Registration Nos. 2-81614
811-3658
- - - - - - - - - - - - - - -
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- - - - - - - - - - - - - - -
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 22 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 23 [X]
(Check appropriate box or boxes)
- - - - - - - - - - - - - - -
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices, including Zip Code)
(617) 578-1388
(Registrant's Telephone Number, including Area Code)
- - - - - - - - - - - - - - -
Robert P. Connolly, Esq.
New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to:
Edward A. Benjamin, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
- - - - - - - - - - - - - - -
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on August 29, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] 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.
Registrant has registered an indefinite number of securities under the
Securities Act of 1933 in accordance with Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant filed on August 13, 1996 the Rule
24f-2 Notice for the Registrant's fiscal year ended June 30, 1996.
<PAGE>
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933
=============================================================================
Proposed Proposed
maximum maximum
Title of Amount offering aggregate
securities being price offering Amount of
being offered registered per unit price* registration fee
=============================================================================
Shares of 6,631,815 $1.00 $6,631,815 $100.00
beneficial shares
interest
=============================================================================
* The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The following information
is furnished pursuant to the requirements of paragraph (b) thereof:
Total amount of securities redeemed
or repurchased during the previous
year: $101,935,023
Total amount of redeemed or
repurchased securities used for
reductions pursuant to paragraph
(a) of Rule 24e-2 or pursuant to
paragraph (c) of Rule 24f-2 in all
previous filings during the
current year: $95,593,208
Amount of redeemed or repurchased
securities being used for such
reduction in this amendment: $ 6,341,815
Amount being registered hereby
in excess of amount of redeemed
or repurchased securities being
used for reduction in this
amendment: $ 290,000
-----------
Total amount being registered: $ 6,631,815
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
(Prospectus and Statement of Additional Information)
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No.
of Form
N-1A Caption in Prospectus
---- ---------------------
1 . . . . . . . . . Cover page
2 . . . . . . . . . Schedule of Fees
3 . . . . . . . . . Financial Highlights; Fund Yields; Additional Facts
about the Funds
4 . . . . . . . . . Investment Objectives; How the Funds Pursue Their
Objectives; Fund Investments; Investment Risks;
Additional Facts about the Funds
5 . . . . . . . . . Fund Management; Back Cover Page
6 . . . . . . . . . Cover Page; Minimum Investment; 6 Ways to Buy Fund
Shares; Fund Dividend Payments; Income Tax
Considerations; Additional Facts about the Funds
7 . . . . . . . . . Cover page; 6 Ways to Buy Fund Shares; Exchanging
Among New England Funds; Back Cover Page
8 . . . . . . . . . 5 Ways to Sell Fund Shares
9 . . . . . . . . . None
<PAGE>
Item No.
of Form Caption in Statement of
N-1A Additional Information
---- ----------------------
10 . . . . . . . . . Cover page
11 . . . . . . . . . Table of Contents
12 . . . . . . . . . Not Applicable
13 . . . . . . . . . Investment Objectives and Policies; Investment
Restrictions
14 . . . . . . . . . Management of the Funds
15 . . . . . . . . . Description of the Funds and Ownership of Shares
16 . . . . . . . . . Investment Advisory, Distribution and Other Services
17 . . . . . . . . . Portfolio Transactions
18 . . . . . . . . . Description of the Funds and Ownership of Shares
19 . . . . . . . . . Purchase of Shares; Shareholder Services; Redemptions;
Net Income, Dividends and Valuation; Taxes
20 . . . . . . . . . Net Income, Dividends and Valuation; Taxes
21 . . . . . . . . . Investment Advisory and Other Services
22 . . . . . . . . . Net Income, Dividends and Valuation; Taxes
23 . . . . . . . . . Financial Statements and Report of Independent
Accountants
<PAGE>
[LOGO]
NEW ENGLAND FUNDS
Where The Best Minds MeetTM
NEW ENGLAND CASH MANAGEMENT TRUST
MONEY MARKET SERIES
U.S. GOVERNMENT SERIES
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST (The "Funds," and each a "Fund")
Prospectus and Application
August 29, 1996
For general information on the Funds or any of their services and for assistance
in opening an account, contact your investment dealer or call the Distributor
toll free at 1-800-225-5478.
This prospectus concisely provides information that you should know about each
of the Funds before investing. Please read it carefully and keep it for future
reference.
Investments in the Funds are neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Funds will be able to maintain
a stable net asset value of $1.00 per share.
The Funds offer two classes of shares to the general public. Class A and Class B
shares are both offered at net asset value; however, under conditions described
below, a contingent deferred sales charge (a "CDSC") may be imposed upon
redemption of Fund shares originally acquired by exchange of shares from any of
the New England Stock or Bond Funds (the "Stock or Bond Funds"). See "Owning
Fund Shares -- Exchanging Among New England Funds" and "Selling Fund Shares --
Contingent Deferred Sales Charges."
You can find more detailed information about the Funds in the Statement of
Additional Information (the "Statement") dated August 29, 1996 which has been
filed with the Securities and Exchange Commission (the "SEC") and is available
free of charge. Write to New England Funds, L.P. (the "Distributor"), SAI
Fulfillment Desk, 399 Boylston Street, Boston, MA 02116 or call toll free at
1-800-225-5478. The Statement contains more detailed information about the Funds
and is incorporated into this prospectus by reference.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C>
Page FUND EXPENSES AND FINANCIAL INFORMATION
1 Schedule of Fees Sales charges, yearly operating expenses.
3 Financial Highlights Historical information on the Funds' performance.
---------------------------------------------------------------------------------------------------------------
INVESTMENT STRATEGY
6 Investment Objectives The investment goal for each Fund.
6 New England Investment The Funds' adviser and subadviser are affiliates of NEIC.
Companies and the Funds' Adviser and
Subadviser
6 How the Funds Pursue Their
Objectives
6 Fund Investments Descriptions of the types of securities in which each
Fund invests.
---------------------------------------------------------------------------------------------------------------
9 INVESTMENT RISKS Each Fund expects to maintain the net asset value of its
shares at $1.00, but it is important to understand the
risks inherent in a Fund before you invest.
---------------------------------------------------------------------------------------------------------------
9 FUND MANAGEMENT Information about the Funds' adviser and subadviser.
---------------------------------------------------------------------------------------------------------------
BUYING FUND SHARES
11 Minimum Investment Everything you need to know to open and add to
11 6 Ways to Buy Fund Shares a New England Funds account.
[ ] Through your investment dealer
[ ] By mail
[ ] By wire transfer
[ ] By Investment Builder
[ ] By electronic purchase through ACH
[ ] By exchange from another New
England Fund
---------------------------------------------------------------------------------------------------------------
OWNING FUND SHARES
13 Exchanging Among New England Funds New England Funds offer three convenient ways to
14 Fund Dividend Payments exchange Fund shares.
---------------------------------------------------------------------------------------------------------------
SELLING FUND SHARES
15 5 Ways to Sell Fund Shares How to withdraw money or close your account.
[ ] Through your investment dealer
[ ] By telephone
[ ] By mail
[ ] By check
[ ] By Systematic Withdrawal Plan
17 Contingent Deferred Sales Charges Class A and Class B shareholders who have exchanged from
the Stock or Bond Funds may be subject to a CDSC upon
redemption.
---------------------------------------------------------------------------------------------------------------
FUND DETAILS Additional information you may find important.
18 Fund Yields
18 Income Tax Considerations
19 Additional Facts About the Funds
</TABLE>
<PAGE>
Fund Expenses and Financial Information
Schedule of Fees
Expenses are one of several factors to consider when you invest in the Funds.
The following table summarizes your maximum transaction costs from investing in
the Funds and estimated annual expenses for each class of the Funds' shares. The
Example on the following page shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each class of shares of the Funds for the
periods specified.
Shareholder transaction expenses
<TABLE>
<CAPTION>
New England
New England Cash Management
Cash Management Trust -- New England
Trust -- U.S. Government Tax Exempt
Money Market Series Series Money Market Trust
-------------------- -------------------- ----------------------
Class A Class B Class A Class B Class A Class B
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Maximum Initial Sales Charge
Imposed on a Purchase None None None None None None
Maximum Contingent Deferred Sales
Charge None* None* None* None* None* None*
</TABLE>
*Shares of each Class are sold without any sales charge. However, Class A and
Class B shares may be subject to a contingent deferred sales charge if the
shares were purchased by exchange from a Stock or Bond Fund. See "Selling
Fund Shares--Contingent Deferred Sales Charges."
Annual Fund operating expenses
(as a percentage of average net assets)
New England
Cash Management Trust
--
Money Market Series
----------------------
Class A Class B
-------- ----------
Management Fees 0.42% 0.42%
12b-1 Fees None None
Other Expenses 0.48% 0.48%
Total Fund Operating Expenses 0.90% 0.90%
New England
Cash Management Trust --
U.S. Government Series
------------------------
Class A Class B
--------- -----------
Management Fees 0.43% 0.43%
12b-1 Fees None None
Other Expenses (after voluntary fee waiver) 0.50%(1) 0.50%(1)
Total Fund Operating Expenses (after voluntary
fee waiver) 0.93%(1) 0.93%(1)
New England
Tax Exempt
Money Market Trust
------------------------
Class A Class B
--------- -----------
Management Fees (after voluntary fee waiver) 0.07%(2) 0.07%(2)
12b-1 Fees None None
Other Expenses 0.49% 0.49%
Total Fund Operating Expenses (after voluntary
fee waiver) 0.56%(2) 0.56%(2)
(1) Without a voluntary waiver of accounting and administrative fees by the
Distributor, Other Expenses would be 0.53% and Total Fund Operating Expenses
would be 0.96% for both Class A and Class B shares. These voluntary
limitations can be terminated by the Distributor at any time.
See "Fund Management."
(2) Without the voluntary fee waiver by the Fund's adviser and subadviser,
Management Fees would be 0.40% and Total Fund Operating Expenses would be
0.90% for both Class A and Class B shares. These voluntary limitations
can be terminated by the Fund's adviser or subadviser at any time. See
"Fund Management."
1
<PAGE>
Example
A $1,000 investment would incur the following expenses, assuming a 5% annual
return and redemption at the end of each time period. The 5% return and expenses
in the Example should not be considered indicative of actual or expected Fund
performance or expenses, both of which may be more or less than shown.
New England New England
Cash Management Trust Cash Management Trust New England
-- -- Tax Exempt
Money Market Series U.S. Government Series Money Market Trust
--------------------- ---------------------- -------------------
Class A Class B Class A Class B Class A Class B
(1) (1) (1)
- -------------------------------------------------------------------------------
1 year $ 9 $ 9 $ 9 $ 9 $ 6 $ 6
- -------------------------------------------------------------------------------
3 years $ 29 $ 29 $ 30 $ 30 $18 $18
- -------------------------------------------------------------------------------
5 years $ 50 $ 50 $ 51 $ 51 $31 $31
- -------------------------------------------------------------------------------
10 years $111 $111 $114 $114 $70 $70
- -------------------------------------------------------------------------------
(1) Assumes CDSC does not apply to the redemption.
The purpose of this fee schedule is to help you understand the various expenses
that you will bear directly or indirectly if you invest in one or more of the
Funds. For additional information about the Funds' fees and other expenses, see
"Fund Management."
A wire fee (currently $5.00) will be deducted from your proceeds if you elect
to transfer redemption proceeds by wire.
2
<PAGE>
Financial Highlights
(For a Class A and B share of each Fund outstanding throughout the indicated
periods.)
The Financial Highlights presented on pages 3 through 5 have been included in
financial statements for the Funds. The financial statements have been examined
by Price Waterhouse LLP, independent accountants, whose reports thereon were
unqualified. The Financial Highlights should be read in conjunction with the
financial statements and the notes thereto incorporated by reference in the
Statement. Each Fund's annual report contains additional performance information
and is available upon request and without charge.
