833,374,672 and the net
unrealized appreciation of investments based on that cost was $18,680,089
which is comprised of $59,562,658 aggregate
gross unrealized appreciation and $40,882,569 aggregate gross unrealized
depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
LUTHERAN BROTHERHOOD INCOME FUND
Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Principal
Maturity
Amount
Rate Date Value
- -----------
- ------- ---------- ------------
<S> <C>
<C> <C> <C>
CORPORATE BONDS - 47.8% (a)
Aerospace - 0.7%
$ 6,000,000 Raytheon Company, Notes
6.45% 8/15/2002 $ 6,028,074
- ------------
Automotive - 2.1%
5,000,000 Ford Motor Credit Co., Notes
6.375% 10/6/2000 5,039,495
6,000,000 General Motors Acceptance Corp., Medium Term Notes
7.625% 5/5/2003 6,368,706
5,000,000 General Motors Acceptance Corp., Unsecured Notes
7.125% 5/1/2003 5,180,040
- ------------
16,588,241
- ------------
Bank & Finance - 19.6%
3,500,000 Aon Capital A, Capital Securities
8.205% 1/1/2027 3,825,462
14,000,000 Associates Corp. of North America, Sr. Notes
9.125% 4/1/2000 14,939,414
4,000,000 Banc One Corp., Subordinated Debentures
8.0% 4/29/2027 4,435,760
3,000,000 Chase Manhattan Corp., Subordinated Notes
10.375% 3/15/1999 3,168,762
3,500,000 Chase Manhattan Corp., Subordinated Notes
9.375% 7/1/2001 3,864,074
7,000,000 Chemical New York Corp., Debentures
9.75% 6/15/1999 7,399,049
13,000,000 Equitable Life Assurance Society of the United States, Surplus
Notes 6.95% 12/1/2005 13,243,932
7,000,000 GenAmerica Capital I, Capital Securities
8.525% 6/30/2027 7,355,628
15,500,000 General Electric Capital Corp., Debentures
8.85% 4/1/2005 17,812,833
10,000,000 Mellon Capital I, Capital Trust Preferred Securities
7.72% 12/1/2026 10,198,170
9,000,000 Metropolitan Life Insurance Co., Surplus Notes
7.7% 11/1/2015 9,534,186
5,000,000 National Westminster Bank plc, Subordinated Notes
9.45% 5/1/2001 5,516,960
8,000,000 New York Life Insurance Co., Surplus Notes
6.4% 12/15/2003 8,008,368
4,000,000 Prudential Insurance Co. of America, Capital Notes
6.875% 4/15/2003 4,029,468
8,000,000 Prudential Insurance Co., Surplus Notes
8.3% 7/1/2025 8,730,680
5,000,000 Riggs Capital Trust, Capital Trust Preferred Securities, Series A
8.625% 12/31/2026 5,221,895
7,000,000 Societe-Generale- New York, Subordinated Notes
9.875% 7/15/2003 8,119,706
6,000,000 Societe-Generale- New York, Subordinated Notes
7.4% 6/1/2006 6,287,280
7,500,000 Societe General Real Estate Investment Trust, LIBOR Bonds, Series A
7.64% 12/29/2049 7,566,442
7,500,000 Wells Fargo Capital, Capital Trust Preferred Securities
7.73% 12/1/2026 7,648,485
- ------------
156,906,554
- ------------
Broadcasting - 1.2%
4,000,000 Continental Cablevision, Inc., Sr. Debentures
8.875% 9/15/2005 4,453,072
5,000,000 TCI Communications, Inc., Sr. Notes
10.125% 8/1/2001 5,566,985
- ------------
10,020,057
- ------------
Computers & Office Equipment - 0.7%
6,000,000 International Business Machines Corp., Debentures
7.125% 12/1/2096 6,048,102
- ------------
Drugs & Health Care - 1.3%
5,000,000 Allegiance Corp., Debentures
7.8% 10/15/2016 5,348,920
4,500,000 McKesson Finance Company of Canada, Sr. Notes
6.55% 11/1/2002 4,524,588
1,500,000 Roche Holdings, Inc., Convertible Notes
Zero Coupon 4/20/2010 753,750
- ------------
10,627,258
- ------------
Electric Utilities - 3.5%
4,000,000 Commonwealth Edison Co., Notes
7.625% 1/15/2007 4,164,820
7,000,000 Empresa Electrica Pehuienche S.A., Notes
7.3% 5/1/2003 7,138,831
10,000,000 Korea Electric Power Corp., Debentures
6.75% 8/1/2027 9,229,740
4,000,000 NRG Energy, Inc., Sr. Notes
7.5% 6/15/2007 4,147,000
3,500,000 Texas Utilities Electric Company, Debentures
7.17% 8/1/2007 3,551,814
- ------------
28,232,205
- ------------
Electronics - 0.1%
1,000,000 Motorola, Inc., Convertible Liquid Yield Option Notes
Zero Coupon 9/27/2013 795,000
- ------------
Household Products - 1.6%
10,000,000 Procter & Gamble, Guaranteed ESOP Debentures
9.36% 1/1/2021 12,673,610
- ------------
Leisure & Entertainment - 0.7%
5,000,000 Time Warner, Inc., Debentures
9.125% 1/15/2013 5,897,770
- ------------
Natural Gas - 1.4%
11,000,000 Columbia Gas Systems, Inc., Series A Notes
6.39% 11/28/2000 11,035,189
- ------------
Oil Drilling & Oil Service - 0.2%
1,000,000 Baker Hughes, Inc., Convertible Liquid Yield Option Notes
Zero Coupon 5/5/2008 900,000
350,000 Diamond Offshore Drilling, Inc., Convertible Subordinated Notes
3.75% 2/15/2007 566,563
- ------------
1,466,563
- ------------
Petroleum - 1.8%
4,994,730 Mobil Oil Corp., ESOP Sinking Fund Debentures
9.17% 2/29/2000 5,194,554
9,500,000 Petroliam Nasional BHD, Notes
7.75% 8/15/2015 9,093,219
- ------------
14,287,773
- ------------
Pollution Control - 0.2%
1,500,000 USA Waste Services, Inc., Convertible Subordinated Notes
4.0% 2/1/2002 1,586,250
- ------------
Publishing & Printing - 1.5%
7,000,000 Belo (A.H.) Corp., Sr. Notes
7.125% 6/1/2007 7,257,551
5,000,000 Belo (A.H.) Corp., Sr. Notes
6.875% 6/1/2002 5,107,150
- ------------
12,364,701
- ------------
Railroads - 1.9%
4,000,000 CSX Corp., Sr. Notes
7.25% 5/1/2004 4,141,092
3,000,000 CSX Corp., Sr. Notes
7.25% 5/1/2027 3,239,514
4,500,000 Norfolk Southern Corp., Notes
6.875% 5/1/2001 4,588,110
3,000,000 Norfolk Southern Corp., Notes
6.95% 5/1/2002 3,068,271
- ------------
15,036,987
- ------------
Retail - 6.3%
1,000,000 Costco Companies, Inc., Convertible Subordinated Notes
Zero Coupon 8/19/2017 541,250
10,000,000 Dayton Hudson Corp., Notes
6.4% 2/15/2003 10,015,500
3,000,000 Federated Department Stores, Inc., Sr. Debentures
6.79% 7/15/2027 3,052,737
4,000,000 Federated Department Stores, Inc., Sr. Notes
8.5% 6/15/2003 4,353,580
500,000 Home Depot, Inc., Convertible Subordinated Notes
3.25% 10/01/2001 644,375
2,500,000 Kroger Co. (The), Sr. Notes
8.15% 7/15/2006 2,743,017
4,000,000 Penney (J.C.) Co., Inc., Notes
6.95% 4/1/2000 4,083,708
1,500,000 Rite Aid Corp., Capital Notes
5.25% 9/15/2002 1,616,250
9,000,000 Safeway, Inc., Sr. Debentures
7.45% 9/15/2027 9,361,278
4,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series III
7.03% 6/4/2003 4,128,416
10,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series II
6.86% 7/3/2001 10,214,780
- ------------
50,754,891
- ------------
Services - 0.3%
750,000 CUC International, Inc., Convertible Subordinated Notes
3.0% 2/15/2002 853,125
750,000 Interpublic Group of Companies, Convertible Subordinated Debentures
1.80% 9/16/2004 613,125
1,000,000 Omnicom Group, Inc., Convertible Subordinated Debentures
4.25% 1/3/2007 1,257,500
- ------------
2,723,750
- ------------
Telephone - 1.8%
4,000,000 New York Telephone Co., Debentures
9.375% 7/15/2031 4,516,408
10,000,000 US West Capital Funding, Inc., Notes
6.85% 1/15/2002 10,163,730
- ------------
14,680,138
- ------------
Textiles & Apparel - 0.9%
7,000,000 Levi Strauss & Co., Notes
6.8% 11/01/2003 7,141,204
- ------------
Total Corporate Bonds (cost $363,088,829)
384,894,317
- ------------
FOREIGN GOVERNMENT BONDS - 4.5% (a,c)
7,000,000 British Columbia Hydro & Power, Debentures
12.5% 9/1/2013 7,649,180
7,500,000 Korea Development Bank, Bonds
7.25% 5/15/2006 6,892,320
5,000,000 Korea Development Bank, Bonds
7.125% 9/17/2001 4,857,850
3,000,000 Korea Development Bank, Unsecured Bonds
6.625% 11/21/2003 2,779,470
7,500,000 Ontario Province, Canada, Debentures
11.75% 4/25/2013 8,069,100
4,500,000 Ontario Province, Canada, Sr. Bonds
7.375% 1/27/2003 4,746,190
2,000,000 Republic Of Poland, Unsecured Bonds
4.0% 10/27/2014 1,640,000(b)
- ------------
Total Foreign Government Bonds (cost $52,158,168)
36,634,110
- ------------
ASSET-BACKED SECURITIES - 15.2% (a)
8,000,000 AESOP Funding II L.L.C., Rental Car Notes, Series 1997-1-A2
6.4% 10/20/2003 8,121,680
19,000,000 Chase Manhattan Credit Card, Series 1996-4, Class A
6.73% 2/15/2002 19,283,480
3,635,061 Chase Manhattan Grantor Trust, Series 1996-B-A
6.61% 9/15/2002 3,676,755
5,000,000 CS First Boston Mortgage Security Corp., Series 1996-2-A4
6.62% 9/25/2009 5,051,050
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A3
6.91% 5/25/2007 5,067,300
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A4
7.15% 5/25/2010 5,133,350
20,000,000 Deutsche Floorplan Receivables Master Trust, Series 1994-1-A
5.825% 2/15/2001 20,054,200(b)
10,000,000 Discover Card Master Trust I, Series 1996-3-A
6.05% 8/18/2008 9,860,700
13,000,000 Standard Credit Master Trust 1, Credit Card Participation
Certificates, Series 1995-9-A
6.55% 10/7/2007 13,233,220
15,000,000 World Financial Network Credit Card Master Trust, Series 1996-B
6.95% 4/15/2006 15,607,275
17,000,000 World Omni Auto Lease Trust
6.9% 6/25/2003 17,362,100
- ------------
Total Asset-Backed Securities (cost $120,461,630)
122,451,110
- ------------
MORTGAGE-BACKED SECURITIES - 13.7% (a)
32,396,993 Federal Home Loan Mortgage Corp., Participation Certificates
6.0% 2011-2012 31,885,733(d)
36,000,000 Federal National Mortgage Association, Participation Certificates
6.5% 11/1/2027 35,403,768(d)
44,173,847 Government National Mortgage Association, Modified
Pass Through Certificates
6.5% 2/15/2027 43,736,526
- ------------
Total Mortgage-Backed Securities (cost $109,226,637)
111,026,027
- ------------
U.S. GOVERNMENT - 7.5% (a)
38,000,000 U.S. Treasury Bonds
8.75%-12.0% 2005-2020 50,810,028(e)
9,000,000 U.S. Treasury Notes
7.875% 11/15/2004 10,032,192
- ------------
Total U.S. Government (cost $60,186,016)
60,842,220
- ------------
Shares
Value
- -----------
- ------------
COMMON STOCKS - 0.5% (a)
20,000 Banc One Corp., Common Stock
$ 1,042,500
10,000 CarrAmerica Realty Corp., Common Stock
298,125
6,000 Cresent Real Estate Equities, Common Stock
216,000
10,000 First Industrial Realty Trust, Common Stock
346,250
17,500 First Union Corp., Common Stock
858,594
5,000 Highwoods Properties, Inc., Common Stock
172,500
15,000 NationsBank Corp., Common Stock
898,125
2,284 Security Capital Group, Inc., Stock Warrants
10,992
10,000 Simon Debartolo Group, Inc., Common Stock
309,375
4,000 Spieker Properties, Inc., Common Stock
156,500
- ------------
Total Common Stocks (cost $4,397,049)
4,308,961
- ------------
PREFERRED STOCKS - 1.8% (a)
15,000 Aetna, Inc., Convertible Preferred Stock
1,076,250
20,000 AirTouch Communications, Inc., Convertible Preferred Stock
1,200,000
10,000 Corning Delaware, L.P., Convertible Preferred Stock
725,000
27,500 Houston Industries, Inc., Preferred Stock
1,505,625
10,000 McKesson Financing Trust, Convertible Preferred Stock
751,250
80,000 National Australia Banks, Preferred Stock
2,225,000
17,500 Security Capital Industrial Trust, Preferred Stock
553,437
17,500 Security Capital Pacific, Preferred Stock
535,937
100,000 SI Financing Trust I, Preferred Stock
2,712,500
100,000 TransCanada Pipelines, Ltd., Preferred Stock
2,606,250
15,000 Unocal Capital Trust, Preferred Stock
879,375
- ------------
Total Preferred Stocks (cost $13,838,428)
14,770,624
- ------------
Principal
Maturity
Amount
Rate Date
- -----------
- ------- ----------
SHORT-TERM SECURITIES - 9.0% (a)
Commercial Paper
$ 12,800,000 Associates Corp. of North America
5.72% 11/3/1997 12,795,932
14,200,000 AVCO Financial Services, Inc.
5.73% 11/3/1997 14,195,480
1,700,000 Coca-Cola Co.
5.5% 11/14/1997 1,696,624
5,000,000 CPC International, Inc.
5.53% 11/6/1997 4,996,160
10,000,000 Ford Motor Credit Co.
5.67% 11/5/1997 9,993,700
11,000,000 General Electric Capital Corp.
5.75% 11/3/1997 10,996,486
8,000,000 Pemex Capital, Inc.
5.52% 11/14/1997 7,984,053
10,000,000 St. Paul Companies, Inc.
5.48% 11/13/1997 9,981,733
- ------------
Total Short-Term Securities (at amortized cost)
72,640,168
- ------------
Total Investments (cost $795,996,925)
$807,567,537(f)
============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Income Fund.
(b) Denotes variable rate obligations for which current yield is shown.
(c) Denominated in U.S. dollars.
(d) Denotes investments purchased on a when-issued basis.
(e) At October 31, 1997, U.S. Treasury Bonds valued at $1,022,189 were
held in escrow to cover open call options written as follows:
<CAPTION>
Number of Exercise Expiration
Contracts Price Date Value
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures 400 $119 11/15/1997 $318,750
========
(f) At October 31, 1997, the aggregate cost of securities for federal
income tax purposes was $796,176,379 and the net unrealized
appreciation of investments based on that cost was $11,391,158
which is comprised of $18,800,428 aggregate gross unrealized
appreciation and $7,409,270 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Principal
Maturity
Amount
Rate Date Value
----------
- ------ ----------- -----------
<S> <C>
<C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES - 99.6% (a)
Alabama - 0.4%
$ 2,500,000 City of Mobile, Alabama, General Obligation Refunding
Warrants, Series 1996, Insured by AMBAC
5.0% 2/15/2016 $ 2,455,725
- ------------
Arizona - 1.3%
1,700,000 Pima County, Arizona (Catalina Foothills Unified School
District
#16), Unlimited Tax General Obligation Bonds, Series A,
Insured by MBIA
8.9% 7/1/2005 2,191,215
1,000,000 Pinal County, Arizona, Unified School District No. 43,
(Apache Junction),School Improvement Bonds, Series
1996-A, Insured by FGIC
5.8% 7/1/2011 1,067,910
2,500,000 Salt River Project, Arizona, Electric System, Revenue Bonds,
Series 1992-C
6.0% 1/1/2016 2,642,950
1,500,000 Tucson, Arizona, Unlimited Tax General Obligation Refunding
Bonds,
Insured by FGIC
6.1% 7/1/2012 1,598,595
- ------------
7,500,670
- ------------
Arkansas - 1.3%
1,340,000 Arkansas Development Finance Authority, Correctional
Facilities Construction Revenue Bonds, Insured by MBIA
7.125% 11/15/2010 1,477,993(b)
1,000,000 Arkansas Housing Development Agency, Single Family
Mortgage Bonds,Series A
8.375% 7/1/2010 1,257,430(b)
3,000,000 City of Jonesboro, Arkansas, Residential Housing and Health
Care
Facilities Board, Hospital Revenue Refunding& Construction
Bonds, (St. Bernards Regional Medical Center), Series 1996-B,
Insured by AMBAC
5.8% 7/1/2011 3,211,530
875,000 Pope County, Arkansas, Pollution Control Revenue Refunding
Bonds,
Series 1994 (ArkansasPower and Light Company Project),
Insured by FSA
6.3% 12/1/2016 948,605
750,000 Sebastian County, Arkansas, Junior College, Unlimited General
Obligation Refunding and Improvement Bonds,
Insured by AMBAC.
5.6% 4/1/2017 769,027
- ------------
7,664,585
- ------------
California - 10.8%
2,500,000 Alameda, California, Unified School District, Alameda County,
Crossover Refunding Bonds, Series A, Insured by AMBAC
6.1% 7/1/2013 2,666,475
3,450,000 Anaheim, California, Public Financing Authority, Lease Revenue
Bonds, (Anaheim Public Improvements Project),
1997 Series A, Insured by FSA
6.0% 9/1/2024 3,830,431
1,000,000 Anaheim, California, Public Financing Authority, Senior Lease
Revenue Bonds (Anaheim Public Improvement Project),
Series A, Insured by FSA
5.0% 9/1/2027 956,650
2,500,000 Bakersfield, California, Certificates of Participation
(Convention
Center Expansion - Arena Project, 1997), Insured by MBIA
5.8% 4/1/2017 2,604,925
3,000,000 California State Public Works Board, Department of
Corrections,
Lease Revenue Bonds,State Prison, Series A
7.4% 9/1/2010 3,649,650
6,285,000 California State, Unlimited Tax General Obligation Bonds,
Insured by MBIA
6.0% 8/1/2016 6,656,506
1,000,000 California State, Unlimited Tax General Obligation Bonds,
Veteran's
Series AT
9.5% 2/1/2010 1,420,680
2,000,000 California State, Various Purpose General Obligation Bonds,
Insured by AMBAC
6.3% 9/1/2010 2,276,360
1,400,000 Central Valley Financing Authority, California, Cogeneration
Project Revenue Bonds, (Carson Ice-Gen Project), Series 1993
6.0% 7/1/2009 1,469,874
3,135,000 County of Orange, California, 1996 Recovery Certificates of
Participation, Series A, Insured by MBIA
5.8% 7/1/2016 3,281,906
2,000,000 Los Angeles County, California, Transportation Commission
Sales
Tax Revenue Bonds, Proposition C, Series A,
Insured by MBIA
6.25% 7/1/2013 2,149,020
2,000,000 Metropolitan Water District of Southern California, Unlimited
Tax General Obligation Bonds, Series G
6.625% 3/1/2009 2,077,880(b)
4,975,000 Palmdale, California, Civic Authority Revenue Bonds (Merged
Redevelopment Project Areas), Series A
6.6% 9/1/2034 5,458,421
1,000,000 Rio Linda, California, Union School District, Series 1992-A,
Insured by AMBAC
7.4% 8/1/2010 1,152,540(b)
2,815,000 Riverside County Transportation Commission, California, Sales
Tax Revenue Capital Appreciation Bonds, Insured by MBIA
Zero Coupon 6/1/2004 2,101,144
1,000,000 Sacramento Cogeneration Authority, Cogeneration Project
Revenue Bonds,(Procter & Gamble Project), 1995 Series
6.375% 7/1/2010 1,084,850
1,500,000 San Francisco Bay Area Rapid Transit District, California,
Sales
Tax Revenue Refunding Bonds, Series 1990, Insured by MBIA
6.75% 7/1/2010 1,774,905
15,000,000 San Joaquin Hills Transportation Corridor Agency, California,
Sr. Lien Convertible Toll Revenue Bonds
Zero Coupon 1/1/2013 14,408,700(b)
1,500,000 State of California, General Obligation Bonds
7.0% 8/1/2006 1,767,150
2,490,000 University of California Revenue Bonds, Multiple Purpose
Projects, Series 1989-B, Insured by AMBAC
11.0% 9/1/1998 2,633,474
- ------------
63,421,541
- ------------
Colorado - 5.4%
1,000,000 Colorado Housing & Finance Authority, Single Family Program,
Revenue Bonds
7.0% 11/1/2016 1,121,680
615,000 Colorado Housing & Finance Authority, Single Family
Residential
Housing Revenue Bonds, Series 1987-B
9.0% 9/1/2017 630,867
3,100,000 Colorado Springs, Colorado, Utilities System Refunding
Bonds, Series 1991-B
7.0% 11/15/2021 3,470,946(b)
1,945,000 Colorado State Colleges Board, Western State College,
Housing & Student Fee Revenue Bonds, Series 1992,
Insured by Connie Lee
6.625% 5/1/2015 2,159,942(b)
1,195,000 Colorado Water Resources Power Development Authority, Clean
Water Revenue Bonds, Series A, Insured by FSA
6.25% 9/1/2013 1,270,787
150,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds
6.5% 12/15/2016 166,941
3,350,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds
6.5% 12/15/2016 3,799,938(b)
1,000,000 Eagle, Garfield, and Routt Counties, Colorado, Eagle County
School District No. RE50J, General Obligation Bonds,
Series 1994, Insured by FGIC
6.3% 12/1/2012 1,103,940
1,885,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA
Zero Coupon 12/1/2008 1,114,864
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA
Zero Coupon 6/1/2008 1,144,641
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA
Zero Coupon 6/1/2007 1,205,877
3,000,000 Larimer County, Colorado, School District No. R-1, Poudre
Valley
Unlimited Tax General Obligation Bonds, Insured by MBIA
7.0% 12/15/2016 3,775,740
635,000 Regional Transportation District, Colorado, Sales Tax
6.25% 11/1/2012 679,844
3,850,000 Regional Transportation District, Colorado, Sales Tax
6.25% 11/1/2012 4,214,980(b)
5,000,000 St. Vrain Valley School District, Boulder, Larimer & Weld
Counties, Colorado, General Obligation Refunding &
Improvement Bonds, Series 1990-A, Insured by MBIA
Zero Coupon 12/15/2004 3,633,500
2,500,000 St. Vrain Valley School District, Boulder, Larimer & Weld
Counties, Colorado, General Obligation Refunding &
Improvement Bonds, Series 1990-A, Insured by MBIA
Zero Coupon 12/15/2003 1,911,550
- ------------
31,406,037
- ------------
Connecticut - 0.8%
4,000,000 Connecticut Special Tax Obligation, Transportation
Infrastructure
Revenue Bonds, Series B
6.5% 10/1/2010 4,623,200
- ------------
Florida - 3.3%
11,835,000 Broward County, Florida, Housing Finance Authority, Home
Mortgage Revenue Bonds, 1983 Series A
Zero Coupon 4/1/2014 2,206,399
3,500,000 Florida State Board of Education, Public Education Capital
Outlay, General Obligation Bonds, Series B
5.875% 6/1/2020 3,649,275
5,000,000 Florida State Turnpike Authority, Turnpike Revenue Refunding
Bonds, (Department of Transportation), Series A,
Insured by FGIC
5.00% 7/1/2019 4,807,750
3,200,000 Hillsborough County, Florida, Industrial Development Authority
(Weyerhaeuser Company, Inc.), Industrial Development
Revenue Bonds, Series 1983
9.25% 6/1/2008 3,244,608
1,705,000 Hillsborough County, Florida, Industrial Development
Authority,
Florida (Tampa Electric Project), Pollution Control Revenue
Bonds, Series 1991
7.875% 8/1/2021 1,958,840
3,500,000 Jacksonville, Florida, Electric Authority (St. John's River
Power
Project), Electric Revenue Refunding Bonds, Issue 2-13
5.375% 10/1/2016 3,542,315
- ------------
19,409,187
- ------------
Georgia - 2.9%
1,500,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series A, Insured by MBIA
6.1% 10/1/2019 1,668,900
2,000,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series 1992, Insured by MBIA
6.0% 10/1/2011 2,211,300
5,000,000 Cherokee County, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Insured by MBIA
5.5% 8/1/2018 5,175,600
2,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-B
5.65% 3/1/2012 2,138,000
3,500,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-D
5.0% 8/1/2012 3,528,840
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series
B 6.3% 3/1/2010 1,131,240
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series
B 6.3% 3/1/2009 1,132,570
- ------------
16,986,450
- ------------
Idaho - 0.6%
1,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding
Bonds, Series 1991, Insured by MBIA
Zero Coupon 4/1/2007 646,000
3,115,000 Idaho Falls, Idaho, General Obligation Electric Refunding
Bonds, Series 1991, Insured by MBIA
Zero Coupon 4/1/2010 1,708,609
2,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding
Bonds, Series 1991, Insured by MBIA
Zero Coupon 4/1/2011 1,023,520
- ------------
3,378,129
- ------------
Illinois - 1.8%
1,000,000 City of Alton, Madison County, Illinois, Hospital Facility
Revenue
Refunding Bonds, Series 1996, (Saint Anthony's Health Center)
6.0% 9/1/2014 1,027,950
2,500,000 Cook County, Illinois, Unlimited General Obligation Bonds,
Series A, Insured by MBIA
6.25% 11/15/2011 2,834,000
2,000,000 Illinois Health Facilities Authority Revenue Refunding Bonds,
Lutheran General Health, Insured by FSA
6.0% 4/1/2018 2,126,680
858,000 Illinois Health Facilities Authority (Community Provider
Pooled
Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA
7.9% 8/15/2003 870,698(b)
170,000 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA
7.9% 8/15/2003 195,097(b)
10,000,000 Metropolitan Pier & Expostion Authority, Illinois, McCormick
Place Expansion, Refunding Bonds, Series 1993-A
Zero Coupon 6/15/2018 3,321,200
- ------------
10,375,625
- ------------
Indiana - 0.6%
2,450,000 Indiana Municipal Power Agency, Power Supply System Revenue
Bonds, Series A, Insured by MBIA
5.5% 1/1/2023 2,439,881
1,100,000 Indianapolis Airport Authority Refunding Revenue Bonds,
Series 1996-A, Insured by FGIC
5.6% 7/1/2015 1,120,229
- ------------
3,560,110
- ------------
Iowa - 0.4%
2,000,000 Iowa Finance Authority, Iowa State Revolving Fund Revenue
Bonds, Combined Series 1994
6.25% 5/1/2024 2,164,280
- ------------
Kansas - 1.7%
8,000,000 Kansas City, Kansas, Utility System Refunding and Improvement
Revenue Bonds, Series 1994, Insured by FGIC
6.375% 9/1/2023 8,801,360
920,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds,
Insured by AMBAC
Zero Coupon 3/1/2007 592,839
1,255,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds,
Insured by AMBAC
Zero Coupon 3/1/2007 809,437(b)
- ------------
10,203,636
- ------------
Kentucky - 0.8%
1,000,000 Kentucky Development Finance Authority, Refunding and
Improvement Revenue Bonds (Ashland Hospital, Kings
Daughter Project)
9.75% 8/1/2005 1,031,520
750,000 Kentucky Turnpike Authority, Economic Development Road
Revenue and Revenue Refunding Bonds, Series 1993,
Insured by AMBAC
5.5% 7/1/2009 799,155
5,345,000 Kentucky Turnpike Authority, Economic Development Road
Revenue Bonds, Insured by FGIC
Zero Coupon 1/1/2010 2,908,215
- ------------
4,738,890
- ------------
Louisiana - 1.2%
6,500,000 New Orleans, Louisiana, General Obligation Bonds, Series 1991,
Insured by AMBAC
Zero Coupon 9/1/2012 3,023,930
3,000,000 Orleans Parish School Board #87, Louisiana, Insured by MBIA
8.95% 2/1/2008 3,994,530(b)
- ------------
7,018,460
- ------------
Maine - 0.3%
1,250,000 Maine Health & Higher Education Facilities Authority, Revenue
Bonds, Series 1994, Insured by FSA
7.0% 7/1/2024 1,420,138
350,000 Regional Waste Systems, Inc., Maine, Solid Waste Resource
Recovery System Revenue Bonds, Series A-C
7.95% 7/1/2010 372,852
- ------------
1,792,990
- ------------
Maryland - 1.4%
2,000,000 Maryland Health & Higher Education Authority, Union Hospital
of
Cecil County Revenue Bonds, Series 1992
6.7% 7/1/2022 2,142,780
4,500,000 Morgan State University, Maryland, Academic Fee and Auxiliary
Facilities Fees Revenue Refunding Bonds, Series 1993,
Insured by MBIA
6.05% 7/1/2015 5,032,530
1,000,000 Prince George's County, Maryland, Dimensions Health Corp.,
Hospital Revenue Bonds, Series 1992
7.00% 7/1/2022 1,131,420(b)
- ------------
8,306,730
- ------------
Massachusetts - 2.3%
2,000,000 Commonwealth of Massachusetts, General Obligation Refunding
Bonds, Series B
6.5% 8/1/2008 2,289,760
1,800,000 Commonwealth of Massachusetts, Limited Tax General Obligation
Bonds, Construction Loan, Series C
7.375% 12/1/2008 1,901,484(b)
1,500,000 Massachusetts Health and Education Facilities Authority
(Newton - Wellesley Hospital) Revenue Bonds, Series C
8.0% 7/1/2018 1,570,560(b)
2,500,000 Massachusetts Health and Education Facilities Authority,
Revenue
Bonds, Daughters of Charity National Health System,
The Carney Hospital, Series D
6.1% 7/1/2014 2,695,750
1,500,000 Massachusetts Health & Education Facilities Authority,
Revenue Bonds, Series F
6.5% 7/1/2012 1,639,065
3,000,000 Plymouth County, Massachusetts, Correctional Facility
Certificates
of Participation Bonds
7.0% 4/1/2012 3,323,040
- ------------
13,419,659
- ------------
Michigan - 3.6%
4,000,000 Detroit, Michigan, Sewer Disposal Revenue Bonds, Series A,
Insured by MBIA
5.0% 7/1/2025 3,749,480
2,000,000 Economic Development Corporation of the County of St. Clair,
Michigan, Pollution Control Revenue Refunding Bonds
(Detroit Edison Company Project), Series 1993-AA,
Insured by AMBAC
6.4% 8/1/2024 2,201,000
1,400,000 Kent County, Michigan, Limited Tax General Obligation Refuse
Disposal System Refunding Bonds
8.3% 11/1/2007 1,435,000
1,500,000 Livonia Public Schools, County of Wayne, Michigan, 1992 School
Building and Site Bonds, Series II (Unlimited Tax General
Obligation), Insured by FGIC
Zero Coupon 5/1/2009 851,460
2,460,000 Michigan Municipal Bond Authority, Government Loan Revenue
Refunding Bonds, Series A, Insured by FGIC
Zero Coupon 12/1/2005 1,694,719
110,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (Detroit Medical Center Obligated
Group), Series 1988-A
8.125% 8/15/2012 115,154
390,000 Michigan State Hospital Finance Authority, Hospital Revenue
and
Refunding Bonds, (Detroit Medical Center Obligated Group),
Series 1988-A
8.125% 8/15/2012 410,342(b)
3,000,000 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds, (Sisters of Mercy Health Corp.), Insured by MBIA
5.375% 8/15/2014 3,068,160
3,320,000 Sault St. Marie Chippewa Indians Housing Authority,
Health Facilities Revenue Bonds, (Tribal Health &
Human Services Center Project), Series 1992
7.75% 9/1/2012 3,583,575
3,455,000 West Ottawa, Michigan, Public School District, Unlimited
Tax General Obligation Bonds, Insured by MBIA
Zero Coupon 5/1/2004 2,585,135
1,860,000 West Ottawa, Michigan, Public School District, Unlimited
Tax General Obligation Bonds, Insured by MBIA
Zero Coupon 5/1/2005 1,316,341
- ------------
21,010,366
- ------------
Minnesota - 4.1%
715,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Revenue Bonds, (The Duluth Clinic, Ltd), Series
1992,
Insured by AMBAC
6.3% 11/1/2022 769,061
285,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Revenue Bonds, (The Duluth Clinic, Ltd),
Series 1992, Insured by AMBAC
6.3% 11/1/2022 317,273(b)
7,685,000 Minneapolis, Minnesota, Community Development Agency, Tax
Increment Revenue Appreciation Bonds, Insured by MBIA
Zero Coupon 3/1/2009 4,437,319
5,000,000 Minnesota Agricultural and Economic Development Board,
Health Care System Revenue Bonds, Series 1997-A
(Fairview Hospital and Healthcare Services), Insured by MBIA
5.75% 11/15/2026 5,166,650
2,000,000 Minnesota Agricultural and Economic Development Board,
Healthcare System Revenue Bonds, Series 97A,
(Fairview Hospital and Healthcare Services), Insured by MBIA
5.5% 11/15/2017 2,040,540
2,500,000 Minnesota Higher Education Facilities Authority, (Augsburg
College), Mortgage Revenue Bonds, Series Four-F1 Bonds
6.25% 5/1/2023 2,635,475
1,740,000 Stewartville, MN, Independent School District, Unlimited
Tax General Obligation Bonds, Series A
5.75% 2/1/2014 1,815,064
3,500,000 St. Louis Park, Minnesota, Health Care Facilities (Park
Nicollet
Medical Center Project), Revenue Bonds, Series 1990-A
9.25% 1/1/2020 3,929,695(b)
1,000,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital
Revenue
Bonds, Series C, Insured by AMBAC
7.25% 7/1/2018 1,096,370(b)
1,400,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital
Revenue
Bonds, Series C, Insured by AMBAC
7.25% 7/1/2015 1,533,056(b)
- ------------
23,740,503
- ------------
Missouri - 3.1%
3,000,000 City of St. Charles, Missouri Public Facilities Authority,
Leasehold
Revenue Bonds, Series 1997A, Insured by MBIA
5.45% 2/1/2017 3,031,770
2,000,000 Health & Educational Facilities Authority of Missouri, Health
Facilities Revenue Bonds, Series 1996, (Lake of the Ozarks
General Hospital, Inc.)