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
Year Ended June 30,
--------------------------------------------
1987 1988 1989 1990
- ------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------
Income from investment
operations
-----------------------------------------------------------------------
Net investment income 0.0554 0.0643 0.0816 0.0801
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000
-----------------------------------------------------------------------
Total income from
investment operations 0.0554 0.0643 0.0816 0.0801
-----------------------------------------------------------------------
Less distributions
-----------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0554) (0.0643) (0.0816) (0.0801)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000
-----------------------------------------------------------------------
Total distributions (0.0554) (0.0643) (0.0816) (0.0801)
-----------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00
=======================================================================
Total return (%) 5.68 6.60 8.45 8.29
-----------------------------------------------------------------------
Ratios/Supplemental data
-----------------------------------------------------------------------
Net assets, end of
period (000) $685,026 $823,742 $984,246 $1,140,852
Ratio of expenses to
average net assets (%) 0.81 0.74 0.72 0.67
Ratio of net income to
average net assets (%) 5.54 6.44 8.21 8.00
(1) Including net realized gain on investments.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
---------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------
Income from investment
operations
---------------------------------------------------------------------------------------------
Net investment income 0.0693 0.0450 0.0275 0.0264 0.0469 0.0482
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0002
---------------------------------------------------------------------------------------------
Total income from
investment operations 0.0693 0.0450 0.0275 0.0264 0.0469 0.0484
---------------------------------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0693) (0.0450) (0.0275) (0.0264) (0.0469) (0.0484)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------------------------------
Total distributions (0.0693) (0.0450) (0.0275) (0.0264) (0.0469) (0.0484)
---------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=============================================================================================
Total return (%) 7.15 4.58 2.84 2.68 4.79 4.95
---------------------------------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------------------------------
Net assets, end of
period (000) $1,150,963 $925,077 $775,914 $699,369 $649,808 $663,621
Ratio of expenses to
average net assets (%) 0.68 0.73 0.79 0.84 0.88 0.90
Ratio of net income to
average net assets (%) 6.92 4.56 2.78 2.65 4.67 4.85
(1) Including net realized gain on investments.
</TABLE>
3
<PAGE>
NEW ENGLAND CASH MANAGEMENT TRUST -- U.S. GOVERNMENT SERIES
Year Ended June 30,
------------------------------------------
1987 1988 1989 1990
---------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------
Income from investment
operations
---------------------------------------------------------------------
Net investment income 0.0539 0.0585 0.0772 0.0762
Net gains or losses on
securities (both
realized and
unrealized) 0.0001 0.0001 0.0001 0.0001
---------------------------------------------------------------------
Total income from
investment operations 0.0540 0.0586 0.0773 0.0763
---------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0540) (0.0586) (0.0773) (0.0763)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------
Total distributions (0.0540) (0.0586) (0.0773) (0.0763)
---------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00
=====================================================================
Total return (%) 5.53 6.00 7.99 7.88
---------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------
Net assets, end of
period (000) $46,585 $57,183 $57,697 $61,746
Ratio of expenses to
average net assets (%) 0.84 0.83 0.81 0.79
Ratio of net income to
average net assets (%) 5.44 5.87 7.74 7.62
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------------------
Income from investment
operations
-------------------------------------------------------------------------------------------
Net investment income 0.0660 0.0449 0.0271 0.0257 0.0454 0.0465
Net gains or losses on
securities (both
realized and
unrealized) 0.0001 0.0000 0.0000 0.0000 0.0000 0.0010
-------------------------------------------------------------------------------------------
Total income from
investment operations 0.0661 0.0449 0.0271 0.0257 0.0454 0.0475
-------------------------------------------------------------------------------------------
Less distributions
-------------------------------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0661) (0.0449) (0.0271) (0.0257) (0.0454) (0.0475)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
-------------------------------------------------------------------------------------------
Total distributions (0.0661) (0.0449) (0.0271) (0.0257) (0.0454) (0.0475)
-------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================
Total return (%) 6.80 4.57 2.80 2.60 4.64 4.86
-------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------
Net assets, end of
period (000) $87,380 $79,218 $64,595 $58,963 $59,742 $52,547
Ratio of expenses to
average net assets (%) 0.74 0.73 0.78 0.84 0.92 0.93(2)
Ratio of net income to
average net assets (%) 6.50 4.50 2.73 2.54 4.53 4.80
</TABLE>
(1) Including net realized gain on investments.
(2) The ratio of expenses to average net assets without giving effect to the
voluntary fee waiver described in Note 3 to the Financial Statements
contained in the Statement would have been 0.96% for the year ended June 30,
1996.
4
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
Year Ended June 30,
------------------------------------------
1987 1988 1989 1990
---------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------
Income from investment
operations
---------------------------------------------------------------------
Net investment income 0.0382 0.0427 0.0541 0.0544
---------------------------------------------------------------------
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------
Total income from
investment operations 0.0382 0.0427 0.0541 0.0544
---------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------
Dividends (from net
investment income) (0.0382) (0.0427) (0.0541) (0.0544)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------
Total distributions (0.0382) (0.0427) (0.0541) (0.0544)
---------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00
=====================================================================
Total return (%) 3.89 4.34 5.53 5.56
---------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------
Net assets, end of
period (000) $56,874 $65,721 $65,433 $68,287
Ratio of expenses to
average net assets (%)
(1) 0.56 0.56 0.56 0.56
Ratio of net income to
average net assets (%) 3.81 4.27 5.41 5.42
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------------------
Income from investment
operations
-------------------------------------------------------------------------------------------
Net investment income 0.0483 0.0337 0.0214 0.0208 0.0314 0.0327
-------------------------------------------------------------------------------------------
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
-------------------------------------------------------------------------------------------
Total income from
investment operations 0.0483 0.0337 0.0214 0.0208 0.0314 0.0327
-------------------------------------------------------------------------------------------
Less distributions
-------------------------------------------------------------------------------------------
Dividends (from net
investment income) (0.0483) (0.0337) (0.0214) (0.0208) (0.0314) (0.0327)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
-------------------------------------------------------------------------------------------
Total distributions (0.0483) (0.0337) (0.0214) (0.0208) (0.0314) (0.0327)
-------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================
Total return (%) 4.93 3.41 2.20 2.10 3.18 3.32
-------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------
Net assets, end of
period (000) $72,634 $65,753 $56,555 $66,620 $67,797 $64,897
Ratio of expenses to
average net assets (%)
(1) 0.56 0.56 0.56 0.56 0.56 0.56
Ratio of net income to
average net assets (%) 4.81 3.38 2.14 2.08 3.15 3.29
</TABLE>
(1) The ratio of expenses to average net assets without giving effect to the
expense limitation described in Note 3 to the Financial Statements contained
in the Statement would have been 0.76%, 0.75%, 0.74%, 0.76%, 0.76%, 0.76%,
0.83%, 0.89%, 0.85% and 0.90% for the years ended June 30, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994, 1995 and 1996, respectively.
5
<PAGE>
Investment Strategy
Investment Objectives
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
(the "Money Market Fund")
The Money Market Fund is a separate series of New England Cash Management Trust
that seeks maximum current income consistent with preservation of capital and
liquidity. The Money Market Fund invests in a variety of high quality money
market instruments.
NEW ENGLAND CASH MANAGEMENT TRUST -- U.S. GOVERNMENT SERIES
(the "Government Fund")
The Government Fund is a separate series of New England Cash Management Trust
that seeks the highest current income consistent with maximum safety of capital
and liquidity. The Government Fund invests only in obligations backed by the
full faith and credit of the U.S. Government and in related repurchase
agreements.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
(the "Tax Exempt Fund")
The Tax Exempt Fund is a separate trust that seeks current income exempt from
federal income taxes consistent with preservation of capital and liquidity. The
Tax Exempt Fund invests primarily in a diversified portfolio of high quality
short-term fixed, variable and floating rate municipal obligations.
New England Cash Management Trust and New England Tax Exempt Money Market
Trust are referred to in this prospectus as the "Trusts."
New England Investment Companies and the Funds' Adviser and Subadviser
The investment adviser and subadviser of each of the Funds are independently
operated subsidiaries of New England Investment Companies, L.P. ("NEIC"), the
5th-largest publicly traded investment management firm in the United States.
NEIC is listed on the New York Stock Exchange and through its subsidiaries or an
affiliate manages over $87 billion in assets for individuals and institutions.
The adviser and subadviser operate independently and are staffed by experienced
investment professionals. The adviser and subadviser apply specialized knowledge
and careful analysis to the pursuit of each Fund's objectives.
New England Funds Management, L.P. ("NEFM") is investment adviser of each of
the Funds, as well as most of the other New England Funds.
Back Bay Advisors(R), L.P. ("Back Bay Advisors(R)"), subadviser of each of
the Funds, manages over $6 billion in assets, primarily mutual fund and
institutional fixed-income portfolios.
How the Funds Pursue Their Objectives
Investments in each Fund will be pooled with money from other investors in that
Fund to invest in a managed portfolio consisting of securities appropriate to
the Fund's investment objective and policies, as described below. There can be
no assurance that any Fund will achieve its objective.
Fund Investments
[ ] Money Market Fund
The Money Market Fund invests in certificates of deposit, bankers' acceptances
and other dollar-denominated obligations of banks whose net assets exceed $100
million. Up to 100% of the Fund's assets may be invested in these kinds of
obligations. These obligations may be issued by U.S. banks or their foreign
branches, or foreign banks (including their U.S. or London branches), subject to
the conditions set forth in the Statement.
The Fund may invest in commercial paper and other corporate debt obligations
that satisfy the Fund's quality and maturity standards.
The Fund may invest in "U.S. Government Securities," which term, as used in
this prospectus, includes all securities issued or guaranteed by the U.S.
Government or its agencies, authorities or instrumentalities. Some U.S.
Government Securities are backed by the full faith and credit of the United
States, some are supported by the discretionary authority of the U.S. Government
to purchase the issuer's obligations (e.g.,
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obligations of the Federal National Mortgage Association), some by the right of
the issuer to borrow from the U.S. Government (e.g., obligations of Federal Home
Loan Banks), while still others are supported only by the credit of the issuer
itself (e.g., obligations of the Student Loan Marketing Association).
The Fund may also invest in repurchase agreements of domestic banks or
broker-dealers relating to any of the above. In repurchase agreements, the Fund
buys a security from a seller, usually a bank or brokerage firm, with the
understanding that the seller will repurchase the security from the Fund at a
higher price at a later date.
All of the Fund's investments at the time of purchase (other than U.S.
Government Securities and repurchase agreements relating thereto) will be rated
in the highest rating category by a major rating agency or, if unrated, will be
of comparable quality as determined by the Fund's subadviser under guidelines
approved by the Trust's trustees.
[ ] Government Fund
The Government Fund invests in U.S. Government Securities, limited, however,
to obligations backed by the full faith and credit of the U.S. Government.
The Government Fund may also invest in repurchase agreements related to the
foregoing.
[ ] Tax Exempt Fund
The Tax Exempt Fund invests in notes, commercial paper and bonds which pay
interest that, in the opinion of the issuer's counsel, is exempt from federal
income tax ("Municipal Securities"). Municipal Securities are generally issued
by states and local governments and their agencies. The Fund will only invest in
Municipal Securities which are:
(bullet) short-term notes rated MIG-2 or better by Moody's Investors
Service, Inc. ("Moody's") or SP-2 or better by Standard & Poor's
Ratings Group ("S&P");
(bullet) municipal bonds rated Aa or better by Moody's or AA or better by S&P
with a remaining maturity of 397 days or less whose issuer has
comparable short-term obligations that are rated in the top rating
category by Moody's or S&P; or
(bullet) other types of Municipal Securities, including commercial paper,
rated P-2 by Moody's or A-2 by S&P or unrated Municipal Securities
determined to be of comparable quality by the Fund's subadviser
under guidelines approved by the Trust's trustees, subject to any
limitations imposed by Rule 2a-7 under the Investment Company Act
of 1940.
Some of these may be variable or floating rate Municipal Securities, which
pay a rate of interest adjusted on a periodic basis and determined by reference
to a prescribed formula. Such obligations may be subject to prepayment without
penalty, at the option of either the Fund or the issuer.
The interest on certain types of Municipal Securities, known as "private
activity" bonds, is an item of tax preference, subject to the federal
alternative minimum tax with a maximum rate of 28%. The Tax Exempt Fund has
instituted procedures to avoid investment in "private activity" Municipal
Securities in order to reduce the possibility that Fund dividends will
constitute an item of tax preference. However, there can be no assurance that
these procedures will be totally effective. The Tax Exempt Fund intends to
continue these procedures so long as it deems them necessary and prudent.
Shareholders should be aware that, while these procedures are in effect, the Tax
Exempt Fund will not be able to invest in the full range of issues available in
the Municipal Securities market. The Tax Exempt Fund's investments in Municipal
Securities that are subject to the federal alternative minimum tax, together
with other investments the interest on which is subject to the alternative
minimum tax, will not normally exceed 20% of Fund investments.
The interest on Municipal Securities issued after August 15, 1986 is
retroactively taxable from the date of issuance if the issuer does not comply
with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.
The Tax Exempt Fund may also invest some of its assets in cash or taxable,
high-quality money market securities eligible for purchase by the Money
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Market Fund. However, unless it has adopted a temporary defensive position,
it is a fundamental policy of the Fund to invest at least 80% of its net
assets in Municipal Securities.
The Fund may buy Municipal Securities on a when-issued basis, and may buy
Municipal Securities from a broker-dealer with the right to sell them back at a
certain time and price (puts). These practices, as well as repurchase
agreements, may present risks in addition to those associated with Municipal
Securities.
The issuer of a Municipal Security may make payments from money raised
through a variety of sources, such as (1) the issuer's general taxing power, (2)
a specific type of tax such as a property tax or (3) a particular facility or
project such as a highway. The ability of an issuer to make these payments could
be affected by litigation, legislation or other political events or the
bankruptcy of the issuer.
[ ] All Funds
All investments of the Funds mature in 397 days or less, and the average
maturity of the investments of each Fund is 90 days or less. The maturity of
repurchase agreements is calculated by reference to the repurchase date, not by
reference to the maturity of the underlying security. All investments of each
Fund will be in U.S. dollars and will be determined to present minimal credit
risks by the subadviser under guidelines established by the Trust's trustees.
It is a fundamental policy of each Fund that no more than 10% of the net
assets of the Fund are to be invested in illiquid securities, including
repurchase agreements with maturities of more than seven days.
Note: Except for each Fund's investment objective and each Fund's policies
that are explicitly described as fundamental in this prospectus or in the
Statement, the investment policies of the Funds may be changed without
shareholder approval or prior notice.
The Funds will make all of their investments in a manner which complies with
Rule 2a-7 under the Investment Company Act of 1940.
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Investment Risks
It is important to understand the following risks inherent in investing in the
Funds before you invest.
By investing only in high-quality, short-term securities, each Fund seeks to
minimize risk. Although changes in interest rates can change the market value of
a security, the Funds expect those changes to be minimal and that each Fund will
be able to maintain the net asset value of its shares at $1.00, although this
value cannot be guaranteed. The price stability and liquidity of the Tax Exempt
Fund may not be equal to that of a taxable money market fund, because the market
for Municipal Securities is not as broad as the market for taxable money market
instruments and because the average portfolio maturity is likely to be greater
for the Fund than for a taxable money market fund.
All repurchase agreements entered into by the Funds provide that the seller's
obligations must be fully collateralized at all times. A Fund may, however, face
various delays and risks of loss if the seller defaults.
The Money Market Fund's holdings of obligations of foreign banks or of foreign
branches or subsidiaries of U.S. banks may be subject to different risks than
obligations of domestic banks, such as foreign economic, political and legal
developments and the fact that different regulatory requirements apply.
Fund Management
NEFM, 399 Boylston Street, Boston, Massachusetts 02116, serves as the adviser to
each of the Funds. NEFM oversees, evaluates and monitors the subadvisory
services provided to each Fund and furnishes general business management and
administration to each Fund. NEFM does not determine what investments will be
purchased by the Funds.
Back Bay Advisors(R), 399 Boylston Street, Boston, Massachusetts 02116, is the
subadviser of the Funds. Back Bay Advisors provides discretionary investment
management services to mutual funds and other institutional investors. Formed in
1986, Back Bay Advisors now manages 14 mutual fund portfolios and a total of
over $6 billion of assets.
The general partners of Back Bay Advisors, NEFM, and the Distributor are special
purpose corporations that are indirect, wholly-owned subsidiaries of NEIC.
NEIC's sole general partner, New England Investment Companies, Inc. is a
wholly-owned subsidiary of New England Mutual Life Insurance Company ("The New
England"), and is expected to become a wholly-owned subsidiary of Metropolitan
Life Insurance Company ("MetLife"), following the merger of The New England with
and into MetLife, which merger is expected to occur on or after August 30, 1996,
subject to the satisfaction of certain conditions.
Subject to the supervision of NEFM, Back Bay Advisors manages each Fund in
accordance with the Fund's investment objective and policies, makes investment
decisions for the Fund, places orders to purchase securities for the Fund and
employs professional advisers and securities analysts who provide research
services relating to the Fund.
In addition to overseeing the management of the Funds as conducted by Back Bay
Advisors, NEFM provides executive and other personnel for the management of the
Trusts. Each Trust's Board of Trustees supervises the affairs of that Trust as
conducted by NEFM and Back Bay Advisors.
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Each of the Funds pay NEFM a management fee at the annual rate set forth in
the following table:
Management fee payable by the Fund to NEFM
Fund (as a percentage of average daily net assets of the Fund)
- ------------------------------------------------------------------------------
Money Market Fund .425% of the first $500 million
.400% of the next $500 million
.350% of the next $500 million
.300% of the next $500 million
.250% of amounts in excess of $2 billion
Government Fund .425% of the first $500 million
.400% of the next $500 million
.350% of the next $500 million
.300% of the next $500 million
.250% of amounts in excess of $2 billion
Tax Exempt Fund .40% of the first $100 million
.30% of amounts in excess of $100 million
NEFM pays Back Bay Advisors a subadvisory fee at the annual rate set forth in
the following table:
Subadvisory fee payable by NEFM to Back Bay Advisors
Fund (as a percentage of average daily net assets of the Fund)
-----------------------------------------------------------------------------
Money Market Fund .205% of the first $500 million
.180% of the next $500 million
.160% of the next $500 million
.140% of the next $500 million
.120% of amounts in excess of $2 billion
Government Fund .2125% of the first $500 million
.2000% of the next $500 million
.1750% of the next $500 million
.1500% of the next $500 million
.1250% of amounts in excess of $2 billion
Tax Exempt Fund .20% of the first $100 million
.15% of amounts in excess of $100 million
The Funds pay no direct fees to Back Bay Advisors.
Prior to January 2, 1996, Back Bay Advisors served as adviser to each Fund.
In addition to management fees, each Fund pays the Distributor for providing
certain accounting and administrative services. The amount of the payments is
based on the allocated costs that the Distributor incurs in providing these
services.
Until further notice to the Tax Exempt Fund, NEFM and Back Bay Advisors have
agreed to reduce their fees and, if necessary, to bear certain expenses
associated with operating the Fund (not including fees payable to the trustees
who are not "interested persons" of the Trust) to the extent necessary in order
to limit those fees and expenses for Class A and B shares to an annual rate of
0.5625% of the Fund's average daily net assets. NEFM and Back Bay Advisors may
terminate these voluntary limitations at any time. In such event, the Fund would
supplement its prospectus. In addition, until further notice, the Distributor
has agreed to waive accounting and administrative fees for the Government Fund.
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Buying Fund Shares
Minimum Investment
$1,000 is the minimum for an initial investment in a Fund and $50 is the minimum
for each subsequent investment. There are special initial investment minimums
for the following plans:
[ ] $25 (for initial and subsequent investments) for payroll deduction
investment programs for 401(k), SARSEP, 403(b)(7) retirement plans and
certain other retirement plans.
[ ] $50 for automatic investing through the Investment Builder program.
[ ] $250 for retirement plans with tax benefits such as corporate pension and
profit sharing plans, IRAs and Keogh plans.
6 Ways to Buy Fund Shares
The Funds offer two classes of shares, Class A and Class B, in order to enable
investors in either class of the Stock or Bond Funds to invest in money market
shares. The Stock Funds are: New England Growth Fund, New England International
Equity Fund, New England Star Advisers Fund, New England Star Worldwide Fund,
Growth Fund of Israel, New England Capital Growth Fund, New England Value Fund,
New England Growth Opportunities Fund and New England Balanced Fund. The Bond
Funds are: New England High Income Fund, New England Strategic Income Fund, New
England Government Securities Fund, New England Bond Income Fund, New England
Limited Term U.S. Government Fund, New England Adjustable Rate U.S. Government
Fund, New England Municipal Income Fund, New England Massachusetts Tax Free
Income Fund, New England Intermediate Term Tax Free Fund of California and New
England Intermediate Term Tax Free Fund of New York.
To determine which class of shares is appropriate for you, see "Owning Fund
Shares--Exchanging Among New England Funds." You may purchase shares in the
following ways:
[Icon of Investment Dealer] Through your investment dealer:
Many investment dealers have a sales agreement with the Distributor and would be
pleased to accept your order.
[Icon of window envelope] By mail:
For an initial investment, simply complete an application and return it, with
a check payable to New England Funds, P.O. Box 8551, Boston, MA 02266-8551.
Using Tele#Facts 1-800-346-5984
Tele#Facts, New England Funds' automated service system, gives you 24-hour
access to your account. Through your touch-tone telephone, you can receive your
current account balance, your last five transactions, Fund prices and recent
performance information. You can also purchase, sell or exchange Class A shares
of any New England Fund. For a free brochure about Tele#Facts including a
convenient wallet card, call us at 1-800-225-5478.
For subsequent investments, please mail your check to New England Funds,
P.O. Box 8551, Boston, MA 02266-8551 along with a letter of instruction
(including your account number) or an additional deposit slip from your
statements. To make investing even easier, you can also order personalized
investment slips by calling 1-800-225-5478.
All purchases made by check should be in U.S. dollars and made payable to New
England Funds, or, in the case of a retirement account, the custodian or
trustee. Third party checks will generally not be accepted except under certain
circumstances approved by the Distributor. When purchases are made by check or
periodic account investment, redemptions may not be allowed until the investment
being redeemed has been in the account for 10 calendar days.
[Icon of wire] By wire transfer of Federal Funds:
For an initial investment, call us at 1-800-225-5478 between 8:00 a.m. and
7:00 p.m. (Eastern time) on a day when the Fund is open for business to
obtain an account number and wire transfer instructions.
For subsequent investments, direct your bank to transfer funds to State
Street Bank and Trust Company, ABA #011000028, DDA #99011538, Credit Fund (Fund
name and Class of shares), Shareholder Name, Shareholder Account Number. Funds
may be transferred between 9:00 a.m. and 4:00 p.m. (Eastern time) on a day when
the Fund is open for business. Your bank may charge a fee
for this service.
[Icon of building blocks] By Investment Builder:
Investment Builder is New England Funds' automatic investment plan. You may
authorize automatic monthly transfers of $50 or more from your bank checking or
savings account to purchase shares of one or more New England Funds.
For an initial investment, please indicate that you would like to begin an
automatic investment plan
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through Investment Builder. Indicate the amount of the monthly investment on
the enclosed application and enclose a check marked "Void" or a deposit slip
from your bank account.
To add Investment Builder to an existing account, please call us at
1-800-225-5478 for a Service Options Form.
[Icon of wire plug] By electronic purchase through ACH:
You may purchase additional shares electronically through the Automated Clearing
House ("ACH") system as long as your bank or credit union is a member of the ACH
system and you have a completed, approved ACH application on file with the Fund.
To make investing even easier, you can also order personalized investment
slips by calling 1-800-225-5478.
To purchase through ACH, call 1-800-225-5478 between 8:00 a.m. and 7:00 p.m.
(Eastern time) on a day when the Fund is open for business. You may also
purchase shares through ACH by calling Tele#Facts at 1-800-346-5984 twenty-four
hours a day. Under normal circumstances, the New York Stock Exchange (the
"Exchange") closes at 4:00 p.m. (Eastern time). Purchase orders through ACH or
Tele#Facts will be complete only upon receipt by New England Funds of funds from
your bank and, on the day that funds are received, will be processed at the net
asset value next determined at the close of regular trading on the Exchange on
days that the Exchange is open. Proceeds of redemptions of Fund shares purchased
through ACH may not be available for up to ten days after the purchase date.
[Icon of East-West arrows] By exchange from another New England Fund:
You may also purchase shares of a Fund by exchanging shares from another Fund
or a Stock or Bond Fund. Please see "Owning Fund Shares--Exchanging Among
New England Funds" for complete details.
General
All purchase orders are subject to acceptance by the Funds and will be effected
at the net asset value next determined after the order is received in proper
form by State Street Bank and Trust Company ("State Street Bank"). However,
orders received by your investment dealer before the close of trading on the
Exchange and transmitted to the Distributor by 5:00 p.m. (Eastern time) on the
same day will be effected at the net asset value determined on that day.
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of sale of shares.
Class B shares and certain special services may not be available to persons
whose shares are held in street name accounts.
You will not receive any certificates for your Class A shares unless you
request them in writing from New England Funds, L.P. (the "Servicing Agent").