6.5% 2/15/2021 2,132,540
1,500,000 Missouri Housing Development Commission, Single Family
Mortgage Revenue Bonds (Home Ownership Loan Program,
Series C-1
6.55% 9/1/2028 1,638,735
2,000,000 Missouri State Health and Education Facilities Authority
(Barnes -
Jewish, Inc. /Christian Health Services), Health Facilities
Refunding & Improvement Revenue Bonds, Series 1993-A
5.25% 5/15/2014 2,030,960
2,650,000 Missouri State Health and Education Facilities Authority
(Christian Health Services), Health Facilities Refunding &
Improvement Revenue Bonds, Series 1991 A, Insured by FGIC
6.875% 2/15/2021 2,919,558(b)
750,000 Missouri State Health and Education Facilities Authority,
Health Facilities Revenue Refunding Bonds, Lester E. Cox
Medical Center Project, Series 1993-I, Insured by MBIA
5.35% 6/1/2009 788,993
2,925,000 Missouri State Health and Education Facilities Authority,
Heartland Health System Revenue Bonds, Series 1992,
Insured by AMBAC
6.35% 11/15/2017 3,187,899
1,500,000 Missouri State Health and Education Facilities Authority,
SSM Health Care Refunding Revenue Bonds, Series A,
Insured by MBIA
6.25% 6/1/2007 1,633,755
1,000,000 State Environmental Improvement and Energy Resources
Authority,
(State of Missouri), Water Pollution Control Revenue Bonds,
(State Revolving Fund Program - Multiple Participant Series),
Series 1995-E
5.625% 7/1/2016 1,034,350
- ------------
18,398,560
- ------------
Montana - 0.8%
2,385,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA
6.875% 6/1/2020 2,609,739
775,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA
6.875% 6/1/2020 848,028(b)
1,240,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA
6.875% 6/1/2020 1,356,845(b)
- ------------
4,814,612
- ------------
Nebraska - 1.6%
1,000,000 Lancaster County, Nebraska, Hospital Authority No. 1, Hospital
Revenue Bonds (Bryan Memorial Hospital Project),
Series 1997-B, Insured by MBIA
5.375% 6/1/2022 987,190
4,000,000 Nebraska Public Power District, Power Supply System
Revenue Bonds, Insured by MBIA
6.125% 1/1/2015 4,250,280
3,455,000 Omaha Public Power District, Nebraska, Electric Revenue
Refunding Bonds, Series B
6.15% 2/1/2012 3,887,981
- ------------
9,125,451
- ------------
New Hampshire - 0.2%
1,100,000 New Hampshire Turnpike System, Residual Interest Bonds,
1991 Refunding, Series C, Insured by FGIC
9.703% 11/29/1997 1,429,461(c)
- ------------
New Jersey - 3.5%
665,000 Camden County, New Jersey, Municipal Utility Authority Sewer
Revenue Bonds, Insured by FGIC
8.25% 12/1/2017 680,435
1,250,000 East Orange, New Jersey, Unlimited Tax General Obligation
Bonds,
Insured by FSA
8.4% 8/1/2006 1,580,250
1,000,000 Mercer County, New Jersey, Improvement Authority, Revenue
Bonds,
Series 1991
6.6% 11/1/2014 1,085,880(b)
2,585,000 New Jersey Health Care Facilities Financing Authority, Jersey
Shore
Medical Center Revenue Bonds, Insured by AMBAC
6.1% 7/1/2010 2,801,235
1,000,000 New Jersey Health Care Facilities Financing Authority, Revenue
and Refunding Bonds, Series 1997A (AHS Hospital Corp. Issue),
Insured by AMBAC
5.0% 7/1/2027 956,760
3,000,000 New Jersey Transit Corp., (Raymond Plaza East, Inc.),
Certificates
of Participation, Insured by FSA
6.375% 10/1/2006 3,397,050
1,240,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series
10.375% 1/1/2003 1,450,800(b)
4,700,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series
C,
Insured by AMBAC
6.5% 1/1/2016 5,484,947
2,195,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC
Zero Coupon 12/15/2007 1,357,410
2,595,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC
Zero Coupon 12/15/2009 1,425,174
- ------------
20,219,941
- ------------
New Mexico - 2.1%
5,000,000 Farmington, New Mexico, Power Revenue Refunding Bonds,
Series 1983
9.875% 1/1/2013 6,624,200(b)
4,040,000 Farmington, New Mexico, Utility Systems Revenue Bonds,
Insured by AMBAC
9.875% 1/1/2008 5,415,862(b)
- ------------
12,040,062
- ------------
New York - 5.9%
2,500,000 Metropolitan Transit Authority, New York, Commuter Facilities
Revenue Bonds, Series 1996-A, Insured by FGIC
6.1% 7/1/2026 2,679,975
5,200,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series A, Insured by MBIA
6.375% 7/1/2018 5,851,404(b)
4,250,000 Metropolitan Transportation Authority, New York, Transit
Facilities
Revenue Bonds, Series O, Insured by MBIA
6.25% 7/1/2014 4,575,635
4,225,000 Metropolitan Transportation Authority, New York, Transit
Facilities
Service Contract Bonds, Series O
5.75% 7/1/2013 4,441,320
2,000,000 New York City, Municipal Water Finance Authority, Water &
Sewer
System Revenue Bonds, Series A, Insured by AMBAC
5.875% 6/15/2012 2,201,640
5,000,000 New York State Dorm Authority, Revenue Refunding Bonds,
State University Educational Facilities, Series B
5.0% 5/15/2018 4,706,300
1,925,000 New York State Medical Care Facilities Finance Agency
(Ellis Hospital), Insured Mortgage Hospital Bonds, Series B,
Insured by FHA
8.0% 2/15/2008 2,016,861
2,860,000 New York State Thruway Authority, Highway & Bridge Trust Fund,
Revenue Bonds, Series 1994-B, Insured by FGIC
6.0% 4/1/2014 3,038,035
1,720,000 New York State Urban Development Corp., Project Revenue Bonds,
(Syracuse University Center for Science and Technology Loan),
1995 Refunding Series
6.0% 1/1/2010 1,844,287
1,620,000 New York State Urban Development Corp., Project Revenue Bonds,
(Syracuse University Center for Science and Technology Loan),
1995 Refunding Series
6.0% 1/1/2009 1,744,173
1,000,000 Triborough Bridge & Tunnel Authority, New York, General
Purpose
Revenue Bonds, Series Q
6.75% 1/1/2009 1,175,360
- ------------
34,274,990
- ------------
North Carolina - 1.8%
2,500,000 Charlotte, North Carolina, Water and Sewer Unlimited Tax
General
Obligation Bonds
5.6% 5/1/2021 2,605,500
1,500,000 County of Pitt, North Carolina, Pitt County Memorial Hospital
Revenue Bonds, Series 1995
5.5% 12/1/2015 1,525,455
2,000,000 North Carolina Municipal Power Agency #1 Catawba
Electric Revenue Bonds, Insured by MBIA
5.0% 1/1/2018 1,909,400
4,000,000 North Carolina Municipal Power Agency #1, Catawba Electric
Revenue Refunding Bonds, Series 1992, Insured by MBIA
6.0% 1/1/2011 4,398,120
- ------------
10,438,475
- ------------
North Dakota - 0.8%
1,000,000 Mercer County, North Dakota, Pollution Control Revenue
Refunding Bonds, Ottertail Power Co. Project)
6.9% 2/1/2019 1,079,350
2,000,000 North Dakota Municipal Bond Bank, State Revolving Fund
Program Bonds, Series 1995-A
6.3% 10/1/2015 2,154,320
1,340,000 North Dakota State Water Commission (Southwest Pipeline),
Revenue Bonds, Series A, Insured by AMBAC
5.75% 7/1/2027 1,372,790
- ------------
4,606,460
- ------------
Ohio - 4.7%
1,050,000 Akron, Bath & Copley Joint Township, Ohio, (Children's
Hospital
Medical Center),Hospital District Revenue Bonds,
Insured by AMBAC
7.45% 11/15/2020 1,166,161(b)
2,500,000 Akron, Ohio, Certificates of Participation, Series 1996, Akron
Municipal Baseball Stadium Project
Zero Coupon 12/1/2016 2,124,725
1,000,000 Butler County, Ohio, Transportation Improvement District,
Highway Improvement Bonds, Series 1997-1
5.125% 4/1/2017 974,160
3,785,000 City of Cleveland, Ohio, Public Power System, First Mortgage
Revenue Bonds, Series 1994-A, Insured by MBIA
7.0% 11/15/2024 4,430,040(b)
1,000,000 Columbus, Ohio, Enlargment Unlimited Tax General
Obligation Bonds
6.0% 5/1/2014 1,071,200
1,630,000 Cuyahoga County, Ohio, (Deaconess Hospital), Hospital
Revenue Bonds, Series C
7.45% 10/1/2018 1,819,113(b)
1,470,000 Lorain County, Ohio, (Humility of Mary Health System),
Hospital
Revenue Bonds
7.125% 12/15/2006 1,666,318(b)
2,000,000 Ohio Higher Educational Facility Commission (Case Western
Reserve University Project), Series B
6.5% 10/1/2020 2,345,580
1,500,000 Ohio Higher Educational Facility Commission, Higher
Educational
Revenue Bonds, (Ohio Dominican College 1994 Project)
6.625% 12/1/2014 1,613,550
5,000,000 Ohio State Air Quality Development Authority, Cleveland
Electric,
Pollution Control Revenue Bonds, Insured by FGIC
8.0% 12/1/2013 5,838,050
2,250,000 Ohio State Air Quality Development Authority, Columbus &
Southern Pollution Control Revenue Bonds, Insured by FGIC
6.375% 12/1/2020 2,442,082
1,795,000 Trumbull County, Ohio (Memorial Hospital), Hospital Revenue
Refunding & Improvement Bonds, Series 1991-B,
Insured by FGIC
6.9% 11/15/2012 1,968,810
- ------------
27,459,789
- ------------
Oklahoma - 1.7%
5,220,000 Bass, Oklahoma, Memorial Baptist Hospital
8.35% 5/1/2009 6,488,773(b)
1,500,000 Oklahoma Municipal Power Authority, Electric Revenue Refunding
Bonds, Series B, Insured by MBIA
5.75% 1/1/2024 1,637,550
1,500,000 Oklahoma Municipal Power Authority, Power Supply System
Revenue Bonds, Series 1992-B, Insured by MBIA
5.875% 1/1/2012 1,646,325
- ------------
9,772,648
- ------------
Oregon - 0.9%
2,700,000 Clackamas County, Oregon, Health Facilities Authority,
Adventist
Health-West Revenue Refunding Bonds, Series 1992-A,
Insured by MBIA
6.35% 3/1/2009 2,929,662
2,000,000 Hospital Facility Authority of the Western Lane Hospital
District,
Oregon, Revenue Refunding Bonds, Series 1994, (Sisters of
St. Joseph of Peace, Health & Hospital Services),
Insured by MBIA
5.875% 8/1/2012 2,123,940
- ------------
5,053,602
- ------------
Pennsylvania - 2.8%
7,500,000 Allegheny County, Pennsylvania, Airport Revenue Refunding
Bonds,
Series 1997B, Insured by MBIA
5.0% 1/1/2019 7,196,850
1,600,000 Allegheny County, Pennsylvania, Hospital Development
Authority,
Hospital Revenue Bonds, Series A-1995, (Allegheny General
Hospital Project), Insured by MBIA
6.2% 9/1/2015 1,731,632
2,575,000 Allegheny County, Pennsylvania, Sanitary Authority, Sewer
Revenue Bonds, Series A, Insured by FGIC
Zero Coupon 6/1/2008 1,548,270
3,170,000 Millcreek Township, Pennsylvania, School District, General
Obligation Bonds, Insured by FGIC
Zero Coupon 8/15/2009 1,773,964
2,000,000 Monroeville, Pennsylvania, Hospital Authority, Forbes Health
System Revenue Bonds, Series 1992
7.0% 10/1/2003 2,175,620
3,000,000 Pennsylvania State, General Obligation Bonds, Second Series of
1992, Insured by AMBAC
Zero Coupon 7/1/2006 2,010,120
- ------------
16,436,456
- ------------
Puerto Rico - 2.0%
4,000,000 Puerto Rico Commonwealth, Aqueduct & Sewer Revenue Bonds,
Series A
9.0% 7/1/2009 5,106,640(b)
3,000,000 Puerto Rico Commonwealth, Unlimited Tax General
Obligation Bonds
6.45% 7/1/2017 3,302,730
3,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series T
6.0% 7/1/2016 3,139,770
- ------------
11,549,140
- ------------
South Carolina - 1.2%
2,000,000 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Series 1991, Insured by FGIC
6.25% 1/1/2021 2,260,220
5,000,000 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Insured by FGIC
5.0% 1/1/2022 4,750,900
- ------------
7,011,120
- ------------
Tennessee - 0.3%
1,750,000 Bristol, Tennessee, Health and Educational Facilities
Authority, Bristol
Memorial Hospital Revenue Bonds, Insured by FGIC
7.0% 9/1/2021 1,933,680(b)
- ------------
Texas - 10.0%
2,165,000 Arlington, Texas, Independent School District, Unlimited Tax
Refunding & Improvement Bonds, Series 1992, Permanent
School Fund Guarantee
Zero Coupon 2/15/2009 1,233,617
8,100,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA
Zero Coupon 11/15/2009 4,461,642
7,000,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA
Zero Coupon 11/15/2008 4,095,560
1,000,000 Austin, Texas, Utility System Revenue Refunding Bonds,
Insured by FGIC
6.0% 11/15/2013 1,103,510
2,500,000 Azle, Texas, Independant School District, Unlimited General
Obligation Bonds, Series A, Permanent School Fund
Guarantee
5.875% 2/15/2013 2,593,725(b)
1,575,000 Bexar County, Texas, Limited Tax General Obligation Bonds
5.0% 6/15/2015 1,562,164
1,000,000 Brazos River Authority, Texas, Collateralized Revenue
Refunding Bonds(Houston Lighting & Power Co.),
1988 Series B
8.25% 5/1/2015 1,038,980
2,000,000 Brazos River Authority, Texas, Houston Lighting
& Power Co., Revenue Refunding Bonds, Insured by MBIA
8.25% 5/1/2015 2,079,740
1,000,000 Cass County, Texas, Industrial Development Corporation,
Pollutions Control Revenue Refunding Bonds, International
Paper, Series 1997-B
5.35% 4/1/2012 1,010,970
1,310,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996
5.25% 2/15/2015 1,311,454
1,390,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996
5.25% 2/15/2016 1,385,024
2,000,000 Copperas Cove, Texas, Independent School District,
Unlimited Tax General Obligation Bonds, Permanent School
Fund Guarantee
6.9% 8/15/2014 2,290,100(b)
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds,
Insured by FGIC
7.375% 11/1/2009 1,170,890
2,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds,
Insured by FGIC
7.375% 11/1/2010 2,335,620
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds,
Insured by FGIC
7.375% 11/1/2008 1,173,970
4,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds
Series 1994-A, Insured by MBIA
6.0% 11/1/2012 4,255,280
2,285,000 Denton, Texas, Independent School District, Unlimited Tax
General Obligation Refunding Bonds, Permanent School
Fund Guarantee
6.25% 2/15/2009 2,570,762
1,000,000 Georgetown, Texas, Higher Education Finance Corp., Higher
Education Revenue Bonds, Series 1994 (Southwestern
University Project)
6.3% 2/15/2014 1,053,250
2,250,000 Harris County, Texas, Toll Road Sr. Lien Bonds, Series A,
Insured by MBIA
6.375% 8/15/2024 2,534,220
1,750,000 Harris County, Texas, Tollroad Unlimited Tax & Subordinated
Lien,
Revenue Refunding Bonds, Series 1988
8.125% 8/1/2015 1,838,497(b)
5,315,000 Lewisville, Texas, Independent School District, Capital
Appreciation Refunding Bonds, Permanent School
Fund Guarantee
Zero Coupon 8/15/2019 1,620,225
1,845,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC
7.375% 7/1/2010 2,133,798
1,000,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC
7.375% 7/1/2011 1,151,100
11,615,000 Southeastern Texas Housing Finance Corp., Single Family
Mortgage Revenue Bonds
Zero Coupon 9/1/2017 3,886,495(b)
4,315,000 Texas State, Veterans Land Board General Obligation Bonds
0.05% 7/1/2010 2,256,486(b)
1,520,000 Travis County, Texas, Housing Finance Corporation, Single
Family Mortgage Revenue Refunding Bonds, Series 1994-A
6.75% 4/1/2014 1,650,933
3,210,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guarantee
6.5% 2/15/2016 3,482,978(b)
440,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guarantee
6.5% 2/15/2016 468,926
1,175,000 Wylie, Texas, Independent School District, (Collin County),
Unlimited Tax School Building & Refunding Bonds,
Series 1994, Permanent School Fund Guarantee
6.875% 8/15/2014 1,373,105
- ------------
59,123,021
- ------------
Utah - 2.5%
5,000,000 Intermountain Power Agency, Utah, Power Supply Revenue Bonds,
Series B, Insured by MBIA
5.75% 7/1/2019 5,149,500
3,405,000 Timpanogos Special Service District, Utah County, Utah, Sewer
Revenue Bonds, Series 1996-A, Insured by AMBAC
6.1% 6/1/2019 3,602,626
3,750,000 Utah Associated Municipal Power Systems, San Juan Project
Revenue Bonds, Series O, Insured by MBIA
6.25% 6/1/2014 4,057,275
1,580,000 West Valley City, Utah, Municipal Building Authority, Lease
Refunding Bonds, Insured by MBIA
6.0% 1/15/2010 1,668,354
- ------------
14,477,755
- ------------
Virginia - 1.7%
3,000,000 Industrial Development Authority of Fairfax County, Virginia,
Health Care Revenue Bonds, (Inova Health System Project),
Series 1996
5.875% 8/15/2016 3,150,030
4,300,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1994 Series H, Subseries H-2
6.5% 1/1/2014 4,633,336
2,000,000 Virginia State, Unlimited Tax General Obligation Bonds
6.5% 6/1/2015 2,247,440(b)
- ------------
10,030,806
- ------------
Washington - 5.7%
1,655,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A
8.75% 9/1/2018 2,222,053(b)
1,395,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A
8.75% 9/1/2018 1,778,611
2,000,000 Grant County, Washington, Public Utility District No. 2,
Columbia River, Priest Rapids Hydro Electric Development
Project, Second Series Revenue Bonds, Series A,
Insured by AMBAC
5.0% 1/1/2023 1,885,240
5,000,000 King County, Washington, Unlimited Tax General Obligation
Bonds, Series A
6.75% 12/1/2009 5,363,700(b)
1,500,000 Tacoma, Washington, Conservation System Project Revenue Bonds,
Tacoma Public Utilities Light Division
6.6% 1/1/2015 1,622,145
2,015,000 Tacoma, Washington, Utilities Refuse Revenue Bonds,
Insured by MBIA
6.625% 12/1/2011 2,213,074(b)
3,000,000 Washington State Public Power Supply System, Nuclear
Project No. 1, Revenue Refunding Bonds, Series 1996-A,
Insured by MBIA
5.75% 7/1/2012 3,120,990
2,000,000 Washington State Public Power Supply System, Nuclear
Project No. 1, Revenue Refunding Bonds, Series 1996-A,
Insured by MBIA
5.75% 7/1/2011 2,093,960
1,000,000 Washington State Public Power Supply System, Nuclear
Project No. 3, Revenue Refunding Bonds, Insured by FGIC
7.25% 7/1/2015 1,079,790(b)
2,000,000 Washington State, Unlimited Tax General Obligation Bonds
6.0% 6/1/2012 2,202,940
2,400,000 Washington State, Unlimited Tax General Obligation Bonds
6.7% 6/1/2016 2,596,992(b)
3,000,000 Washington State, Unlimited Tax General Obligation Bonds,
Series 93A
5.75% 10/1/2012 3,231,000
1,500,000 Washington State, Unlimited Tax General Obligation Bonds,
Series A
6.25% 2/1/2011 1,686,030
2,500,000 Washington State, Various Purpose General Obligation Bonds
6.25% 6/1/2010 2,811,375
- ------------
33,907,900
- ------------
Wisconsin - 0.9%
1,000,000 Southeast Wisconsin, Professional Baseball Park District Sales
Tax Revenue Bonds, Insured by MBIA
5.8% 12/15/2026 1,028,150
4,315,000 State of Wisconsin, Clean Water Revenue Bonds, 1995 Series 1
5.8% 6/1/2015 4,456,057
- ------------
5,484,207
- ------------
Wyoming - 0.4%
2,500,000 State of Wyoming, Farm Loan Board, Capital Facilities Revenue
Bonds, Series 1994
6.1% 4/1/2024 2,622,275
- ------------
Total Long-Term Municipal Securities (cost $527,891,785)
583,387,184
- ------------
SHORT-TERM MUNICIPAL SECURITIES - 0.4% (a, c)
400,000 Illinois Development Finance Authority, (Amoco Oil Company
Project), Pollution Control Revenue Refunding Bonds,
Series 1994
4.2% 11/3/1997 400,000
400,000 Lake Charles, Louisiana, Harbor & Terminal Variable Rate
Demand Note
4.2% 11/3/1997 400,000
1,600,000 Maricopa County, Arizona Pollution Control Corp., Pollution
Control
Revenue Refunding Bonds, (Arizona Public Service Co. Palo
Verde Project), 1994 Series E
4.2% 11/3/1997 1,600,000
- ------------
Total Short-Term Municipal Securities (at amortized cost)
2,400,000
- ------------
Total Investments (cost $530,291,785)
$585,787,184(e)
============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments
of the Lutheran Brotherhood
Municipal Bond Fund.
(b) Denotes securities that have been pre-refunded or escrowed to maturity.
Under such an arrangement,
money is deposited into an irrevocable escrow account and is used to
purchase U.S. Treasury securities
or Government Agency securities with maturing principal and interest
earnings sufficient to pay all debt
service requirements of the pre-refunded bonds. Because the original bonds
assume a quality rating
equivalent to the escrowed U.S. Government securities, they are considered
to be U.S. Government
securities for purposes of portfolio diversification requirements.
(c) Denotes variable rate obligations for which the current yield and next
scheduled interest reset date are
shown.
(d) Denotes investments purchased on a when-issued basis.
(e) At October 31, 1997, the aggregate cost of securities for federal income tax
purposes was $530,321,668
and the net unrealized appreciation of investments based on that cost was
$55,465,516 which is comprised
of $55,480,864 aggregate gross unrealized appreciation and $15,348 aggregate
gross unrealized
depreciation.
(f) Miscellaneous abbreviations:
AMBAC- AMBAC Indemnity Corp.
Connie Lee- Connie Lee Insurance Co.
FGIC- Financial Guaranty Insurance Co.
FHA- Federal Housing Administration
FSA- Federal Security Assurance, Inc.
MBIA- Municipal Bond Investors Assurance Corp.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
Portfolio of Investments
October 31, 1997
Principal
Maturity
Amount
Rate Date Value
- ----------------
- ------ ----------- --------------
<S> <C>
<C> <C> <C>
BANK NOTES - 1.1% (a)
$ 5,000,000 Wachovia Bank of Georgia, N.A.
6.20% 04/06/1998 $ 4,997,965
- --------------
COMMERCIAL PAPER - 82.8% (a)
Banking-Domestic - 4.2%
5,000,000 Allegheny University Hospitals, (PNC Bank, N.A., Direct Pay
Letter of Credit)
5.58% 11/18/1997 4,986,943
5,000,000 Enterprise Funding Corp. (NationsBank, N.A.)
5.62% 12/30/1997 4,954,603
1,834,000 Enterprise Funding Corp. (NationsBank, N.A.)
5.61% 11/14/1997 1,830,324
5,000,000 Vehicle Services of America (NationsBank of Texas, N.A.
Direct Pay Letter of Credit)
5.63% 11/04/1997 4,997,688
3,000,000 Vehicle Services of America (NationsBank of Texas, N.A.
Direct Pay Letter of Credit)
5.63% 12/03/1997 2,985,067
- --------------
19,754,625
- --------------
Banking-Foreign - 16.5%
5,000,000 Banco Real S.A. Grand Cayman, (Barclays Bank plc, Direct Pay
Letter of Credit)
5.78% 04/20/1998 4,867,305
5,000,000 CEMEX S.A. de C.V., (Credit Suisse, Direct Pay Letter of Credit)
5.67% 01/16/1998 4,940,994
3,000,000 Alpargatas Funding Corp., (Union Bank of Switzerland,
Direct Pay Letter of Credit)
5.62% 12/19/1997 2,977,720
5,000,000 Banco de Columbia, S.A. (Barclays Bank plc, Direct Pay
Letter of Credit)
5.62% 11/10/1997 4,993,075
3,000,000 Banco de Columbia, S.A. (Barclays Bank plc, Direct Pay
Letter of Credit)
5.63% 12/11/1997 2,981,500
5,000,000 China Merchants (Cayman), Inc., (Credit Suisse, Direct
Pay Letter of Credit)
5.61% 12/05/1997 4,973,792
5,000,000 China Merchants (Cayman), Inc., (Credit Suisse, Direct
Pay Letter of Credit)
5.62% 11/10/1997 4,993,063
5,000,000 Comision Federal de Electricidad, Series A (Westdeutsche
Landesbank, Girozentrale, Direct Pay Letter of Credit)
5.63% 12/05/1997 4,973,697
5,000,000 Comision Federal de Electricidad, Series A (Westdeutsche
Landesbank, Girozentrale, Direct Pay Letter of Credit)
5.60% 11/17/1997 4,987,667
5,000,000 Fletcher Challenge Finance USA, Inc.(National Westminster
Bank plc, Direct Pay Letter of Credit)
5.60% 11/19/1997 4,986,200
5,000,000 Glencore Finance (Bermuda) Ltd., (Union Bank of Switzerland,
Direct Pay Letter of Credit)
5.71% 02/04/1998 4,926,507
2,100,000 Hyundai Motor Finance Co., (Bank of America N.T. & S.A.,
Direct Pay Letter of Credit)
5.54% 11/04/1997 2,099,034
9,396,000 Oyster Creek Fuel Corp., (Union Bank of Switzerland,
Direct Pay Letter of Credit)
5.70% 11/05/1997 9,390,049
5,000,000 Petroleo Brasileiro S.A., (Barclays Bank plc, Direct Pay
Letter of Credit)
5.63% 12/12/1997 4,968,453
100,000 River Fuel Funding Co. #3, Inc., (Union Bank of Switzerland,
Direct Pay Letter of Credit)
5.68% 01/09/1998 98,927
5,240,000 U.S. Prime Property, Inc., (ABN AMRO Bank N.V.,
Direct Pay Letter of Credit)
5.72% 02/12/1998 5,156,643
4,760,000 U.S. Prime Property, Inc., (ABN AMRO Bank N.V.,
Direct Pay Letter of Credit)
5.65% 03/09/1998 4,666,577
- --------------
76,981,203
- --------------
Computers & Office Equipment - 1.0%
5,000,000 IBM Credit Corp.