The Funds' "open account" system for recording your investment eliminates the
problems of handling and safekeeping certificates. Certificates will not be
issued for Class B shares. If you wish transactions in your account to be
effected by another person under a power of attorney from you, special rules
apply. Please contact your investment dealer or the Distributor for details.
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<PAGE>
Owning Fund Shares
Exchanging Among
New England Funds
Class A Shares
You or your investment dealer can exchange some or all of your Class A shares of
a Fund for Class A shares of any other Fund described in this prospectus with no
sales charge and exchange some or all of your Class A shares of a Fund which
have not previously been subject to a sales charge for Class B shares of any
other Fund described in this prospectus with no sales charge. Class A or Class B
shares of a Fund acquired by exchange from either another Fund or a Stock or
Bond Fund will be subject to a CDSC if, and to the same extent as, the shares
exchanged were subject to a CDSC.
Class A Fund shares on which no sales charge was previously paid may be
exchanged (i) for Class A shares of any of the Stock or Bond Funds except New
England Growth Fund, which is subject to special eligibility requirements, on
the basis of relative net asset value plus the sales charge applicable to
initial purchases of Class A shares of the Fund into which you are exchanging,
(ii) for Class B shares of any of the Stock or Bond Funds on the basis of
relative net asset value, subject to the CDSC schedule of the Stock or Bond Fund
into which you are exchanging, or (iii) for Class C shares of any of the Stock
or Bond Funds on the basis of relative net asset value.
Class A Fund shares which have previously been subject to a sales charge may
be exchanged on the basis of relative net asset value, without the payment of a
sales charge, for Class A shares of any of the Stock or Bond Funds except New
England Growth Fund, which is subject to special eligibility requirements, and
except as described in the remainder of this paragraph, but may not be exchanged
for Class B or Class C shares of the Stock or Bond Funds. The absence of sales
charges on exchanges described in the previous sentence is subject to two
exceptions: (i) Class A shares of a Fund acquired through exchange from Class A
shares of New England Intermediate Term Tax Free Fund of California or New
England Intermediate Term Tax Free Fund of New York (the "California and New
York Funds") may be exchanged for Class A shares of another Stock or Bond Fund
at net asset value only if you held the California or New York Fund shares for
at least six months; otherwise, sales charges apply to the exchange; and (ii) if
Class A shares of a Fund acquired through exchange from Class A shares of New
England Adjustable Rate U.S. Government Fund (the "Adjustable Rate Fund") are
exchanged for shares of another Stock or Bond Fund that has a higher sales
charge, you will pay the difference between any sales charge you have already
paid on your Adjustable Rate Fund shares and the higher sales charge of the
Stock or Bond Fund into which you are exchanging.
Automatic Exchange Plan
The Funds have an Automatic Exchange Plan under which shares of a Fund are
automatically exchanged each month for shares of the same Class of any other
Fund or Stock or Bond Fund (other than New England Growth Fund, which is
available only to certain investors) subject to the appropriate sales charge or
CDSC. The minimum monthly exchange amount under the plan is $50. There is no fee
for exchanges made pursuant to this program.
Class B Shares
You can exchange some or all of your Class B shares of a Fund for Class B shares
of any other Fund described in this prospectus with no sales charge. Class B
shares of a Fund may be exchanged for Class B shares of any of the Stock or Bond
Funds on the basis of relative net asset value, subject to the CDSC schedule of
the Stock or Bond Fund acquired. For purposes of computing the CDSC payable upon
redemption of shares acquired by such exchange, and the conversion of such
shares to Class A shares, the holding period of any Class B Stock or Bond Fund
shares that were exchanged for Class B shares of a Fund is included, but the
holding period of the Class B shares of a Fund is not included. See "Selling
Fund Shares--Contingent Deferred Sales Charges."
To make an exchange, please call 1-800-225-5478 between 8:00 a.m. and 7:00
p.m. (Eastern time) on a day when the Fund is open for business, write to New
England Funds or call Tele#Facts at 1-800-346-5984 twenty-four hours a day. The
exchange must be for a minimum of $500 (or the total net asset value of your
account, whichever is less), except that, under the Automatic Exchange Plan, the
minimum is $50. All exchanges are subject to the eligibility requirements of the
Fund or Stock or Bond Fund into which you are exchanging. Also, see "Selling
Fund Shares--Contingent Deferred Sales Charges." In connection with any
exchange, you must receive a current prospectus of the Stock or Bond Fund into
which you are exchanging. The exchange privilege may be exercised only in those
states where shares of such Stock or Bond Fund may be legally sold.
You have the automatic privilege to exchange your Fund shares by telephone.
The Servicing Agent will employ reasonable procedures to confirm that your
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<PAGE>
telephone instructions are genuine, and, if it does not, it may be liable for
losses due to unauthorized or fraudulent instructions. The Servicing Agent will
require a form of personal identification prior to acting upon your telephone
instructions, will provide you with written confirmations of such transactions
and will tape record your instructions.
Except as otherwise permitted by SEC rule, shareholders will receive at least
60 days' advance notice of any material change to the exchange privilege.
Fund Dividend Payments
Each Fund pays out as dividends substantially all of the net investment income
from interest it receives from its investments. The dividends of each Fund are
declared daily and paid to you monthly. If all of your shares of a Fund are
redeemed at any time during a month, all dividends accrued to date will be paid
together with the redemption proceeds. Dividends are automatically reinvested in
more shares. If you prefer, you may receive them in cash by selecting that
option on your account application. You may change your distribution option by
notifying New England Funds in writing or by calling 1-800-225-5478. If you
elect to receive your dividends in cash and the dividend checks sent to you are
returned "undeliverable" to the Fund or remain uncashed for six months, your
cash election will be automatically changed and your future dividends will be
reinvested.
DIVIDEND DIVERSIFICATION
PROGRAM
You may also establish a dividend diversification program, that allows you to
have all dividends and any other distributions from either class of the Funds
automatically invested in shares of the same class of a Stock or Bond Fund.
Class A shareholders may also have dividends and distributions automatically
invested in Class C shares of a Stock or Bond Fund. For Class A shareholders,
investments will be made at the appropriate public offering price, which may
include a sales charge. For Class B shareholders, shares acquired through this
program will be subject to a CDSC if they are redeemed from the account. For
both classes, this program is subject to the investor eligibility requirements
of the Stock or Bond Fund and to state securities law requirements. Dividends
will be invested in the selected Stock or Bond Fund's shares on the dividend
payable date. A dividend diversification account must be in the same
registration (shareholder name) as the distributing Fund account and, if a new
account in a Stock or Bond Fund is being established, the minimum investment
requirements of that fund must be met. Before establishing a dividend
diversification program into any Stock or Bond Fund, you must obtain and
carefully read a copy of that Stock or Bond Fund's prospectus.
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<PAGE>
Selling Fund Shares
5 Ways to Sell Fund Shares
[Icon of Investment Dealer] Through your investment dealer:
Call your authorized investment dealer for information.
[Icon of Telephone Receiver] By Telephone:
You or your investment dealer may redeem (sell) shares by telephone using any
of the three methods described below:
Wired to Your Bank Account -- If you have previously selected the telephone
redemption privilege on your account, you may redeem either class of shares by
calling 1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day
when the Fund is open for business. Class A shares only may also be redeemed by
calling Tele#Facts at 1-800-346-5984 twenty-four hours a day.
Redemption requests accepted after the Exchange has closed (4:00 p.m.
[Eastern time]) will be processed at the next determined net asset value. The
proceeds (less any applicable CDSC) generally will be wired on the next business
day to the bank account previously chosen by you on your application. A wire fee
(currently $5.00) will be deducted from the proceeds.
You may elect this service on your initial application or you may add it
later or change bank information by completing the Service Options Form (with a
signature guarantee), available through your investment dealer or by calling
1-800-225-5478. Your bank must be a member of the Federal Reserve System or
have a correspondent bank that is a member. If your account is with a savings
bank, it must have only one correspondent bank that is a member of the Federal
Reserve System.
Mailed to Your Address of Record -- Both classes of shares may be redeemed by
calling 1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day
when the Fund is open for business and requesting that a check for the proceeds
(less any applicable CDSC) be mailed to the address on your account, provided
that the address has not changed during the previous month and that the proceeds
are for $100,000 or less. Generally, the check will be mailed to your address of
record on the business day after your redemption request is received.
Through ACH -- Shares may be redeemed electronically through the ACH system,
provided that you have an approved ACH application on file with the Fund. To
redeem through ACH, call 1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern
time) on a day when the Fund is open for business. The proceeds (less any
applicable CDSC) generally will arrive at your bank within three business days;
their availability will depend on your bank's particular rule. Class A
shareholders may also redeem shares by calling Tele#Facts at 1-800-346-5984
twenty-four hours a day.
Redemptions will be processed the day your telephone call is made if it is
made prior to 4:00 p.m. (Eastern time). Orders submitted through Tele#Facts or
ACH after 4:00 p.m. (Eastern time), or after the Exchange closes, if it closes
earlier than 4:00 p.m., will be accepted and processed the next business day.
[Icon of window envelope] By mail:
You may redeem your shares at their net asset value (less any applicable CDSC)
next determined after receipt of your request in good order by sending a written
request (including any necessary special documentation) to New England Funds,
P.O. Box 8551, Boston, MA 02266-8551.
The request must include the name of the Fund, your account number, the exact
name(s) in which your shares are registered, the number of shares or the dollar
amount to be redeemed and whether you wish the proceeds mailed to your address
of record, wired to your bank or transmitted through ACH. All owners of the
shares must sign the request in the exact names in which the shares are
registered (this appears on the confirmation statement) and indicate any special
capacity in which they are signing (such as trustee, custodian or under power of
attorney or on behalf of a partnership, corporation or other entity).
If you are redeeming shares worth less than $100,000 and the proceeds check
is made payable to the registered owner(s) and mailed to the record address, no
signature guarantee is required. Otherwise, you generally must have your
signature guaranteed by an eligible guarantor institution in accordance with
procedures established by the Servicing Agent. See the Statement. Signature
guarantees by notaries public are not acceptable.
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<PAGE>
Additional written information may be required for redemptions by certain
benefit plans and IRAs. Contact the Distributor or your investment dealer for
details.
If you hold certificates for your Class A shares, you must enclose them with
your redemption request or your request will not be honored. The Funds recommend
that certificates be sent by registered mail.
[Icon of pen writing] By check:
For Class A shares only, you may select the checkwriting option on your
application and complete the attached signature card. You may add checkwriting
to an existing account by completing the Service Options Form (with a signature
guarantee) available through your investment dealer or by calling
1-800-225-5478. The Fund will send you checks drawn on State Street Bank. You
will continue to earn dividends on shares redeemed by check until the check
clears. Each check must be written for $250 or more, except that qualified
corporate retirement plans and certain other corporate accounts may write checks
for any amount.
If you use withdrawal checks, you will be subject to State Street Bank's
rules governing checking accounts. The Funds and the Distributor are in no way
responsible for any checkwriting account established with State Street Bank.
You may not close your Fund account by withdrawal check, because the exact
balance of your account will not be known until after the check is received by
State Street Bank.
[Icon of calendar] By Systematic Withdrawal Plan:
You may establish a Systematic Withdrawal Plan (the "Plan") that allows you to
redeem shares and receive payments on a regular schedule. In the case of shares
subject to a CDSC, the amount or percentage you specify may not exceed, on an
annualized basis, 10% of the value of your Fund account (based on the day you
establish your Plan). Redemptions of shares pursuant to the Plan will not be
subject to a CDSC. For information, contact the Distributor or your investment
dealer.
General. Redemption requests will be effected at the net asset value next
determined after your redemption request is received in proper form by State
Street Bank or your investment dealer (except that orders received by your
investment dealer before the close of regular trading on the Exchange and
transmitted to the Distributor by 5:00 p.m. Eastern time on the same day will
receive that day's net asset value). In certain cases where shares were acquired
by exchanging shares of a Stock or Bond Fund, however, redemption proceeds will
be reduced by the amount of any applicable CDSC that would have been imposed on
a redemption of shares of the Stock or Bond Fund. See "Contingent Deferred Sales
Charges" below. Redemption proceeds will normally be mailed to you within seven
days after State Street Bank or the Distributor receives your request in good
order. However, in those cases where you have recently purchased your shares by
check or an electronic funds transfer through the ACH system and you make a
redemption request within 10 days after such purchase or transfer, a Fund may
withhold redemption proceeds until the Fund knows that the check or funds have
cleared.