5.73% 03/09/1998 4,900,978
- --------------
Education - 13.1%
5,000,000 Duke University
5.68% 01/27/1998 4,932,333
16,750,000 Harvard University
5.73% 11/03/1997 16,744,668
5,000,000 Leland H. Stanford Junior University
5.75% 04/02/1998 4,883,255
5,000,000 Leland H. Stanford Junior University
5.68% 11/18/1997 4,986,872
5,000,000 Leland H. Stanford Junior University
5.71% 04/23/1998 4,866,886
5,000,000 Leland H. Stanford Junior University
5.80% 12/09/1997 4,970,233
5,000,000 Yale University
5.59% 12/02/1997 4,976,276
5,000,000 Yale University
5.60% 12/16/1997 4,965,500
3,000,000 Yale University
5.65% 11/20/1997 2,991,197
7,000,000 Yale University
5.59% 12/22/1997 6,945,062
- --------------
61,262,282
- --------------
Finance-Automotive - 5.4%
1,000,000 Ford Motor Credit Co.
5.61% 12/19/1997 992,613
5,000,000 Ford Motor Credit Co.
5.67% 12/15/1997 4,966,206
2,000,000 Ford Motor Credit Co.
5.58% 12/23/1997 1,984,024
5,000,000 Ford Motor Credit Co. of Puerto Rico, Inc. (Guaranteed FMCC)
5.84% 12/01/1997 4,976,375
5,000,000 General Motors Acceptance Corp.
5.61% 11/25/1997 4,981,533
5,000,000 General Motors Acceptance Corp.
5.96% 11/10/1997 4,992,763
2,600,000 General Motors Acceptance Corp.
5.61% 11/05/1997 2,598,402
- --------------
25,491,916
- --------------
Finance-Commercial - 6.4%
5,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed GECC)
5.76% 12/04/1997 4,974,242
1,000,000 General Electric Capital Corp.
5.61% 12/18/1997 992,767
5,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed GECC)
5.71% 02/23/1998 4,911,650
9,100,000 General Electric Capital Corp.
5.75% 11/03/1997 9,097,093
5,000,000 Norwest Financial, Inc.
5.64% 01/29/1998 4,931,519
5,000,000 Norwest Financial, Inc.
5.70% 02/26/1998 4,909,163
- --------------
29,816,434
- --------------
Finance-Consumer - 3.3%
4,500,000 Associates Financial Services of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America)
5.59% 12/01/1997 4,479,225
900,000 Associates Financial Services of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America)
5.58% 12/02/1997 895,714
5,000,000 AVCO Financial Services, Inc.
5.59% 12/03/1997 4,975,467
5,000,000 Penney (J.C.) Funding Corp.
5.67% 01/30/1998 4,930,125
- --------------
15,280,531
- --------------
Finance-Retail - 2.1%
5,000,000 Sears Roebuck Acceptance Corp.
5.59% 11/26/1997 4,980,799
5,000,000 Sears Roebuck Acceptance Corp.
5.58% 11/03/1997 4,998,461
- --------------
9,979,260
- --------------
Finance-Structured - 6.3%
3,000,000 Asset Securitization Cooperative Corp.
5.54% 11/26/1997 2,988,542
3,309,000 Delaware Funding Corp
5.62% 12/22/1997 3,282,889
2,285,000 New Center Asset Trust
5.60% 11/19/1997 2,278,659
1,000,000 New Center Asset Trust
5.64% 12/17/1997 992,908
1,000,000 Preferred Receivables Funding Corp.
5.57% 11/10/1997 998,613
2,925,000 Preferred Receivables Funding Corp.
5.57% 12/22/1997 2,902,168
2,400,000 Preferred Receivables Funding Corp.
5.86% 11/18/1997 2,393,540
1,825,000 Preferred Receivables Funding Corp.
5.63% 2/11/1998 1,796,457
5,000,000 Triple-A One Funding Corp. (Guaranteed CapMAC)
5.63% 11/12/1997 4,991,521
349,000 Triple-A One Funding Corp. (Guaranteed CapMAC)
5.62% 12/04/1997 347,224
5,000,000 Triple-A One Funding Corp. (Guaranteed CapMAC)
5.69% 1/16/1998 4,941,100
1,945,000 Triple-A One Funding Corp. (Guaranteed CapMAC)
5.61% 11/07/1997 1,943,194
- --------------
29,856,815
- --------------
Financial Services - 3.9%
4,000,000 American Express Credit Corp.
5.60% 12/08/1997 3,977,266
5,000,000 American Express Credit Corp.
5.57% 12/29/1997 4,955,694
5,000,000 American Express Credit Corp.
5.57% 12/24/1997 4,959,367
3,100,000 USAA Capital Corp.
5.66% 11/06/1997 3,097,567
1,047,000 USAA Capital Corp.
5.65% 11/04/1997 1,046,507
- --------------
18,036,401
- --------------
Food & Beverage - 2.6%
7,000,000 Cargill, Inc.
5.55% 12/16/1997 6,951,875
5,000,000 CPC International, Inc.
5.58% 11/24/1997 4,982,431
- --------------
11,934,306
- --------------
Industrial - 8.1%
5,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.)
5.60% 12/18/1997 4,963,967
5,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.)
5.72% 2/20/1998 4,913,358
5,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.)
5.70% 3/19/1998 4,893,242
5,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.)
5.64% 12/08/1997 4,971,582
2,030,000 Du Pont (E.I.) de Nemours and Co.
5.69% 3/06/1998 1,990,880
7,000,000 Du Pont (E.I.) de Nemours and Co.
5.75% 6/02/1998 6,771,380
5,000,000 Monsanto Co.
5.68% 2/02/1998 4,928,313
5,000,000 Monsanto Co.
5.62% 2/04/1998 4,927,299
- --------------
38,360,021
- --------------
Insurance - 2.1%
5,000,000 A.I. Credit Corp.
5.67% 1/15/1998 4,942,396
5,000,000 Prudential Funding Corp.
5.54% 11/13/1997 4,990,817
- --------------
9,933,213
- --------------
Sovereign/Foreign Government - 1.1%
5,000,000 Kingdom Of Sweden
5.62% 12/08/1997 4,971,736
- --------------
Transportation - 1.6%
7,500,000 United Parcel Service of America, Inc.
5.58% 11/07/1997 7,493,125
- --------------
U.S. Municipal - 5.1%
5,000,000 California Pollution Control Finance Authority
(Guaranteed Shell Oil Co.)
5.64% 12/15/1997 5,000,000
6,900,000 City of New York Government Bonds, Fiscal 1995, Series B
(Guaranteed FGIC SPI)
5.77% 11/21/1997 6,900,000
7,000,000 Port of Corpus Christi Authority of Nueces County, Texas
(Guaranteed Koch Ind.)
5.62% 12/22/1997 7,000,000
5,000,000 City of Whiting, Indiana, Series 1995, Sewage & Waste Disposal
(Guaranteed Amoco Oil Co.)
5.59% 11/06/1997 5,000,000
- --------------
23,900,000
- --------------
Total Commercial Paper
387,952,846
- --------------
CERTIFICATES OF DEPOSIT - 4.1% (a)
Domestic - 0.9%
4,000,000 Bankers Trust Co., N.A.- New York
6.00% 08/28/1998 3,999,057
- --------------
Euro Dollar-Foreign - 3.2%
10,000,000 Morgan Guaranty Trust, London
5.55% 12/31/1997 10,000,136
5,000,000 Westdeutcshe Landesbank, London
5.83% 11/24/1997 5,000,004
- --------------
15,000,140
- --------------
Total Certificates of Deposit
18,999,197
- --------------
MEDIUM TERM NOTES - 1.1% (a)
5,000,000 Abbey National Treasury Services plc
5.72% 04/02/1998 5,003,926
- --------------
VARIABLE RATE NOTES - 10.9% (a,b)
8,000,000 Abbey National Treasury Services plc
5.51% 11/17/1997 7,996,052
8,000,000 Bankers Trust Co., N.A.- New York
5.64% 11/03/1997 7,999,572
10,000,000 Federal Home Loan Bank
5.42% 11/07/1997 9,993,285
10,000,000 IBM Credit Corp.
5.62% 11/17/1997 9,995,945
5,000,000 Illinois Student Assistance Commission, (Bank of America,
Illinois, Direct Pay Letter of Credit)
5.61% 11/06/1997 5,000,000
10,000,000 Illinois Student Assistance Commission, (Student Loan Mkt.
Association, Direct Pay Letter of Credit)
5.56% 11/07/1997 10,000,000
- --------------
Total Variable Rate Notes
50,984,854
- --------------
Total Investments (at amortized cost)
$ 467,938,788(c)
==============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments
of the Lutheran Brotherhood Money Market Fund.
(b) Denotes variable rate obligations for which the current yield and the next
scheduled interest reset date are shown.
(c) Also represents cost for federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Opportunity Growth Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $288,568,546)
$316,506,996
Cash
984,715
Receivable for investment securities sold
903,847
Dividend receivable
23,180
-------------
- -
Total assets
318,418,738
-------------
- -
LIABILITIES:
Open options written, at value
(premium received $751,131)
434,272
Payable for investment securities purchased
6,384,041
Accrued expenses
176,834
-------------
- -
Total liabilities
6,995,147
-------------
- -
NET ASSETS
$311,423,591
==============
NET ASSETS CONSIST OF:
Paid-in capital
$273,656,885
Accumulated net investment loss
(3,069)
Accumulated net realized gain from sale of
investments
9,514,466
Unrealized net appreciation of investments
28,255,309
-------------
- -
NET ASSETS
$311,423,591
==============
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $307,919,974 and 23,734,675 shares of
beneficial interest outstanding)
$12.97
======
Maximum public offering price per share (based on a
net asset value per share of $12.97 divided by 0.96
for a 4% sales charge)
$13.51
======
Class B Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $25,000 and 1,928
shares of beneficial interest outstanding)
$12.97
======
Institutional Class Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $3,478,617 and
268,205 shares of beneficial interest outstanding)
$12.97
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income
$398,706
Interest income
1,471,469
-----------
- -
Total income
1,870,175
-----------
- -
Expenses --
Investment advisory fee
1,868,475
Transfer agent services
1,147,649
Custodian fee
132,943
Administrative personnel and services
55,875
Printing and postage
228,510
Trust share registration costs
56,534
Auditing fees
6,487
Legal fees
3,515
Trustees' fees
5,773
Amortization of organization costs
9,855
Miscellaneous
7,771
-----------
- -
Total expenses
3,523,387
-----------
- -
Net investment loss
(1,653,212)
-----------
- -
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions
11,659,779
Net realized gain on closed or expired option
contracts written
330,904
-----------
- -
Net realized gain on investments
11,990,683
Net increase in unrealized appreciation of investments
13,347,891
-----------
- -
Net gain on investments
25,338,574
-----------
- -
Net increase in net assets resulting from
operations
$23,685,362
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1997 and 1996
Year
Ended Year Ended
10/31/97 10/31/96
--------
- ----------- -----------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment loss
$(1,653,212) $(2,076,149)
Net realized gain on investments
11,990,683 33,047,405
Net increase in unrealized appreciation or depreciation of investments
13,347,891 6,165,586
-----
- ------- ------------
Net increase in net assets resulting from operations
23,685,362 37,136,842
-----
- ------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net realized gain on investments
(29,849,878) (33,356,556)
-----
- ------- ------------
NET TRUST SHARE TRANSACTIONS --
Class A
48,247,150 96,374,157
Class B
25,000 --
Institutional Class
3,478,617 --
-----
- ------- ------------
Net increase in net assets resulting from trust share transactions
51,750,767 96,374,157
-----
- ------- ------------
Net increase in net assets
45,586,251 100,154,443
NET ASSETS:
Beginning of period
265,837,340 165,682,897
-----
- ------- ------------
End of period
$311,423,591 $265,837,340
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Mid Cap Growth Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $15,391,945)
$15,284,239
Cash
6,893
Receivable for investment securities sold
247,660
Dividend receivable
6,427
Unamortized organization costs
25,166
-----------
- -
Total assets
15,570,385
-----------
- -
LIABILITIES:
Payable for investment securities purchased
951,538
Accrued expenses
16,207
-----------
- -
Total liabilities
967,745
-----------
- -
NET ASSETS
$14,602,640
============
NET ASSETS CONSIST OF:
Paid-in capital
$14,324,750
Accumulated net investment loss
(26,047)
Accumulated net realized gain from sale of
investments
411,643
Unrealized net depreciation of investments
(107,706)
-----------
- -
NET ASSETS
$14,602,640
============
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $14,044,262 and 1,359,069 shares of
beneficial interest outstanding)
$10.33
======
Maximum public offering price per share (based on a
net asset value per share of $10.33 divided by 0.96
for a 4% sales charge)
$10.76
======
Class B Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $25,000 and 2,420
shares of beneficial interest outstanding)
$10.33
======
Institutional Class Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $533,378 and 51,634
shares of beneficial interest outstanding)
$10.33
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the period from May 30, 1997 (effective date)
through October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income
$13,663
Interest income
20,419
-----------
- -
Total income
34,082
-----------
- -
Expenses --
Investment advisory fee
21,586
Transfer agent services
21,145
Custodian fee
1,542
Administrative personnel and services
617
Printing and postage
4,068
Trust share registration costs
12,116
Auditing fees
2,008
Trustees' fees
1,571
Amortization of organization costs
2,288
Miscellaneous
545
-----------
- -
Total expenses
67,486
Expense reimbursement from
investment advisor
(7,357)
-----------
- -
Net expenses
60,129
-----------
- -
Net investment loss
(26,047)
-----------
- -
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions
411,643
Net change in unrealized depreciation of investments
(107,706)
-----------
- -
Net gain on investments
303,937
-----------
- -
Net increase in net assets resulting from
operations
$277,890
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the
period from
May 30,
1997
(effective
date) to
October 31,
1997
----------------
- -----------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment loss
$(26,047)
Net realized gain on investments
411,643
Net change in unrealized depreciation
of investments
(107,706)
-------------
- -
Net increase in net assets resulting from operations
277,890
-------------
- -
NET TRUST SHARE TRANSACTIONS --
Class A
13,766,372
Class B
25,000
Institutional Class
533,378
-------------
- -
Net increase in net assets resulting from trust share transactions
14,324,750
-------------
- -
Net increase in net assets
14,602,640
NET ASSETS:
Beginning of period --
-------------
- -
End of period
$14,602,640
==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood World Growth Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $69,492,238)
$74,730,499
Cash (including foreign currency holdings
of $317,490)
340,960
Receivable for investment securities sold
16,922
Dividend receivable
161,115
Unamortized organization costs
28,916
-----------
- -
Total assets
75,278,412
-----------
- -
LIABILITIES:
Payable for investment securities purchased
85,020
Accrued expenses
61,157
-----------
- -
Total liabilities
146,177
-----------
- -
NET ASSETS
$75,132,235
-----------
- -
NET ASSETS CONSIST OF:
Paid-in capital
$68,716,028
Undistributed net investment income
304,487
Accumulated net realized gain from sale of
investments and foreign currency transactions
868,953
Unrealized net appreciation of investments and on
translation of assetsand liabilities in foreign
currencies
5,242,767
-----------
- -
NET ASSETS
$75,132,235
============
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $67,805,208 and 6,722,657 shares of
beneficial interest outstanding)
$10.09
======
Maximum public offering price per share (based on a
net asset value per share of $10.09 divided by 0.96
for a 4% sales charge)
$10.51
======
Class B Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $25,000 and 2,478
shares of beneficial interest outstanding)
$10.09
======
Institutional Class Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $7,302,027 and
723,689 shares of beneficial interest outstanding)
$10.09
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $161,042)
$1,170,362
Interest income
182,235
-----------
- -
Total income
1,352,597
-----------
- -
Expenses --
Investment advisory fee
682,203
Transfer agent services
311,027
Custodian fee
92,299
Administrative personnel and services
13,826
Printing and postage
63,442
Trust share registration costs
48,963
Auditing fees
1,475
Legal fees
759
Trustees' fees
5,148
Amortization of organization costs
10,220
Miscellaneous
4,436
-----------
- -
Total expenses
1,233,798
-----------
- -
Net investment income
118,799
-----------
- -
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investment transactions
1,162,159
Net realized gain on foreign currency transactions
20,047
-----------
- -
Net realized gain on investments and foreign
currency transactions
1,182,206
-----------
- -
Net increase in unrealized appreciation of investments
2,468,156
Net increase in unrealized depreciation on translation
of assets and liabilities in foreign currencies
3,319
-----------
- -
Net increase in unrealized appreciation of investments
and on translation of assets and liabilities in
foreign currencies
2,471,475
-----------
- -
Net gain on investments and foreign currency
3,653,681
-----------
- -
Net increase in net assets resulting
from operations
$3,772,480
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1997 and 1996
Year Ended Year Ended
10/31/97 10/31/96
--------
- ----------- -----------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income
$118,799 $243,405
Net realized gain on investments and foreign currency transactions
1,182,206 204,436
Net increase in unrealized appreciation of investments and
on translation of assets and liabilities in foreign currencies
2,471,475 2,906,319
----
- ------- -----------
Net increase in net assets resulting from operations
3,772,480 3,354,160
----
- ------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income
(257,604) (37,674)
Net realized gain on investments
(247,812) --
----
- ------- -----------
Total distributions
(505,416) (37,674)
----
- ------- -----------
NET TRUST SHARE TRANSACTIONS --
Class A
11,601,520 35,652,107
Class B
25,000 --
Institutional Class
7,302,027 --
----
- ------- -----------
Net increase in net assets resulting from trust share transactions
18,928,547 35,652,107
----
- ------- -----------
Net increase in net assets
22,195,611 38,968,593
NET ASSETS:
Beginning of period
52,936,624 13,968,031
----
- ------- -----------
End of period (including undistributed net investment income of
$304,487 and $255,036, respectively)
$75,132,235 $52,936,624
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $754,145,951)
$986,629,252
Cash
97,369
Receivable for investment securities sold
31,820,626
Dividend receivable
1,175,794
----------------
- -
Total assets
1,019,723,041
----------------
- -
LIABILITIES:
Payable for investment securities purchased
29,633,216
Accrued expenses
283,255
----------------
- -
Total liabilities
29,916,471
----------------
- -
NET ASSETS
$989,806,570
=================
NET ASSETS CONSIST OF:
Paid-in capital
$661,071,784
Undistributed net investment income
380,398
Accumulated net realized gain from sale of
investments
95,871,087
Unrealized net appreciation of investments
232,483,301
----------------
- -
NET ASSETS
$989,806,570
=================
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $975,154,021 and 36,146,769 shares of
beneficial interest outstanding)
$26.98
======
Maximum public offering price per share (based on a
net asset value per share of $26.98 divided by 0.96
for a 4% sales charge)
$28.10
======
Class B Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $25,000 and 926.6
shares of beneficial interest outstanding)
$26.98
======
Institutional Class Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $14,627,549 and
542,163 shares of beneficial interest outstanding)
$26.98
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income
$13,119,675
Interest income
1,686,216
-------------
- -
Total income
14,805,891
-------------
- -
Expenses --
Investment advisory fee
5,686,741
Transfer agent services
1,791,020
Custodian fees
185,522
Administrative personnel and services
184,583
Printing and postage
358,048
Trust share registration costs
67,750
Auditing fees
19,195
Legal fees
11,538
Trustees' fees
13,649
Miscellaneous
18,489
-------------
- -
Total expenses before expense reimbursement
8,336,535
Expense reimbursement from
investment advisor
(385,904)
-------------
- -
Net expenses
7,950,631
-------------
- -
Net investment income
6,855,260
-------------
- -
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions
122,431,480
Net realized gain on closed or expired option
contracts written
2,336
Net realized gain on closed futures contracts
(22,447,731)
-------------
- -
Net realized gain on investments
99,986,085
Net increase in unrealized appreciation of investments
101,725,926
-------------
- -
Net gain on investments
201,712,011
-------------
- -
Net increase in net assets resulting from
operations
$208,567,271
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1997 and 1996
Year
Ended Year Ended
10/31/97 10/31/96
--------
- ----------- -----------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income
$6,855,260 $6,672,089
Net realized gain on investments
99,986,085 62,729,282
Net increase in unrealized appreciation of investments
101,725,926 45,131,419
-----
- ------- ------------
Net increase in net assets resulting from operations
208,567,271 114,532,790
-----
- ------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income
(7,140,586) (6,494,190)
Net realized gain on investments
(58,599,470) (44,162,422)
-----
- ------- ------------
Total distributions
(65,740,056) (50,656,612)
-----
- ------- ------------
NET TRUST SHARE TRANSACTIONS --
Class A
63,484,688 59,464,357
Class B
25,000 --
Institutional Class
14,627,549 --
-----
- ------- ------------
Net increase in net assets resulting from trust share transactions
78,137,237 59,464,357
-----
- ------- ------------
Net increase in net assets
220,964,452 123,340,535
NET ASSETS:
Beginning of period
768,842,118 645,501,583
-----
- ------- ------------
End of period (including undistributed net investment income of
$380,398 and $665,724, respectively)
$989,806,570 $768,842,118
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood High Yield Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $832,313,304)
$852,054,761
Cash
1,407,857
Receivable for investment securities sold
11,279,457
Interest and dividend receivable
16,528,457
-----------
- -
Total assets
881,270,532
-----------
- -
LIABILITIES:
Payable for investment securities purchased
18,100,425
Accrued expenses
220,404
-----------
- -
Total liabilities
18,320,829
-----------
- -
NET ASSETS
$862,949,703
============
NET ASSETS CONSIST OF:
Paid-in capital
$824,942,025
Undistributed net investment income
2,736,361
Accumulated net realized gain from sale of
investments
15,529,860
Unrealized net appreciation of investments
19,741,457
-----------
- -
NET ASSETS
$862,949,703
============
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $812,008,902 and 84,796,352 shares of
beneficial interest outstanding)
$9.58
======
Maximum public offering price per share (based on a
net asset value per share of $9.58 divided by 0.96
for a 4% sales charge).
$9.98
======
Class B Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $25,000 and 2,610
shares of beneficial interest outstanding)
$9.58
======
Institutional Class Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $50,915,801 and
5,314,802 shares of beneficial interest outstanding)
$9.58
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Interest income
$70,520,468
Dividend income
6,791,034
-----------
- -
Total income
77,311,502
-----------
- -
Expenses --
Investment advisory fee
4,911,490
Transfer agent services
1,205,817
Custodian fee
177,370
Administrative personnel and services
158,365
Printing and postage
254,058
Trust share registration costs
80,915
Auditing fees
14,404
Legal fees
10,150
Trustees' fees
13,649
Miscellaneous
17,759
-----------
- -
Total expenses before expense reimbursement
6,843,977
Expense reimbursement from
investment advisor
(328,810)
-----------
- -
Net expenses
6,515,167
-----------
- -
Net investment income
70,796,335
-----------
- -
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions
16,963,856
Net increase in unrealized appreciation of investments
17,585,438
-----------
- -
Net gain on investments
34,549,294
-----------
- -
Net increase in net assets resulting from
operations
$105,345,629
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1997 and 1996
Year
Ended Year Ended
10/31/97 10/31/96
--------
- ----------- -----------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income
$70,796,335 $59,976,148
Net realized gain on investment transactions
16,963,856 16,240,947
Net change in unrealized appreciation or depreciation of investments
17,585,438 (5,314,640)
-----
- ------- ------------
Net increase in net assets resulting from operations
105,345,629 70,902,455
-----
- ------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income
(71,372,708) (58,709,581)
Net realized gain on investments
(2,451,356) --
-----
- ------- ------------
Total distributions
(73,824,064) (58,709,581)
-----
- ------- ------------
NET TRUST SHARE TRANSACTIONS --
Class A
77,340,401 96,617,152
Class B
25,000 --
Institutional Class
50,915,801 --
-----
- ------- ------------
Net increase in net assets resulting from trust share transactions
128,281,202 96,617,152
-----
- ------- ------------
Net increase in net assets
159,802,767 108,810,026
NET ASSETS:
Beginning of period
703,146,936 594,336,910
-----
- ------- ------------
End of period (including undistributed net investment income of
$2,736,361 and $3,312,734, respectively)
$862,949,703 $703,146,936
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Income Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $795,996,925)
$807,567,537
Cash
68,275
Receivable for investment securities sold
22,238,967
Interest and dividend receivable
11,452,031
-----------
- -
Total assets
841,326,810
-----------
- -
LIABILITIES:
Open options written, at value (premium
received $133,272)
318,750
Payable for investment securities purchased
62,791,027
Accrued expenses
199,447
-----------
- -
Total liabilities
63,309,224
-----------
- -
NET ASSETS
$778,017,586
============
NET ASSETS CONSIST OF:
Paid-in capital
$810,834,338
Undistributed net investment income
1,619,914
Accumulated net realized loss from sale
of investments
(45,821,800)
Unrealized net appreciation of investments
11,385,134
-----------
- -
NET ASSETS
$778,017,586
-----------
- -
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $759,817,416 and 88,210,001
shares of beneficial interest outstanding)
$8.61
======
Maximum public offering price per share (based on a
net asset value per share of $8.61 divided by 0.96
for a 4% sales charge)
$8.97
======
Class B Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $25,000 and 2,904
shares of beneficial interest outstanding)
$8.61
======
Institutional Class Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $18,175,170 and
2,110,937 shares of beneficial interest outstanding)
$8.61
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Interest income
$57,675,987
Dividend income
1,177,961
-----------
- -
Total income
58,853,948
-----------
- -
Expenses --
Investment advisory fee
4,799,245
Transfer agent services
1,275,325
Custodian fee
193,403
Administrative personnel and services
166,209
Printing and postage
272,422
Trust share registration costs
46,043
Auditing fees
23,670
Legal fees
12,335
Trustees' fees
13,649
Miscellaneous
22,417
-----------
- -
Total expenses before expense reimbursement
6,824,718
Expense reimbursement from
investment advisor
(333,931)
-----------
- -
Net expenses
6,490,787
-----------
- -
Net investment income
52,363,161
-----------
- -
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions
3,378,655
Net realized gain on closed or expired option
contracts written
125,995
Net realized loss on closed futures contracts
(175,489)
-----------
- -
Net realized gain on investments
3,329,161
Net increase in unrealized appreciation of investments
6,682,802
-----------
- -
Net gain on investments
10,011,963
-----------
- -
Net increase in net assets resulting
from operations
$62,375,124
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1997 and 1996
Year
Ended Year Ended
10/31/97 10/31/96
--------
- ----------- -----------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income
$52,363,161 $59,871,426
Net realized gain (loss) on investment transactions
3,329,161 (8,854,736)
Net change in unrealized appreciation or depreciation of investments
6,682,802 (11,610,324)
-----
- ------- ------------
Net increase in net assets resulting from operations
62,375,124 39,406,366
-----
- ------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income
(52,271,463) (63,354,789)
-----
- ------- ------------
NET TRUST SHARE TRANSACTIONS --
Class A
(121,262,283) (47,217,230)
Class B
25,000 --
Institutional Class
18,175,170 --
-----
- ------- ------------
Net change in net assets resulting from trust share transactions
(103,062,113) (47,217,230)
-----
- ------- ------------
Net change in net assets
(92,958,452) (71,165,653)
NET ASSETS:
Beginning of period
870,976,038 942,141,691
-----
- ------- ------------
End of period (including undistributed net investment income of
$1,602,351 and $1,510,653, respectively)
$778,017,586 $870,976,038
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Municipal Bond Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $530,291,785)
$585,787,184
Cash
2,125
Receivable for investment securities sold
498,519
Receivable for capital stock sold
25,000
Interest receivable
9,227,046
-----------
- -
Total assets
595,539,874
-----------
- -
LIABILITIES:
Payable for investment securities purchased
3,583,503
Accrued expenses
93,947
-----------
- -
Total liabilities
3,677,450
-----------
- -
NET ASSETS
$591,862,424
============
NET ASSETS CONSIST OF:
Paid-in capital
$540,115,037
Undistributed net investment income
2,081,584
Accumulated net realized loss from sale
of investments
(5,829,596)
Unrealized net appreciation of investments
55,495,399
-----------
- -
NET ASSETS
$591,862,424
============
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $587,654,326 and 66,387,642 shares
of beneficial interest outstanding)
$8.85
=====
Maximum public offering price per share (based on a
net asset value per share of $8.85 divided by 0.96
for a 4% sales charge).