During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If you are unable to contact the
Distributor by telephone, shares may be redeemed by delivering the redemption
request in person to the Distributor or by mail as described above. Requests are
processed at the net asset value next determined after the request is received.
Special rules apply to redemptions under powers of attorney. Please call the
Distributor or your investment dealer for more information.
Telephone redemptions are not available for tax qualified retirement plans or
for Fund shares in certificate form. If certificates have been issued for your
investment, you must send them to New England Funds along with your request
before a redemption request can be honored. See the instructions for redemption
by mail above.
The Funds may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC, when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Funds
to dispose of their securities or to determine fairly the value of their
16
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net assets, or during any other period permitted by the SEC for the
protection of investors.
Contingent Deferred Sales Charges
Shares of the Funds are sold without any sales charge at the time of purchase.
Class A -- Class A shares of a Fund acquired through exchange of Class A shares
of a Stock or Bond Fund that were subject to a CDSC of 1% at the time of the
exchange will be subject to a CDSC of 1% upon redemption. If such shares are
exchanged for Class A shares of a Stock or Bond Fund rather than redeemed, then
the Class A Stock or Bond Fund shares will be subject to a 1% CDSC if redeemed
within one year after the original purchase of the Stock and Bond Fund shares
exchanged for the Class A shares of a Fund; the time that Class A Fund shares
are held is not included in the holding period used to determine the
applicability of a Stock or Bond Fund's Class A CDSC. Class B -- Class B shares
of a Fund will be subject to a CDSC upon redemption if the shares were acquired
by exchange of Class B shares of a Stock or Bond Fund which were subject to a
CDSC at the time of the exchange, at the rate applicable to redemptions of the
Stock or Bond Fund at such time. The time that Class B shares of a Fund are held
is not included in the holding period used to determine the CDSC (and conversion
to Class A shares). The CDSC is calculated at the following rates, measured in
each case from the time the shares in the Stock or Bond Fund were purchased, and
without regard to the period during which Class B shares of the Fund were held:
4% during the first year, 3% in each of the second and third years, 2% in the
fourth year, 1% in the fifth year and 0% the sixth year and thereafter.
Investors are referred to the prospectus of the relevant Stock or Bond Fund for
a description of the applicable CDSC.
Shareholders may obtain copies of prospectuses of the New England Funds by
telephoning 1-800-255-5478 or by writing to:
New England Funds, L.P.
P.O. Box 8551
Boston, Massachusetts 02266-8551
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<PAGE>
Fund Details
Fund Yields
The yield is different for each Fund because each invests in different types of
securities. For current yield information, shareholders or their investment
representatives may call Tele#Facts 24 hours a day at 1-800-346-5984.
Income Tax Considerations
As long as a Fund distributes substantially all its net investment income and
net short-term capital gains, if any, to its shareholders, it will not pay
federal income tax on the amounts distributed.
The Funds usually do not realize a substantial amount of long-term capital
gains. If a Fund does, it will distribute them annually and they will be taxable
to you as long-term capital gains, whether received in cash or additional shares
and regardless of how long you have held your shares. No distribution from any
Fund is expected to be eligible for the dividends-received deduction for
corporations.
To avoid certain excise taxes, each Fund must distribute by December 31 each
year virtually all of its ordinary income realized in that year, and all of any
previously undistributed capital gains it realized in the twelve months ended on
October 31 of that year. Certain dividends declared by a Fund in December, but
not actually received by you until January, will be treated for federal tax
purposes as though you had received them on December 31.
The Distributor will send you and the Internal Revenue Service an annual
statement detailing federal tax information, including information about
dividends and distributions paid to you during the preceding year. Be sure to
keep this statement as a permanent record. A fee may be charged for any
duplicate information requested.
The Money Market Fund and the Government Fund are each required to withhold 31%
of all income dividends and capital gain distributions it pays to you if you do
not provide a correct, certified taxpayer identification number, if the Fund is
notified that you have underreported income in the past, or if you fail to
certify to the Fund that you are not subject to such federal back-up
withholding. In addition, each such Fund is required to withhold 31% of the
gross proceeds of Fund shares you redeem if you have not provided a correct,
certified taxpayer identification number. Similar withholding requirements apply
to the Tax Exempt Fund, but not to dividends from the Fund if at least 95% of
the Fund's dividends for any year are "exempt-interest dividends" (dividends
derived from interest on Municipal Securities).
[ ] Money Market Fund and Government Fund
Dividends and distributions of short-term capital gains, if any, are taxable to
you as ordinary income, whether paid in cash or in additional shares.
Dividends derived from interest on U.S. Government Securities may be exempt from
state and local taxes. Each Fund intends to advise shareholders of the
proportion of its dividends derived from such interest. Before investing in
either Fund, you should check the consequences of your local and state tax laws,
and of any retirement plan offering tax benefits.
[ ] Tax Exempt Fund
You may exclude from your gross income on your federal tax return any
"exempt-interest dividends" received from the Fund. However, if you receive
social security benefits, you may be taxed on a portion of those benefits as a
result of receiving tax exempt income. Also, if the Fund invests in private
activity Municipal Securities, a portion of the Fund's dividends may constitute
a tax preference item subject to the alternative minimum tax. In addition, all
exempt-interest dividends will constitute an item of "adjusted current earnings"
(although not taxable income) to corporate shareholders, which may in certain
circumstances give rise to alternative minimum tax liability.
Other dividends and short-term capital gains, if any, are taxable to you as
ordinary income, whether paid in cash or additional shares.
The federal exemption for "exempt-interest dividends" does not necessarily
result in an exemption from state and local taxes. Distributions of
"exempt-interest dividends" may be exempt from state and local taxation to the
extent they are derived from the state or locality in which you reside. The Fund
will report annually on a state-by-state basis the source of income the Fund
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<PAGE>
receives on Municipal Securities which was paid out as dividends during the
preceding year.
Note: The information above is only a summary of applicable tax law. You
should consult your own tax adviser for more information about the tax
consequences of an investment in the Funds.
Additional Facts About
the Funds
[ ] If the balance in your account with a Fund is less than a minimum dollar
amount set by the trustees of the Trusts (currently $500 for all accounts,
except for those indicated below and for Individual Retirement Accounts, which
have a $25 minimum), the Fund may close your account and send the proceeds to
you. Shareholders who are affected by this policy will be notified of a Fund's
intention to close the account and will have 60 days immediately following the
notice in which to bring the account up to the minimum. The minimum does not
apply to Keogh, pension and profit sharing plans, or accounts established in
conjunction with New England Securities Brokerage Services.
[ ] The Distributor pays a service fee to investment dealers for services
provided and expenses incurred when establishing or servicing shareholder
accounts in any of the Funds. The fee is not a direct or indirect expense of the
Funds or their shareholders and does not affect a Fund's yield.
[ ] Each Trust offers only its own shares for sale. In some circumstances, a
Trust might be held liable to shareholders of the other for misstatements, if
any, contained in this combined prospectus. The trustees of each Trust have
considered this possible liability and have approved the use of a combined
prospectus.
[ ] Assets of each Fund normally are valued at amortized cost on each day that
the Exchange is open for trading. Net asset value per share is determined by
dividing each Fund's net assets by the total number of Fund shares outstanding.
Each Fund's net assets are equal to the value of its investments and its other
assets minus its liabilities.
[ ] Shares of each Fund are freely transferable and are entitled to be voted at
shareholder meetings. Each Fund holds shareholder meetings only when required
rather than on an annual basis.
[ ] The Money Market Fund and the Government Fund are separate series of New
England Cash Management Trust, a Massachusetts business trust organized on June
5, 1980. The Tax Exempt Fund is a Massachusetts business trust organized on
January 18, 1983. Each Fund is registered as a diversified open-end management
investment company under the Investment Company Act of 1940 and is authorized to
issue an unlimited number of full and fractional shares.
[ ] Each Fund may include its yield in advertisements or other written sales
material. Yield may be either the yield for a particular seven-day period
(stated on an annualized basis), or an "effective yield" calculated by assuming
that an investor reinvests all Fund dividends throughout a one-year period and
that the Fund earns net income for the entire year at the same rate as net
income is earned during a particular seven-day period. The Tax Exempt Fund may
also advertise its taxable-equivalent yield, which is the taxable yield an
investor would have to earn to receive the equivalent of the Fund's yield after
payment of federal income tax (assuming a particular federal income tax rate).
Each Fund may also show illustrations of how the value of an account with the
Fund would have grown over past time periods, assuming that all dividends paid
to that account were immediately reinvested in shares of the Fund.
[ ] New England Funds, L.P., 399 Boylston Street, Boston, MA 02116 is the
transfer and dividend paying agent for each Fund. It has subcontracted certain
of its obligations as such to State Street Bank, 225 Franklin Street, Boston, MA
02110.
[ ] Each Fund's annual report contains additional performance information and is
available upon request and without charge. Each Fund will send a single copy of
its annual and semi-annual reports to an address at which more than one
shareholder of record with the same last name has indicated that mail is to be
delivered. Shareholders may request additional copies of any annual or
semi-annual report in writing or by telephone.
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<PAGE>
[ ] The Class A and Class B structure could be terminated should certain IRS
rulings be rescinded.
[ ] Each Trust's trustees have the authority without shareholder approval to
issue other classes of shares of each Fund that represent interests in the
Funds' portfolios but that have different sales load and fee arrangements.
[ ] Back Bay Advisors(R) is a registered trademark of Back Bay Advisors, L.P.
20
<PAGE>
XM51-0896
<PAGE>
[New England Funds Logo]
- --------------------------------------------------------------------------------
NEW ENGLAND MONEY MARKET FUNDS
NEW ENGLAND CASH MANAGEMENT TRUST - MONEY MARKET SERIES
NEW ENGLAND CASH MANAGEMENT TRUST - U.S. GOVERNMENT SERIES
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
Statement of Additional Information -- August 29, 1996
This Statement of Additional Information (the "Statement") is not a prospectus.
This Statement relates to the prospectus of New England Cash Management Trust
and New England Tax Exempt Money Market Trust dated August 29, 1996 (the
"Prospectus"), and should be read in conjunction therewith. A copy of the
Prospectus may be obtained from New England Funds, L.P. (the "Distributor"), 399
Boylston Street, Boston, Massachusetts 02116.
Table of Contents
Page
Investment Objectives and Policies 2
Investment Restrictions 5
Management of the Funds 8
Investment Advisory, Subadvisory,
Distribution and Other Services 11
Portfolio Transactions 15
Performance 16
Description of the Funds and Ownership of Shares 19
Purchase of Shares 22
Shareholder Services 22
Open Accounts 22
Automatic Investment Plans 22
Retirement Plans Offering Tax Benefits 23
Systematic Withdrawal Plans 23
Exchange Privilege 24
Automatic Exchange Plan 24
Redemptions 26
Net Income, Dividends and Valuation 27
Tax-Free Investing 28
Taxes 29
Financial Statements 30
Appendix A - Description Certain New England
Cash Management Trust Investments
A-1
Appendix B - Description of Certain New England
Tax-Exempt Money Market Trust Investments B-1
Appendix C - Ratings of Corporate and Municipal
Bonds, Commercial Paper and
Short-Term Tax Exempt Obligations C-1
Appendix D - Publications That May be Referred
to in Fund Advertisements or
Sales Literature D-1
Appendix E - Certain Information That May Be
Included in Advertising and
Promotional Literature E-1
1
<PAGE>
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INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
GENERAL
The investment objectives and policies of New England Cash Management
Trust Money Market Series (the "Money Market Fund"), New England Cash Management
Trust U.S. Government Series (the "Government Fund") and New England Tax Exempt
Money Market Trust (the "Tax Exempt Fund") (the "Funds," and each a "Fund") are
summarized in the Prospectus under "Investment Strategy" and "Investment Risks."
The investment policies and types of permitted investments of each Fund
set forth below and in the Prospectus may be changed without shareholder
approval except that the investment objective of each Fund, and any investment
policy expressly identified as fundamental, may not be changed without the
approval of a majority of the outstanding voting securities of that Fund.
The terms "shareholder approval" and "majority of the outstanding voting
securities" as used in the Prospectus and this Statement each refer to approval
by the lesser of (i) 67% or more of the shares of the applicable Fund
represented at a meeting at which more than 50% of the outstanding shares of
such Fund are represented or (ii) more than 50% of the outstanding shares of
such Fund.