$9.22
=====
Class B Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $25,000 and 2,825
shares of beneficial interest outstanding)
$8.85
=====
Institutional Class Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $4,183,098 and
472,666 shares of beneficial interest outstanding)
$8.85
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Interest income
$34,821,828
-----------
- -
Expenses --
Investment advisory fee
3,424,258
Transfer agent services
492,743
Custodian fee
157,049
Administrative personnel and services
122,078
Printing and postage
114,759
Trust share registration costs
46,427
Auditing fees
16,331
Legal fees
8,738
Trustees' fees
13,648
Miscellaneous
16,715
-----------
- -
Total expenses before expense reimbursement
4,412,746
Expense reimbursement from
investment advisor
(247,844)
-----------
- -
Net expenses
4,164,902
-----------
- -
Net investment income
30,656,926
-----------
- -
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions
2,734,887
Net realized gain on closed or expired option
contracts written
36,396
Net realized loss on closed futures contracts
(619,118)
-----------
- -
Net realized gain on investments
2,152,165
Net increase in unrealized appreciation of investments
15,004,813
-----------
- -
Net gain on investments
17,156,978
-----------
- -
Net increase in net assets resulting
from operations
$47,813,904
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1997 and 1996
Year
Ended Year Ended
10/31/97 10/31/96
--------
- ----------- -----------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income
$30,656,926 $31,876,162
Net realized gain on investment transactions
2,152,165 102,442
Net change in unrealized appreciation or depreciation of investments
15,004,813 (358,129)
-----
- ------- ------------
Net increase in net assets resulting from operations
47,813,904 31,620,475
-----
- ------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income
(30,372,431) (30,660,042)
-----
- ------- ------------
NET TRUST SHARE TRANSACTIONS --
Class A
(39,259,157) (20,186,392)
Class B
25,000 --
Institutional Class
4,183,098 --
-----
- ------- ------------
Net change in net assets resulting from trust share transactions
(35,051,059) (20,186,392)
-----
- ------- ------------
Net change in net assets
(17,609,586) (19,225,959)
NET ASSETS:
Beginning of period
609,472,010 628,697,969
-----
- ------- ------------
End of period (including undistributed net investment income of
$2,081,584 and $1,804,431, respectively)
$591,862,424 $609,472,010
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Money Market Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 1997
<S> <C>
ASSETS:
Investments in securities, at amortized cost
and value
$467,938,788
Cash
677,327
Interest receivable
1,113,669
-----------
- -
Total assets
469,729,784
-----------
- -
LIABILITIES:
Dividends payable
247,147
Accrued expenses
258,824
-----------
- -
Total liabilities
505,971
-----------
- -
NET ASSETS
$469,223,813
============
NET ASSETS CONSIST OF:
Paid-in capital
$469,223,813
============
Class A Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $416,278,833 and
416,278,833 shares of beneficial interest
outstanding)
$1.00
=====
Class B Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $25,000 and 25,000
shares of beneficial interest outstanding).
$1.00
=====
Institutional Class Shares:
Net asset value, redemption price and offering price
per share ( based on net assets of $52,919,980 and
52,919,980 shares of beneficial interest
outstanding)
$1.00
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Interest income
$24,727,343
-----------
- -
Expenses --
Investment advisory fee
2,210,254
Transfer agent services
1,383,639
Custodian fee
383,212
Administrative personnel and services
90,172
Printing and postage
424,924
Trust share registration costs
108,517
Auditing fees
10,244
Legal fees
5,901
Trustees' fees
7,262
Miscellaneous
11,156
-----------
- -
Total expenses before expense reimbursement
4,635,281
Expense reimbursement from
investment advisor
(435,799)
-----------
- -
Net expenses
4,199,482
-----------
- -
Net investment income
$20,527,861
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1997 and 1996
Year
Ended Year Ended
10/31/97 10/31/96
--------
- ----------- -----------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income
$20,527,861 $17,421,840
-----
- ------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income
(20,527,861) (17,421,840)
-----
- ------- ------------
NET TRUST SHARE TRANSACTIONS --
Class A
(1,329,756) 76,524,322
Class B
25,000 --
Institutional Class
52,919,980 --
-----
- ------- ------------
Net increase in net assets resulting from trust share transactions
51,615,224 76,524,322
-----
- ------- ------------
Net increase in net assets
51,615,224 76,524,322
NET ASSETS:
Beginning of period
417,608,589 341,084,267
-----
- ------- ------------
End of period
$469,223,813 $417,608,589
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
The Lutheran Brotherhood Family of Funds
Notes to Financial Statements
October 31, 1997
(1) Organization
The Lutheran Brotherhood Family of Funds (the "Trust") is a Delaware
business trust and a diversified, open-end investment company
registered under the Investment Company Act of 1940. The Trust is
divided into eight series (the "Fund(s)"), each with its own
investment objective and policies. The eight Funds of the Trust are:
Lutheran Brotherhood Opportunity Growth Fund, Lutheran Brotherhood Mid
Cap Growth Fund, Lutheran Brotherhood World Growth Fund, Lutheran
Brotherhood Fund, Lutheran Brotherhood High Yield Fund, Lutheran
Brotherhood Income Fund, Lutheran Brotherhood Municipal Bond Fund and
Lutheran Brotherhood Money Market Fund. The Lutheran Brotherhood Mid
Cap Growth Fund's registration was declared effective by the
Securities and Exchange Commission and began operations as a series of
The Lutheran Brotherhood Family of Funds on May 30, 1997.
Effective October 31, 1997, the Funds implemented a multiple class
structure whereby each Fund is authorized to offer three classes of
shares: Class A, Class B and Institutional Class. The shares
outstanding prior to October 31, 1997 were designated as Class A
shares. The three classes of shares differ principally in their
respective shareholder servicing and distribution expenses and
arrangements. All three classes of shares have identical rights to
earnings, assets and voting privileges, except for class specific
expenses and exclusive rights to vote on matters affecting only
individual classes.
(2) Significant Accounting Policies
Investment Security Valuations
Securities traded on U.S. or foreign securities exchanges or included
in a national market system are valued at the last quoted sales price
at the close of each business day. Securities traded on the over-the-
counter market and listed securities for which no price is readily
available are valued at prices within the range of the current bid and
asked prices considered best to represent the value in the
circumstances, based on quotes that are obtained from an independent
pricing service approved by the Board of Trustees. The pricing
service, in determining values of securities, takes into consideration
such factors as current quotations by broker/dealers, coupon,
maturity, quality, type of issue, trading characteristics, and other
yield and risk factors it deems relevant in determining valuations.
Securities which cannot be valued by the approved pricing service are
valued using valuations obtained from dealers that make markets in the
securities. Exchange listed options and futures contracts are valued
at the last quoted sales price. For all Funds other than the Money
Market Fund, short-term securities with maturities of 60 days or less
are valued at amortized cost; those with maturities greater than 60
days are valued at the mean between bid and asked price. Short-term
securities held by the Money Market Fund are valued on the basis of
amortized cost (which approximates market value), whereby a portfolio
security is valued at its cost initially, and thereafter valued to
reflect a constant amortization to maturity of any discount or
premium. The Money Market Fund follows procedures necessary to
maintain a constant net asset value of $1.00 per share. All other
securities for which market values are not readily available are
appraised at fair value as determined in good faith by or under the
direction of the Board of Trustees.
Foreign Currency Translations
The accounting records of the Fund are maintained in U.S. dollars.
Securities and other assets and liabilities of the LB World Growth
Fund that are denominated in foreign currencies are translated into
U.S. dollars at the daily closing rate of exchange. Foreign currency
amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date.
Currency gains and losses are recorded from sales of foreign currency,
exchange gains or losses between the trade date and settlement dates
on securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes. The effect
of changes in foreign exchange rates on realized and unrealized
security gains or losses are not segregated from gains and losses that
arise from changes in market prices of investments, and are included
with the net realized and unrealized gain or loss on investments.
Federal Income Taxes
It is the policy of each Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and
to distribute to shareholders each year substantially all of their
taxable income on a timely basis, including any net realized gain on
investments each year. It is also the intention of the Funds to
distribute an amount sufficient to avoid imposition of any federal
excise tax. Accordingly, no provision for federal income tax is
necessary. Each Fund is treated as a separate taxable entity for
federal income tax purposes.
When-Issued and Delayed Delivery Transactions
The Funds may engage in when-issued or delayed delivery transactions.
To the extent that a Fund engages in such transactions, it will do so
for the purpose of acquiring securities consistent with its investment
objectives and policies and not for the purpose of investment leverage
or to speculate on interest rate changes. On the trade date, assets of
the Fund are segregated on the Fund's records in a dollar amount
sufficient to make payment for the securities to be purchased. Income
is not accrued until settlement date.
Repurchase Agreements
The Funds may engage in repurchase agreement transactions in pursuit
of their investment objectives. When a fund engages in such
transactions, it is policy to require the custodian bank to take
possession of all securities held as collateral in support of
repurchase agreement investments. In addition, the Fund monitors the
market value of the underlying collateral on a daily basis. If the
seller defaults or if bankruptcy proceedings are initiated with
respect to the seller, the realization or retention of the collateral
may be subject to legal proceedings.
Investment Income
Interest income is determined on the basis of interest or discount
earned on any short-term investments and interest earned on all other
debt securities, including accrual of original issue discount.
Interest earned on debt securities also includes amortization of
premium for the Opportunity Growth, Mid Cap Growth Fund, World Growth
Fund, LB Fund, High Yield and Municipal Bond Funds and the accrual of
market discount for the Opportunity Growth, Mid Cap Growth Fund, World
Growth, LB Fund and High Yield Funds. Market discount, if any, is
recognized for tax purposes when bonds are sold for the Income and
Municipal Bond Funds. Dividend income is recorded on the ex-dividend
date. For payment-in-kind securities, income is recorded on the ex-
dividend date in the amount of the value received.
Options, Financial Futures and
Forward Foreign Currency Contracts
All Funds except the Money Market Fund may buy put and call options,
write covered call options and buy and sell futures contracts.
The Funds intend to use such derivative instruments as hedges to
facilitate buying or selling securities or to provide protection
against adverse movements in security prices or interest rates. The LB
World Growth Fund may also enter into options and futures contracts on
foreign currencies and forward foreign currency contracts to protect
against adverse foreign exchange rate fluctuation.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sale for a written call option or the cost
of a security for purchased put and call options is adjusted by the
amount of premium received or paid.
Upon entering into a futures contract, the Fund is required to deposit
initial margin, either cash or securities in an amount equal to a
certain percentage of the contract value. Subsequent variation margin
payments are made or received by the Fund each day. The variation
margin payments are equal to the daily changes in the contract value
and are recorded as unrealized gains and losses. The Fund realizes a
gain or loss when the contract is closed or expires.
Foreign currency contracts are valued daily and unrealized
appreciation or depreciation is recorded daily as the difference
between the contract exchange rate and the closing forward rate
applied to the face amount of the contract. A realized gain or loss is
recorded at the time a forward contract is closed.
Dollar Roll Transactions
The Income Fund enters into dollar roll transactions, with respect to
mortgage securities issued by GNMA, FNMA and FHLMC, in which the Fund
sells mortgage securities and simultaneously agrees to repurchase
similar (same type, coupon and maturity) securities at a later date at
an agreed upon price. During the period between the sale and
repurchase, the Fund forgoes principal and interest paid on the
mortgage securities sold. The Fund is compensated by the interest
earned on the cash proceeds of the initial sale and from negotiated
fees paid by brokers offered as an inducement to the Fund to "roll
over" its purchase commitments. The Income Fund earned $1,392,147 from
such fees for the year ended October 31, 1997.
Organization Costs
Organization costs incurred in connection with the start up and
initial registration of the Funds are capitalized and amortized over a
period of 60 months from the date of commencement. If any initial
shares are redeemed during the amortization period, the redemption
proceeds will be reduced by a pro-rata portion of the unamortized
balance at the time of redemption, in the same proportion that the
number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
Distributions to Shareholders
Dividends from net investment income, if available, are declared and
paid annually for the Opportunity Growth, Mid Cap Growth and World
Growth Funds, declared and paid quarterly for the LB Fund, declared
and paid monthly for the High Yield, Income and Municipal Bond Funds,
and declared daily (including short-term net realized gains and
losses) and paid monthly for the Money Market Fund. Net realized gains
from securities transactions, if any, are distributed at least
annually for all Funds, after the close of the fiscal year. Dividends
and capital gain distributions to shareholders are recorded on the ex-
dividend date.
Net investment income (loss) and net realized gain (loss) may differ
for financial statement and tax purposes. The character of
distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of dividend
distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or net realized gains were
recorded by the Fund.
It is the policy of the Fund to reclassify the net effect of permanent
differences between book and taxable income to trust capital accounts
on the statements of assets and liabilities. As a result of permanent
book-to-tax differences for the year ended October 31, 1997,
accumulated net realized gain or loss from the sale of investments was
increased (decreased) by ($2,025,853), ($238,256), ($3,890,000),
($500,000), ($17,563), and $7,342, respectively, for the Opportunity
Growth, World Growth, LB Fund, High Yield, Income and Municipal Bond
Funds; undistributed net investment income was increased (decreased)
by $1,650,853, $188,256, $17,563, and ($7,342), respectively, for the
Opportunity Growth, World Growth, Income and Municipal Bond Funds; and
net increases of $375,000, $50,000, $3,890,000, and $500,000,
respectively, for the Opportunity Growth, World Growth, LB Fund, and
High Yield Fund were reclassified into trust capital. These
reclassifications have no effect on net assets, net asset value per
share, the change in net assets resulting from operations, or on the
amount of income available for distribution to shareholders.
Other
Investment transactions are accounted for on the date the investments
are purchased or sold. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income
tax purposes.
Each Fund is charged for the operating expenses that are directly
attributable to it. Fund operating expenses that cannot be directly
attributable to a Fund are either shared equally or allocated among
them based on the relative net assets of each Fund or via other
methodologies.
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
(3) Fees and Compensation Paid To Affiliates
Investment Advisory Fees
Each Fund pays Lutheran Brotherhood Research Corp. (LBRC), the Trust's
investment advisor, a fee for its advisory services. The fees are
accrued daily and paid monthly. The fees are based on the following
annual rates of average daily net assets: Opportunity Growth Fund,
0.75% for the first $100 million, 0.65% for the next $150 million,
0.60% for the next $250 million, 0.55% for the next $500 million, and
0.50% for net assets over $1 billion; Mid Cap Growth Fund, 0.70% for
the first $100 million, 0.65% for the next $150 million, 0.60% for the
next $250 million, 0.55% for the next $500 million, and 0.50% for net
assets over $1 billion; World Growth Fund, 1.25% for the first $20
million, 1.10% for the next $30 million, and 1.0% of net assets over
$50 million; LB Fund and High Yield Fund, 0.65% for the first $500
million, 0.60% for the next $500 million, and 0.55% for net assets
over $1 billion; Income Fund, 0.60% for the first $500 million, 0.575%
for the next $500 million, and 0.55% for net assets over $1 billion;
Municipal Bond Fund, 0.575% for the first $500 million, 0.5625% for
the next $500 million, and 0.55% for net assets over $1 billion; Money
Market Fund, 0.50% for the first $500 million, 0.475% for the next
$500 million, 0.45% for the next $500 million, 0.425% for the next
$500 million, and 0.40% for net assets over $2 billion.
LBRC has entered into a sub-advisory agreement with Rowe Price -
Fleming International, Inc. for the performance of various sub-
advisory services for the World Growth Fund. For these services, LBRC
pays an annual sub-advisory fee equal to 0.50% of all of the World
Growth Fund's annual average daily net assets.
Effective January 1, 1997, LBRC voluntarily agreed to waive 5 basis
points (0.05%) on an annual basis from the advisory fees payable by
the LB Fund, LB High Yield Fund, LB Income Fund and LB Municipal Bond
Fund. Expense reimbursements amounted to $385,904, $328,810, $333,931
and $247,844 respectively, for the aforementioned Funds through
October 31, 1997. The Money Market Fund advisory fees totaled
$2,210,254 of which $435,799 were voluntarily waived by LBRC to limit
the Money Market Fund's expense ratio to 0.95% of its average daily
net assets. The Mid Cap Growth Fund advisory fees totaled $21,586 of
which $7,357 were voluntarily waived by LBRC to limit the Mid Cap
Growth Fund's expense ratio to 1.95% of its average daily net assets.
LBRC can terminate its voluntary waiver of expenses for these Funds at
any time at its discretion.
Sales Charges and Other Fees
For the year ended October 31, 1997, Lutheran Brotherhood Securities
Corp. (LBSC), the Trust's distributor, received sales charges paid by
purchasers of Fund shares of: Opportunity Growth Fund, $1,724,236; Mid
Cap Growth Fund, $278,924; World Growth Fund, $637,128; LB Fund,
$2,613,029; High Yield Fund, $3,716,291; Income Fund, $905,599; and
Municipal Bond Fund, $689,914. Sales charges are not an expense of the
Trust and are not reflected in the financial statements of any of the
Funds.
LBSC also received fees pursuant to an agreement to provide certain
administrative personnel and services to the Funds. Effective January
1, 1997, a new agreement went into effect whereby LBSC will receive an
annual fee equal to 0.02% of average daily net assets. LBSC received
the following compensation for the year ended October 31, 1997:
Opportunity Growth Fund, $55,875; Mid Cap Growth Fund, $617; World
Growth Fund, $13,826; LB Fund, $184,583; High Yield Fund, $158,365;
Income Fund, $166,209; Municipal Bond Fund, $122,078; and Money Market
Fund, $90,172.
In addition, LBSC provides the Funds with transfer agent services
pursuant to an agreement and received the following compensation:
Opportunity Growth Fund, $1,147,649; Mid Cap Growth Fund, $21,145;
World Growth Fund, $311,027; LB Fund, $1,791,020; High Yield Fund,
$1,205,817; Income Fund, $1,275,325; Municipal Bond Fund, $492,743;
and Money Market Fund, $1,383,639.
The Funds have adopted a trustee fee deferral plan which allows the
Trustees to defer the receipt of all or a portion of their Trustee
Fees. The deferred fees remain in the fund and are invested within the
Lutheran Brotherhood Family of Funds until distribution in accordance
with the plan.
Certain officers and non-independent trustees of the Fund are officers
and directors of LBRC and LBSC; however, they receive no compensation
from the Funds.
(4) Securities Lending
To generate additional income, the Funds may participate in a
securities lending program administered by the Fund's custodian bank.
Securities are periodically loaned to brokers, banks or other
institutional borrowers of securities, for which collateral in the
form of cash, U.S. government securities, or letter of credit is
received by the custodian in an amount at least equal to the market
value of securities loaned. Collateral received in the form of cash is
invested in short-term investments by the custodian from which
earnings are shared between the borrower, the custodian and the Fund
at negotiated rates. The Fund bears the risk that it may experience
delays in recovery or even loss of rights in the collateral should the
borrower of securities fail financially. There were no security loans
during the year ended October 31, 1997.
(5) Distributions From Capital Gains
During the year ended October 31, 1997, distributions from net
realized capital gains of $29,849,878, $247,812, $58,599,470 and
$2,451,356, were paid by the LB Opportunity Growth Fund, LB World
Growth Fund, LB Fund and the LB High Yield Fund, respectively. These
distributions related to net capital gains realized during the prior
fiscal year ended October 31, 1996.
(6) Capital Loss Carryover
At October 31, 1997, the LB Income Fund and the LB Municipal Bond Fund
had accumulated net realized capital loss carryovers expiring as
follows:
Income Municipal Bond
Year Fund Fund
- ----- ----------- --------------
2002 $37,081,944 $3,461,322
2003 -- 134,719
2004 8,472,280 --
----------- ----------
Total $45,554,224 $3,596,041
=========== ==========
To the extent these Funds realize future net capital gains, taxable
distributions will be reduced by any unused capital loss carryovers.
Temporary timing differences of $1,001,322, $13,233, $184,189,
$323,286, $1,061,368, $267,574, and $2,233,555 existed between net
realized capital gains or losses for financial statement and tax
purposes as of October 31, 1997 for the Opportunity Growth, Mid Cap
Growth, World Growth, LB Fund, LB High Yield Fund, LB Income and
Municipal Bond Funds, respectively. These differences are due
primarily to deferral of capital losses for tax purposes.
(7) Shareholder Notification of
Federal Income Tax Status
The LB Fund designates 100% of the dividends declared from net
investment income as dividends qualifying for the 70% corporate
dividends received deduction and the Municipal Bond Fund designates
100% of the dividends declared from net investment income as exempt
from federal income tax for the year ended October 31, 1997. The
Opportunity Growth Fund, World Growth Fund, LB Fund, and the High
Yield Fund designate $244,225, $70,859, $3,922,065, and $97,984,
respectively, as capital gain distributions resulting from earnings
and profits distributed to shareholders on redemption of fund shares
during the year.
(8) Investment Transactions
Purchases and Sales of Investment Securities
For the year ended October 31, 1997, the cost of purchases and the
proceeds from sales of investment securities other than U.S.
Government and short term securities were as follows:
$(thousands)
------------------------------------
Fund Purchases Sales
- --------------------------------------------------------
Opportunity Growth $368,184 $345,547
Mid Cap Growth Fund 19,153 6,382
World Growth Fund 27,303 10,814
LB Fund 475,292 494,770
High Yield 955,836 828,473
Income 462,932 478,979
Municipal Bond 107,111 142,768
Purchases and sales of U.S. Government securities were:
$(thousands)
------------------------------------
Fund Purchases Sales
- --------------------------------------------------------
LB Fund $12,361 $15,790
Income 265,304 441,228
Investments in Restricted Securities
The High Yield Fund owns restricted securities that were purchased in
private placement transactions without registration under the
Securities Act of 1933. Unless such securities subsequently become
registered, they generally may be resold only in privately negotiated
transactions with a limited number of purchasers. The aggregate value
of restricted securities was $519,632 at October 31, 1997, which
represented 0.1% of net assets of the High Yield Fund.
Investments in High Yielding Securities
The High Yield Fund invests primarily in high yielding fixed income
securities. These securities will typically be in the lower rating
categories or will be non-rated and generally will involve more risk
than securities in the higher rating categories. Lower rated or
unrated securities are more likely to react to developments affecting
market risk and credit risk than are more highly rated securities,
which react primarily to movements in the general level of interest
rates.
Investments in Options and Futures Contracts
The movement in the price of the instrument underlying an option or
futures contract may not correlate perfectly with the movement in the
prices of the portfolio securities being hedged. A lack of correlation
could render the Fund's hedging strategy unsuccessful and could result
in a loss to the Fund. In the event that a liquid secondary market
would not exist, the Fund could be prevented from entering into a
closing transaction which could result in additional losses to the
Fund.
Open Option Contracts
The number of contracts and premium amounts associated with call option
contracts written during the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
Opportunity Growth LB Fund
Income Fund Municipal Bond
---------------------- ----------------------
- ---------------------- ----------------------
Number of Premium Number of Premium
Number of Premium Number of Premium
Contracts Amount Contracts Amount
Contracts Amount Contracts Amount
---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Balance at October 31, 1996 -- -- -- --
400 $142,648 -- --
Opened 3,899 $1,345,787 520 $81,896
2,734 982,191 200 $66,636
Closed (820) (271,674) (520) (81,896)
(1,934) (737,882) (200) (66,636)
Expired (443) (102,228) -- --
(800) (253,685) -- --
Exercised (845) (220,754) -- --
- -- -- -- --
---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
Balance at October 31, 1997 1,791 $751,131 -- $--
400 $133,272 -- $--
========== ========== ========== ==========
========== ========== ========== ==========
</TABLE>
Foreign Denominated Investments
The LB World Growth Fund invests primarily in foreign denominated
stocks. Foreign denominated assets and currency contracts may involve
more risks than domestic transactions, including: currency risk,
political and economic risk, regulatory risk, and market risk. The
Fund may also invest in securities of companies located in emerging
markets. Future economic or political developments could adversely
affect the liquidity or value, or both, of such securities.
(9) Shares of Beneficial Interest
The Master Trust Agreement permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest ($0.001
par value) of all of the Funds. Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
Lutheran Brotherhood Opportunity Growth Fund
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Year Ended October 31, 1996 Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 6,711,097 $89,874,940 --
- -- -- --
Dividends and distributions
reinvested 2,801,319 33,057,094 --
- -- -- --
Redeemed (1,973,395) (26,557,877) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 7,539,021 $96,374,157 --
- -- -- --
============ ============ ============
=========== ============ ===========
Year Ended October 31, 1997
Sold 5,905,439 $69,165,678 1,928
$25,000 268,205 $3,478,617
Dividends and distributions
reinvested 2,555,559 29,593,578 --
- -- -- --
Redeemed (4,240,983) (50,512,106) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 4,220,015 $48,247,150 1,928
$25,000 268,205 $3,478,617
============ ============ ============
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Mid Cap Growth Fund
For the period from May 30, 1997
(effective date) through October 31, 1997
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 1,450,459 $14,716,873 2,420
$25,000 51,634 $533,378
Dividends and distributions
reinvested -- -- --
- -- -- --
Redeemed (91,390) (950,501) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 1,359,069 $13,766,372 2,420
$25,000 51,634 $533,378
============ ============ ============
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood World Growth Fund
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Year Ended October 31, 1996 Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 4,309,447 $39,161,715 --
- -- -- --
Dividends and distributions
reinvested 2,995 26,205 --
- -- -- --
Redeemed (381,546) (3,535,813) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 3,930,896 $35,652,107 --
- -- -- --
============ ============ ============
=========== ============ ===========
Year Ended October 31, 1997
Sold 2,771,231 $28,247,203 2,478
$25,000 723,689 $7,302,027
Dividends and distributions
reinvested 45,757 442,919 --
- -- -- --
Redeemed (1,679,423) (17,088,602) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 1,137,565 $11,601,520 2,478
$25,000 723,689 $7,302,027
============ ============ ============
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Fund
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Year Ended October 31, 1996 Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 3,864,306 $84,069,262 --
- -- -- --
Dividends and distributions
reinvested 2,392,606 49,537,622 --
- -- -- --
Redeemed (3,398,596) (74,142,527) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 2,858,316 $59,464,357 --
- -- -- --
============ ============ ============
=========== ============ ===========
Year Ended October 31, 1997
Sold 4,207,081 $105,635,206 927
$25,000 542,163 $14,627,549
Dividends and distributions
reinvested 2,796,737 64,235,302 --
- -- -- --
Redeemed (4,178,880) (106,385,820) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 2,824,938 $63,484,688 927
$25,000 542,163 $14,627,549
============ ============ ============
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood High Yield Fund
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Year Ended October 31, 1996 Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 15,831,978 $145,880,542 --
- -- -- --
Dividends and distributions
reinvested 4,373,177 40,091,272 --
- -- -- --
Redeemed (9,697,248) (89,354,662) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net change 10,507,907 $96,617,152 --
- -- -- --
============ ============ ============
=========== ============ ===========
Year Ended October 31, 1997
Sold 19,214,316 $178,869,458 2,610
$25,000 5,314,802 $50,915,801
Dividends and distributions
reinvested 5,475,615 50,814,451 --
- -- -- --
Redeemed (16,218,071) (152,343,508) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 8,471,860 $77,340,401 2,610
$25,000 5,314,802 $50,915,801
============ ============ ============
=========== ============ ===========
(*) Transactions in Class B and Institutional Class shares recorded
by the Fund on October 31, 1997, the inception date of the new
offerings.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Income Fund
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Year Ended October 31, 1996 Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 6,482,945 $55,392,852 --
- -- -- --
Dividends and distributions
reinvested 5,621,887 47,792,081 --
- -- -- --
Redeemed (17,687,759) (150,402,163) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change (5,582,927) $(47,217,230) --
- -- -- --
============ ============ ============
=========== ============ ===========
Year Ended October 31, 1997
Sold 4,334,735 $36,746,239 2,904
$25,000 2,110,937 $18,175,170
Dividends and distributions
reinvested 4,686,641 39,615,137 --
- -- -- --
Redeemed (23,296,755) (197,623,659) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change (14,275,379) $(121,262,283) 2,904
$25,000 2,110,937 $18,175,170
============ ============ ============
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Municipal Bond Fund
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Year Ended October 31, 1996 Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 4,807,171 $41,275,499 --
- -- -- --
Dividends and distributions
reinvested 2,755,029 23,551,470 --
- -- -- --
Redeemed (9,927,341) (85,013,361) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change (2,365,141) $(20,186,392) --
- -- -- --
============ ============ ============
=========== ============ ===========
Year Ended October 31, 1997
Sold 3,478,212 $30,173,502 2,825
$25,000 472,666 $4,183,098
Dividends and distributions
reinvested 2,700,258 23,380,685 --
- -- -- --
Redeemed (10,686,508) (92,813,344) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change (4,508,038) $(39,259,157) 2,825
$25,000 472,666 $4,183,098
============ ============ ============
=========== ============ ===========
</TABLE>
Lutheran Brotherhood Money Market Fund
<TABLE>
<CAPTION>
Class A Class B
(*) Institutional Class (*)
----------------------------- -----------------
- ----------- ----------------------------
Year Ended October 31, 1996 Shares Amount Shares
Amount Shares Amount
------------ ------------ ------------
- ----------- ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
Sold 692,236,105 $692,236,105 --
- -- -- --
Dividends and distributions
reinvested 17,063,037 17,063,037 --
- -- -- --
Redeemed (632,774,820) (632,774,820) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change 76,524,322 $76,524,322 --
- -- -- --
============ ============ ============
=========== ============ ===========
Year Ended October 31, 1997
Sold 754,520,379 $754,520,379 25,000
$25,000 52,919,980 $52,919,980
Dividends and distributions
reinvested 19,916,469 19,916,469 --
- -- -- --
Redeemed (775,766,604) (775,766,604) --
- -- -- --
------------ ------------ ------------
- ----------- ------------ -----------
Net Change (1,329,756) $(1,329,756) 25,000
$25,000 52,919,980 $52,919,980
============ ============ ============
=========== ============ ===========
</TABLE>
(*) Transactions in Class B and Institutional Class shares recorded
by the Fund on October 31, 1997, the inception date of the new
offerings.
(10) Financial Highlights
"Financial highlights" showing per share data and selected information
is presented in the prospectus.
The Lutheran Brotherhood Family of Funds
Lutheran Brotherhood Opportunity Growth Fund
Lutheran Brotherhood Mid Cap Growth Fund
Lutheran Brotherhood World Growth Fund
Lutheran Brotherhood Fund
Lutheran Brotherhood High Yield Fund
Lutheran Brotherhood Income Fund
Lutheran Brotherhood Municipal Bond Fund
Lutheran Brotherhood Money Market Fund
Trustees
Rolf F. Bjelland
Charles W. Arnason
Herbert F. Eggerding, Jr.
Noel K. Estenson
Connie M. Levi
Bruce J. Nicholson
Ruth E. Randall
Officers
Rolf F. Bjelland Wade M. Voigt
Chairman and President Treasurer
James R. Olson Rand E. Mattsson
Vice President Assistant Treasurer
James M. Walline James M. Odland
Vice President Assistant Secretary
Otis F. Hilbert Randall L. Wetherille
Secretary and Vice President Assistant Secretary
Richard B. Ruckdashel
Vice President
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the
current prospectuses.
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In response to shareholder concerns regarding multiple mailings, we
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printing and postage costs, thereby saving shareholders' money. If
you wish to receive an additional copy of this year's Prospectus and
Annual Report, call us toll free at 1-800-328-4552.
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