New England Cash Management Trust and New England Tax Exempt Money
Market Trust are sometimes referred to hereinafter as the "Trusts," and each as
a "Trust."
MONEY MARKET FUND AND GOVERNMENT FUND
Each Fund will invest only in securities which the Funds' subadviser,
Back Bay Advisors(R), L.P. ("Back Bay Advisors(R)"), acting under guidelines
established by the relevant Trust's Board of Trustees, has determined are of
high quality and present minimal credit risk. For a description of certain of
the money market instruments in which each Fund may invest, and the related
descriptions of the ratings of Standard and Poor's Ratings Group ("S&P") and
Moody's Investors Service, Inc. ("Moody's"), see Appendices A and C to this
Statement. Money market instruments maturing in less than one year may yield
less than obligations of comparable quality having longer maturities.
Obligations in which the Government Fund invests generally yield less
than the obligations in which the Money Market Fund may invest. Therefore, the
Government Fund may generally be expected to have a lower yield than the Money
Market Fund.
As described in the Prospectus, the Money Market Fund's investments may
include certain U.S. dollar-denominated obligations of foreign banks or of
foreign branches and subsidiaries of U.S. banks, which may be subject to foreign
economic, political and legal risks. Such risks include foreign economic and
political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign withholding
and other taxes on interest income, difficulties in obtaining and enforcing a
judgment against a foreign obligor, exchange control regulations (including
currency blockage), and the expropriation or nationalization of assets or
deposits. Foreign branches of U.S. banks and foreign banks are not necessarily
subject to the same or similar regulatory requirements that apply to domestic
banks. For instance, such branches and banks may not be subject to the types of
requirements imposed on domestic banks with respect to mandatory reserves, loan
limitations, examinations, accounting, auditing, recordkeeping and the public
availability of information. Obligations of such branches or banks will be
purchased only when Back Bay Advisors(R) believes the risks are minimal.
The full faith and credit obligations of the U.S. Government in which the
Government Fund may invest include obligations issued by such government
agencies as the Government National Mortgage Association, the Farmer's Home
Administration and the Small Business Administration.
2
<PAGE>
Considerations of liquidity, safety and preservation of capital may
preclude the Funds from investing in money market instruments paying the highest
available yield at a particular time. Each Fund, consistent with its investment
objective, attempts to maximize yields by engaging in portfolio trading and by
buying and selling portfolio investments in anticipation of or in response to
changing economic and money market conditions and trends. Each Fund also invests
to take advantage of what are believed to be temporary disparities in the yields
of the different segments of the high quality money market or among particular
instruments within the same segment of the market. These policies, as well as
the relatively short maturity of obligations to be purchased by the Funds, may
result in frequent changes in the portfolio of each Fund. There are usually no
brokerage commissions as such paid by the Funds in connection with the purchase
of securities of the type in which they invest. See "Portfolio Transactions."
See also "Investment Restrictions" below.
TAX EXEMPT FUND
As described in the Prospectus, the Tax Exempt Fund seeks to achieve its
objective through investment in a diversified portfolio consisting primarily of
high quality short-term fixed, variable and floating rate debt securities the
interest on which is, in the opinion of bond counsel for the issuers of the
securities at the time of their issuance, exempt from federal income taxation
("Municipal Securities"). Municipal Securities are generally obligations issued
by or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by or on behalf of multi-state agencies or authorities.
For a more complete description of various types of Municipal Securities and the
meanings of the Moody's and S&P ratings referred to in the Prospectus, see
Appendices B and C to this Statement. The Fund expects that at least 95% of all
dividends paid by the Fund in any given year will be exempt from federal income
tax. See "Taxes."
As described in the Prospectus, the Fund may elect on a temporary basis
to hold cash or to invest in obligations other than Municipal Securities when
such action is deemed advisable by Back Bay Advisors(R). For example, the Fund
might hold cash or make such temporary investments: (i) due to market
conditions; (ii) in the event of the scarcity of suitable Municipal Securities;
(iii) pending investment of proceeds from subscriptions for Fund shares or from
the sale of portfolio securities; or (iv) in anticipation of redemptions. The
Fund will limit its investments in obligations other than Municipal Securities
to "money market securities" such as (i) short-term obligations issued or
guaranteed by the United States Government or its agencies, authorities or
instrumentalities ("U.S. Government Securities"), (ii) high quality short-term
domestic certificates of deposit, commercial paper and domestic bankers'
acceptances and other high quality money market instruments, or (iii) repurchase
agreements with brokers, dealers and banks relating to Municipal or U.S.
Government Securities. The interest earned on money market securities is not
exempt from federal income tax and may be taxable to shareholders as ordinary
income. The ability of the Fund to invest in such taxable money market
securities is limited by a requirement of the Internal Revenue Code (the "Code")
that at least 50% of the Fund's total assets be invested in Municipal Securities
at the end of each quarter of the Fund's fiscal year (see "Taxes") and by a
fundamental policy of the Fund which requires that during periods of normal
market conditions the Fund will not purchase any security if, as a result, less
than 80% of the Fund's net assets would then be invested in Municipal
Securities.
As described in the Prospectus, the Fund may invest in variable or
floating rate Municipal Securities. These obligations pay a rate of interest
adjusted on a periodic basis and determined by reference to a prescribed
formula. Such obligations will be subject to prepayment without penalty, at the
option of either the Fund or the issuer, and may be backed by letters of credit
or similar arrangements where necessary to ensure that the obligations are of
appropriate investment quality. Back Bay Advisors(R) intends to evaluate the
credit of the issuers of these obligations and the providers of credit support
no less frequently than quarterly.
The price stability and liquidity of the Fund may not be equal to that
of a money market fund which invests exclusively in short-term taxable money
market securities, because the taxable money market is a broader and more liquid
market with a greater number of investors, issuers and market makers than the
short-term Municipal Securities market and because the average portfolio
maturity of a money market fund will generally be shorter than the average
portfolio maturity of a tax exempt money fund such as the Fund. Adverse
economic, business or political developments might affect all or a substantial
portion of the Fund's Municipal Securities in the same manner.
3
<PAGE>
When-Issued Securities
As described in the Prospectus, the Tax Exempt Fund may purchase
Municipal Securities on a when-issued basis, which means that delivery and
payment for the securities normally occurs 15 to 45 days after the date of the
commitment to purchase. The payment obligation and the interest rate that will
be received on the securities are each fixed at the time the buyer enters into
the commitment. Pending delivery of securities purchased on a when-issued basis,
the amount of the purchase price will be held in liquid assets such as cash or
high quality debt obligations. Such obligations and cash will be maintained in a
separate account with the Fund's custodian in an amount equal on a daily basis
to the amount of the Fund's when-issued commitments. By committing itself to
purchase Municipal Securities on a when-issued basis, the Fund subjects itself
to market and credit risks on such commitments as well as such risks otherwise
applicable to its portfolio securities. Therefore, to the extent the Fund
remains substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility that the
market value of the Fund's assets will vary from $1.00 per share. (See "Net
Income, Dividends and Valuation.") The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the securities.
However, the Fund may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy. Such sales may result in
capital gains which are not exempt from federal income taxes. When the time
comes to pay for when-issued securities, the Fund will meet its obligations from
then available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the when-issued securities themselves
(which may have a value greater or less than the Fund's payment obligation).
Purchase of Securities with Rights to Put Securities to Seller
The Fund has authority to purchase securities, including Municipal
Securities, at a price which would result in a yield to maturity lower than that
generally offered by the seller at the time of purchase if the Fund
simultaneously acquires the right to sell the securities back to the seller at
an agreed-upon price at any time during a stated period or on a certain date.
Such a right is generally called a "put." The purpose of engaging in
transactions involving puts is to maintain flexibility and liquidity and to
permit the Fund to meet redemptions while remaining as fully invested as
possible in Municipal Securities. The Fund will acquire puts only from
recognized securities dealers.
For the purposes of asset valuation, the Fund will never ascribe any
value to puts. The Fund will rarely pay specific consideration for them
(although typically the yield on a security that is subject to a put will be
lower than for an otherwise comparable security that is not subject to a put).
In no event will the specific consideration paid for puts held in the Fund's
portfolio at any time exceed 1/2 of 1% of the Fund's net assets. Puts purchased
by the Fund will generally not be marketable and the Fund's ability to exercise
puts will depend on the creditworthiness of the other party to the transaction.
ALL FUNDS
As noted in the Prospectus, each Fund may enter into repurchase
agreements, which are agreements by which the Fund purchases a security and
obtains a simultaneous commitment from the seller (a member bank of the Federal
Reserve or, to the extent permitted by the Investment Company Act of 1940 [the
"1940 Act"], a recognized securities dealer) to repurchase the security at an
agreed upon price and date (usually seven days or less from the date of original
purchase). The resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the purchased security.
Such transactions afford each Fund the opportunity to earn a return on
temporarily available cash at relatively low market risk. While the underlying
security may be a U.S. Government Security (in the case of any Fund), a
Municipal Security (in the case of the Tax Exempt Fund) or another type of high
quality money market instrument, the obligation of the seller is not guaranteed
by the U.S. Government, the issuer of the Municipal Security, or the issuer of
any other high quality money market instrument underlying the agreement, and
there is a risk that the seller may fail to repurchase the underlying security.
In such event, the Fund would attempt to exercise rights with respect to the
underlying security, including possible disposition in the market. However, in
case of such a default, a Fund may be subject to various delays and risks of
loss, including (a) possible declines in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto, (b)
possible reduced levels of income and lack of access to income during this
period, and (c) inability to enforce rights and the expenses involved in
attempted enforcement. Each Fund will enter into repurchase agreements only
where the market
4
<PAGE>
value of the underlying security equals or exceeds the repurchase price, and
each Fund will require the seller to provide additional collateral if this
market value falls below the repurchase price at any time during the term of the
repurchase agreement.
As described in the Prospectus, all of each Fund's investments will, at
the time of investment, have remaining maturities of 397 days or less. The
average maturity of each Fund's portfolio securities based on their dollar value
will not exceed 90 days at the time of each investment. If the disposition of a
portfolio security results in a dollar-weighted average portfolio maturity in
excess of 90 days for any Fund, such Fund will invest its available cash in such
a manner as to reduce its dollar-weighted average portfolio maturity to 90 days
or less as soon as reasonably practicable. For the purposes of the foregoing
maturity restrictions, variable rate instruments which are scheduled to mature
in more than 397 days are treated as having a maturity equal to the longer of
(i) the period remaining until the next readjustment of the interest rate and
(ii) if the Fund is entitled to demand prepayment of the instrument, the notice
period remaining before the Fund is entitled to such prepayment; other variable
rate instruments are treated as having a maturity equal to the shorter of such
periods. Floating rate instruments which are scheduled to mature in more than
397 days are treated as having a maturity equal to the notice period remaining
before the Fund is entitled to demand prepayment of the instrument; other
floating rate instruments, and all such instruments which are U.S. Government
Securities, are treated as having a maturity of one day.
The value of the securities in each Fund can be expected to vary
inversely with changes in prevailing interest rates. Thus, if interest rates
increase after a security is purchased, that security, if sold, might be sold at
a loss. Conversely, if interest rates decline after purchase, the security, if
sold, might be sold at a profit. In either instance, if the security were held
to maturity, no gain or loss would normally be realized as a result of these
fluctuations. Substantial redemptions of the shares of any Fund could require
the sale of portfolio investments of that Fund at a time when a sale might not
be desirable.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by such Fund. Neither
event will require a sale of such security by such Fund. However, such event
will be considered in determining whether the Fund should continue to hold the
security. To the extent that the ratings given by Moody's or S&P (or another
SEC-approved nationally recognized statistical rating organization ["NRSRO"])
may change as a result of changes in such organizations or their rating systems,
each Fund will, in accordance with standards approved by the relevant Board of
Trustees, attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following is a list of each Fund's investment restrictions. Except
as otherwise specifically indicated, they are fundamental policies and,
accordingly, will not be changed without the consent of the holders of a
majority of the outstanding voting securities of the applicable Fund.
MONEY MARKET FUND AND GOVERNMENT FUND
Neither the Money Market Fund nor the Government Fund will:
(1) Purchase any security (other than U.S. Government Securities and
repurchase agreements relating thereto) if, as a result, more than 5% of the
Fund's total assets (taken at current value) would be invested in securities of
a single issuer. This restriction applies to securities subject to repurchase
agreements but not to the repurchase agreements themselves;
(2) Purchase any security if, as a result, more than 25% of the Fund's
total assets (taken at current value) would be invested in any one industry.
This restriction does not apply to U.S. Government Securities and bank
obligations. For purposes of this restriction, telephone, gas and electric
public utilities are each regarded as separate industries and finance companies
whose financing activities are related primarily to the activities of their
parent companies are classified in the industry of their parents;
5
<PAGE>
(3) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities); or make short sales except where, by virtue of ownership of other
securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold, and the
Fund will not deposit or pledge more than 10% of its total assets (taken at
current value) as collateral for such sales;
(4) Acquire more than 10% of the total value of any class of the
outstanding securities of an issuer or acquire more than 10% of the outstanding
voting securities of an issuer. This restriction does not apply to U.S.
Government Securities;
(5) Borrow money, except as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of investment) up to an amount not
in excess of 10% of its total assets (taken at cost) or 5% of such total assets
(taken at current value), whichever is lower;
(6) Pledge, mortgage or hypothecate more than 10% of its total assets
(taken at cost);
(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years old;
(8) Purchase or retain securities of any issuer if, to the knowledge of
the Fund, officers and Trustees of the Fund or officers and directors of any
investment adviser of the Fund who individually own beneficially more than 1/2
of 1% of the securities of that company, together own beneficially more than 5%;
(9) Make loans, except by purchase of debt obligations in which the Fund
may invest consistent with its objective and investment policies. This
restriction does not apply to repurchase agreements;
(10) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts or real estate. This restriction
does not prevent the Fund from purchasing securities of companies investing in
real estate or of companies which are not principally engaged in the business of
buying or selling such leases, rights or contracts;
(11) Act as underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws;
(12) Make investments for the purpose of exercising control or
management;
(13) Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or sale of
portfolio securities with other accounts under the management of Back Bay
Advisors(R) to reduce acquisition costs, to average prices among them, or to
facilitate such transactions, is not considered participating in a trading
account in securities);
(14) Write or purchase puts, calls or combinations thereof; or
(15) Invest in the securities of other investment companies, except in
connection with a merger, consolidation or similar transaction.
Except as otherwise stated, the foregoing percentages and the percentage
limitations set forth in the Prospectus will apply at the time of the purchase
of a security and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of a purchase of
such security.
As a matter of operating policy and subject to change without
shareholder approval, the Funds will not purchase or sell real property,
including limited partnership interests.
6
<PAGE>
TAX EXEMPT FUND
The Tax Exempt Fund will not:
(1) Purchase any security if, as a result, more than 5% of the Fund's
total assets (based on current value) would then be invested in the securities
of a single issuer. This limitation does not apply to securities of the United
States Government, its agencies or instrumentalities or to any security
guaranteed thereby. The limitation applies to securities subject to credit
enhancement, but guarantors, insurers, issuers of puts and letters of credit and
other parties providing credit enhancement are not considered issuers for
purposes of the restriction, although investment in such securities may be
limited by applicable regulatory restrictions. The restriction also applies to
securities subject to repurchase agreements but not to the repurchase agreements
themselves. (The SEC staff currently takes the position that only fully
collateralized repurchase agreements may be excluded from such restriction);
(2) Purchase voting securities or make investments for the purpose of
exercising control or management;
(3) Invest more than 25% of its total assets in industrial development
bonds which are based, directly or indirectly, on the credit of private entities
in any one industry or in securities of private issuers in any one industry. (In
the utilities category, gas, electric, water and telephone companies will be
considered as being in separate industries.);
(4) Participate on a joint or joint and several basis in any trading
account in securities;
(5) Make short sales of securities, maintain a short position or
purchase securities on margin, except that the Fund may obtain short-term
credits as necessary for the clearance of securities transactions;
(6) Borrow money except for temporary or emergency purposes and then
only in an amount not exceeding 10% of its total assets taken at cost, except
that the Fund may enter into reverse repurchase agreements. The Fund will not,
however, borrow or enter into reverse repurchase agreements if the value of the
Fund's assets would be less than 300% of its borrowing and reverse repurchase
agreement obligations. In addition, when borrowings (other than reverse
repurchase agreements) exceed 5% of the Fund's total assets (taken at current
value), the Fund will not purchase additional portfolio securities. Permissible
borrowings and reverse repurchase agreements will be entered into solely for the
purpose of facilitating the orderly sale of portfolio securities to accommodate
redemption requests;
(7) Make loans, except that the Fund may purchase or hold debt
instruments in accordance with its investment objective and policies and may
enter into loan participations and repurchase agreements;
(8) Pledge, mortgage or hypothecate its assets except in connection with
reverse repurchase agreements and except to secure temporary borrowings
permitted by (6) above in aggregate amounts not to exceed 10% of its net assets
taken at cost at the time of the incurrence of such borrowings;
(9) Act as an underwriter of securities of other issuers except that, in
the disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws;
(10) Invest in securities of other investment companies, except by
purchases in the open market involving only customary brokers' commissions, or
in connection with a merger, consolidation, reorganization or similar
transaction. Under the 1940 Act the Fund may not (a) invest more than 10% of its
total assets (taken at current value) in such securities, (b) own securities of
any one investment company having a value in excess of 5% of the Fund's total
assets (taken at current value), or (c) own more than 3% of the outstanding
voting stock of any one investment company;
(11) Purchase or retain securities of an issuer if, to the knowledge of
the Fund, officers, trustees or directors of the Fund or any investment adviser
of the Fund who individually own beneficially more than 1/2 of 1% of the shares
or securities of that issuer together own beneficially more than 5% of such
shares or securities;
7
<PAGE>
(12) Purchase securities of any company which has (with predecessor
businesses and entities) a record of less than three years' continuing operation
or purchase securities whose source of repayment is based, directly or
indirectly, on the credit of such a company, except (i) obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities,
or (ii) Municipal Securities which are rated by at least two nationally
recognized municipal bond rating services, if as a result more than 5% of the
total assets of the Fund (taken at current value) would be invested in such
securities;
(13) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts or real estate (except that the
Fund may buy Municipal Securities or other permitted investments secured by real
estate or interests therein), or
(14) Write or purchase puts, calls, warrants, straddles, spreads or
combinations thereof, except that the Fund may purchase puts as described under
"Investment Objectives and Policies -- Tax Exempt Fund -- Purchase of Securities
with Rights to Put Securities to Seller" and may purchase Municipal Securities
on a "when-issued" basis as described under "Investment Objectives and Policies
- -- Tax Exempt Fund -- When-Issued Securities";
Except as otherwise stated in restriction (6), the foregoing percentages
and the percentage limitations set forth in the Prospectus will apply at the
time of the purchase of a security and shall not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of a
purchase of such security. As regards restriction (6), as a non-fundamental
operating policy, any borrowings of the Tax Exempt Fund will not exceed 5% of
the Fund's total assets.
For the purpose of the foregoing investment restrictions, the
identification of the "issuer" of Municipal Securities which are not general
obligation bonds (see Appendix B) is made by Back Bay Advisors(R) on the basis
of the characteristics of the obligation, the most significant of which is the
source of funds for the payment of principal and interest on such securities. If
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
subdivision, and the obligation is based solely on the assets and revenues of
the subdivision, such subdivision would be regarded as the sole issuer.
Similarly, in the case of industrial development bonds (see Appendix B), if the
bond is backed only by the assets and revenues of the non-governmental user, the
non-governmental user would be regarded as the sole issuer.
As a matter of operating policy and subject to change without
shareholder approval, the Fund will not purchase or sell real property,
including limited partnership interests.
ALL FUNDS
No Fund will purchase any security restricted as to disposition under
federal securities laws if, as a result, more than 10% of such Fund's net assets
would be invested in such securities or in other securities that are illiquid.
The Funds have implemented procedures to determine the liquidity of Section 4(2)
commercial paper purchased by the Funds for purposes of determining whether the
Fund's limit on the purchases of illiquid securities has been met.
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are "illiquid" securities. Each Fund currently
intends to conduct its operations in a manner consistent with this view. In
addition, certain loan participations may be "illiquid" securities for this
purpose.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
Trustees
The trustees of the Trusts and their ages (in parentheses) and principal
occupations during at least the past five years are as follows:
8
<PAGE>
GRAHAM T. ALLISON, JR.--Trustee (56); 79 John F. Kennedy Street, Cambridge, MA
02138; Douglas Dillon Professor and Director for the Center of Science and
International Affairs, John F. Kennedy School of Government; Special
Advisor to the United States Secretary of Defense; formerly, Assistant
Secretary of Defense; formerly Dean, John F. Kennedy School of Government.
DANIEL M. CAIN - Trustee (51); 452 Fifth Avenue, New York, NY 10018; President,
Cain Brothers & Company (investment banking); Trustee, Universal Health
Realty Income Trust (REIT); Chairman, Inter Fish, Inc. (aquaculture venture
in Barbados).
KENNETH J. COWAN -- Trustee (64); One Beach Drive, S.E. #2103, St. Petersburg,
Florida 33701; Retired; formerly, Senior Vice President-Finance and Chief
Financial Officer, Blue Cross of Massachusetts, Inc. and Blue Shield of
Massachusetts, Inc.; formerly, Director, Neworld Bank for Savings and
Neworld Bancorp.
RICHARD DARMAN - Trustee (53); 1001 Pennsylvania Avenue, N.W., Washington, D.C.
20004; Partner and Managing Director, The Carlyle Group (investments);
Trustee, Council for Excellence in Government (not-for-profit); Director,
Frontier Ventures (personal investment); Director, Highway Master
Communications (mobile communications); Managing Partner, Little Falls
Partners (family investment); Director, Sequana Therapeutics
(biotechnology/genomics); Director, Telcom Ventures (telecommunications);
formerly, Director of the U.S. Office of Management and Budget and a member
of President Bush's Cabinet.
SANDRA O. MOOSE -- Trustee (54); 135 E. 57th Street New York, NY 10022; Senior
Vice President and Director, The Boston Consulting Group, Inc. (management
consulting); Director, GTE Corporation and Rohm and Haas Company (specialty
chemicals).
HENRY L. P. SCHMELZER* -- Trustee and President (53); President, Chief Executive
Officer and Director, NEF Corporation; President and Chief Executive
Officer, New England Funds, L.P.; President and Chief Executive Officer,
New England Funds Management, L.P. ("NEFM"); Director, Back Bay
Advisors(R), Inc.; formerly, Director, New England Securities Corporation
("New England Securities").
JOHN A. SHANE -- Trustee (63); 300 Unicorn Drive, Woburn, Massachusetts 01801;
President, Palmer Service Corporation (venture capital organization);
General Partner, The Palmer Organization and Palmer Partners L.P.;
Director, Abt Associates, Inc. (consulting firm); Director, Arch
Communications Group, Inc. (paging service); Director, Dowden Publishing
Company, Inc. (publishers of medical magazines); Director, Eastern Bank
Corporation; Director, Overland Data, Inc. (manufacturer of computer tape
drives); Director, Gensym Corporation (expert system software); Director,
Summa Four, Inc. (manufacturer of telephone switching equipment); Director,
United Asset Management Corporation (holding company for institutional
money management).
PETER S. VOSS* -- Chairman of the Board, Chief Executive Officer and Trustee
(49); President and Chief Executive Officer of New England Investment
Companies, L.P. ("NEIC"); Director, President and Chief Executive Officer
of New England Investment Companies, Inc. ("NEIC Inc."); Chairman of the
Board and Director, NEF Corporation; Chairman of the Board and Director,
Back Bay Advisors(R), Inc.; Director, The New England; formerly, Group
Executive Vice President, Bank of America (Los Angeles); formerly, Group
Head of International Banking, Trading and Securities, Security Pacific
National Bank and Chief Executive Officer, Security Pacific Investment
Group.
PENDLETON P. WHITE -- Trustee (65); 6 Breckenridge Lane, Savannah, Georgia
31411; Retired; formerly, President and Chairman of the Executive
Committee, Studwell Associates (executive search consultants); formerly,
Trustee, The Faulkner Corporation (community hospital corporation).
- ----------
*Trustee deemed an "interested person" of the Trusts, as defined in the
1940 Act.
9
<PAGE>
Officers
In addition to Messrs. Voss and Schmelzer, the officers of the Trusts
and their ages (in parentheses) and principal occupations during the past five
years are as follows:
BRUCE R. SPECA -- Executive Vice President (40); Executive Vice President, NEF
Corporation; Executive Vice President, New England Funds, L.P.; Executive
Vice President, NEFM.
ROBERT P. CONNOLLY -- Secretary and Clerk (42); Senior Vice President and
General Counsel, NEF Corporation; Senior Vice President and General
Counsel, New England Funds, L.P.; Senior Vice President and General
Counsel, NEFM; formerly, Managing Director and General Counsel, Kroll
Associates, Inc. (business consulting company); formerly, Managing Director
and General Counsel, Equitable Capital Management Corporation (investment
management company).
FRANK NESVET -- Treasurer (53); Senior Vice President and Chief Financial
Officer, NEF Corporation; Senior Vice President and Chief Financial
Officer, New England Funds, L.P.; Senior Vice President and Chief Financial
Officer, NEFM; formerly, Executive Vice President, SuperShare Services
Corporation (mutual fund and unit investment trust sponsor).
Previous positions during the past five years with The New England, New
England Securities or New England Funds, L.P. are omitted, if not materially
different. Each of the trustees is also a director or trustee of several other
investment companies for which New England Funds, L.P. acts as principal
underwriter and affiliates of The New England act as investment adviser.
The address of each trustee and officer affiliated with NEF Corporation,
New England Funds, L.P., NEFM or New England Securities is 399 Boylston Street,
Boston, MA 02116.
Compensation
Neither Trust pays compensation to its officers, or to its trustees who
are "interested persons" of the Trusts.
Each trustee who is not an interested person of the Trusts receives in
the aggregate for serving on the boards of the Trusts and New England Funds
Trust I and New England Funds Trust II (all four trusts collectively, the "New
England Funds Trusts"), comprising a total of 22 mutual fund portfolios, a
retainer fee at the annual rate of $40,000 and meeting attendance fees of $2,500
for each meeting of the boards he or she attends and $1,500 for each meeting he
or she attends of a committee of the board of which he or she is a member. Each
committee chairman receives an additional retainer fee at the annual rate of
$2,500. These fees are allocated among the Funds and the nineteen other mutual
fund portfolios in the New England Funds Trusts based on a formula that takes
into account, among other factors, the net assets of each fund.
During the fiscal year ended June 30, 1996, the persons who were
trustees of the Trusts for all or part of such year received the amounts set
forth in the following table for serving as a trustee of the Trusts; and during
the year ended December 31, 1995, such persons received the amounts set forth
below for serving as trustee of the Trusts and for also serving on the governing
boards of the other New England Funds Trusts, New England Zenith Fund ("Zenith")
and New England Variable Annuity Fund I ("NEVA"), comprising as of August 29,
1996 a total of thirty-seven mutual fund portfolios (not all of which were in
existence during all of 1995).
10
<PAGE>
<TABLE>
<CAPTION>
Aggregate Aggregate Pension or Total Compensation
Compensation Compensation Retirement from the New
from New England from New England Benefits Accrued England Funds
Cash Management Tax Exempt Money as Part of Fund Estimated Trusts, Zenith and
Trust in the Market Trust in Expenses in the Annual NEVA in
Year Ended the Year Ended Year Ended Benefits Upon the Year Ended
Name of Trustee June 30, 1996 June 30, 1996 June 30, 1996 Retirement December 31, 1995
<S> <C> <C> <C> <C> <C>
Graham T. Allison, Jr.(a) $5,751 $2,427 $0 $0 $50,000
Daniel M. Cain (b) $2,097 $ 865 $0 $0 $ 0
Kenneth J. Cowan $6,562 $2,764 $0 $0 $69,291
Richard Darman (b) $2,097 $ 865 $0 $0 $ 0
Sandra O. Moose $5,748 $2,427 $0 $0 $56,250
James H. Scott (c) $4,271 $1,807 $0 $0 $59,000
John A. Shane $6,023 $2,564 $0 $0 $63,000
Pendleton P. White $6,023 $2,564 $0 $0 $63,000
</TABLE>
(a) Mr. Allison became a trustee of the Trusts effective April 1, 1995.
(b) Messrs. Cain and Darman were elected trustees of the Trusts on
February 23, 1996.
(c) Effective March 5, 1996, Mr. Scott resigned as a trustee of the Trusts.
The Trusts provide no pension or retirement benefits to trustees, but
have adopted a deferred payment arrangement under which each trustee may elect
not to receive fees from each Fund on a current basis but to receive in a
subsequent period an amount equal to the value that such fees would have if they
had been invested in each Fund on the normal payment date for such fees. As a
result of this method of calculating the deferred payments, each Fund, upon
making the deferred payments, will be in the same financial position as if the
fees had been paid on the normal payment dates.
At August 1, 1996, the officers and trustees of the Trusts as a group
owned less than 1% of the outstanding shares of each Fund.
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY, SUBADVISORY, DISTRIBUTION AND OTHER SERVICES
- --------------------------------------------------------------------------------
Investment Advisory and Subadvisory Agreements
Pursuant to separate advisory agreements, each dated January 2, 1996,
NEFM has agreed, subject to the supervision of the Board of Trustees of the
relevant Trust, to manage the investment and reinvestment of the assets of each
Fund and to provide a range of administrative services to each Fund. For the
services described in the advisory agreements, each Fund has agreed to pay NEFM
a management fee as set forth below:
Money Market Fund and Government Fund
Annual Percentage Rate Average Daily Net Asset Value Levels
- ---------------------- ------------------------------------
.425% the first $500 million
.400% the next $500 million
.350% the next $500 million
.300% the next $500 million
.250% amounts in excess of $2 billion
Tax Exempt Fund -- Under the advisory agreement relating to the Tax
Exempt Fund, the Fund pays NEFM a fee at the annual rate of 0.40% of the average
daily net asset value of the Fund up to $100 million and 0.30% of such asset
value in excess of $100 million.
The advisory agreements each provide that NEFM may delegate its
responsibilities thereunder to other parties. Pursuant to separate subadvisory
agreements, each dated January 2, 1996, NEFM has delegated
11
<PAGE>
responsibility for managing the investment and reinvestment of each Fund's
assets to Back Bay Advisors(R) as subadviser. For providing such subadvisory
services to the Funds, NEFM pays Back Bay Advisors(R) a subadvisory fee as set
forth below:
Annual Average Net
Fund Fee Rate Asset Levels
- ---- -------- ------------
Money Market Fund 0.205% the first $500 million
0.180% the next $500 million
0.160% the next $500 million
0.140% the next $500 million
0.120% amounts in excess of $2 billion
Government Fund 0.2125% the first $500 million
0.2000% the next $500 million
0.1750% the next $500 million
0.1500% the next $500 million
0.1250% amounts in excess of $2 billion
Tax Exempt Fund 0.200% the first $100 million
0.150% amounts in excess of $100 million
The Funds pay no direct fees to Back Bay Advisors.
Prior to January 2, 1996, Back Bay Advisors served as adviser to the
Funds pursuant to separate advisory agreements, each of which provided for an
advisory fee payable by the Fund to Back Bay Advisors at the same rate as the
management fee currently payable by the Fund to NEFM.
For the fiscal years ended June 30, 1994 and 1995 and the period July 1,
1995 to December 31, 1995, the advisory compensation paid to Back Bay Advisors
amounted to $3,022,248, $2,796,164 and $1,379,803, respectively, for the Money
Market Fund and $265,221, $255,727 and $126,103, respectively, for the
Government Fund.
For the six months ended June 30, 1996, the advisory compensation paid
to NEFM amounted to $726,741 and $59,722 for the Money Market Fund and the
Government Fund, respectively.
For the six months ended June 30, 1996, the subadvisory fee NEFM paid to
Back Bay Advisors amounted to $678,119 and $60,520 for the Money Market Fund and
the Government Fund, respectively.
Until further notice to the Tax Exempt Fund, NEFM and Back Bay Advisors
have agreed to reduce their fee and/or pay the charges, expenses and fees of the
Fund (not including fees payable to the trustees who are not "interested
persons" of the Trust) to the extent necessary to limit the Fund's expenses to
an annual rate of 0.5625 of 1% of average net assets. Prior to January 2, 1996,
similar voluntary limitations were in effect with regard to Back Bay Advisors(R)
and the Fund. For the fiscal years ended June 30, 1994 and 1995 and the period
July 1, 1995 to December 31, 1995, gross advisory fees payable to Back Bay
Advisors(R) of $231,093, $281,837 and $134,552, respectively, were reduced by
$192,773, $199,639 and $108,843, respectively, as a result of this expense
limitation. For the six months ended June 30, 1996, the gross management fee
payable to NEFM of $133,354 was reduced by $54,887, resulting in a net
management fee of $78,467, and the gross subadvisory fee payable by NEFM to Back
Bay Advisors(R) of $66,677 was reduced by $54,887, resulting in a net
subadvisory fee of $11,790 as a result of this expense limitation.
In General. Back Bay Advisors(R) serves as subadviser to the Funds.
Formed in 1986, Back Bay Advisors(R) provides investment management services to
institutional clients, including other registered investment companies and
accounts of The New England and its affiliates. Back Bay Advisors'(R) general
partner, Back Bay Advisors(R), Inc., is a wholly-owned subsidiary of NEIC
Holdings, Inc. ("NEIC Holdings"), which is a wholly-owned subsidiary of NEIC.
NEIC owns the entire limited partnership interest in Back Bay Advisors(R).
NEFM, formed in 1995, is a limited partnership whose sole general
partner, NEF Corporation, is a wholly-owned subsidiary of NEIC Holdings. NEF
Corporation is also the sole general partner of New England
12
<PAGE>
Funds, L.P., the distributor of the Funds (the "Distributor"). NEIC owns the
entire limited partnership interest in each of NEFM and New England Funds, L.P.
NEIC's sole general partner, NEIC Inc., is a wholly-owned subsidiary of
The New England, which owns a majority limited partnership interest in NEIC.
NEIC and its eight subsidiary or affiliated asset management firms,
collectively, have more than $87 billion of assets under management or
administration.
The New England and Metropolitan Life Insurance Company ("MetLife") have
entered into an agreement to merge, with MetLife to be the survivor of the
merger. The merger is conditioned upon, among other things, receipt of certain
regulatory approvals. After such merger, NEIC Inc. will be a wholly-owned
subsidiary of MetLife, and MetLife will own, directly or indirectly, a majority
limited partnership in NEIC. The merger is expected to occur on or after August
30, 1996.
Each Fund pays all of its expenses not assumed by NEFM or Back Bay
Advisors(R), including, but not limited to, the charges and expenses of the
Fund's custodian and transfer agent, independent auditors and legal counsel, all
brokerage commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses for registration
or qualification of its shares under the federal or state securities laws, all
expenses of shareholders' and trustees' meetings and of preparing and printing
reports to shareholders and the compensation of trustees who are not directors,
officers or employees of NEFM, Back Bay Advisors(R) or their affiliates (other
than registered investment companies). Since January 2, 1996, the Funds have
borne the cost of certain accounting and legal services that were formerly borne
by Back Bay Advisors(R).
Under each Fund's advisory agreement, if the total ordinary business
expenses of a particular Fund (and, in the case of New England Cash Management
Trust, the total ordinary business expenses of the Trust as a whole) for any
fiscal year exceed the lowest applicable limitation (based on a percentage of
average net assets or income) prescribed by any state in which shares of that
Fund (or, with respect to New England Cash Management Trust, of any series of
the Trust) are qualified for sale, NEFM shall pay such excess. At the date of
this Statement, the most restrictive state annual expense limitation is 2 1/2%
of the average annual net assets up to $30,000,000, 2% of the next $70,000,000
of such assets and 1 1/2% of such assets in excess of $100,000,000. NEFM will
not be required to reduce its fee or pay such expenses to an extent or under
circumstances which might result in a Fund's inability to qualify as a regulated
investment company under the Code. The term "expenses" is defined in the
statutes or regulations of such jurisdictions and, generally speaking, excludes
brokerage commissions, taxes, interest, distribution-related expenses and
extraordinary expenses.
Each Fund's advisory agreement and subadvisory agreement provides that it will
continue in effect only if it is approved at least annually (i) by the trustees
of the relevant Trust or by vote of a majority of the outstanding voting
securities of the applicable Fund and (ii) by vote of a majority of the trustees
who are not interested persons of the Fund or NEFM. Any amendment to an advisory
or subadvisory agreement must be approved by vote of a majority of the
outstanding voting securities of the applicable Fund and by vote of a majority
of the trustees who are not such interested persons. Each agreement may be
terminated without penalty by the trustees or by the shareholders of the
applicable Fund upon 60 days' written notice or by NEFM upon 90 days' written
notice, and each terminates automatically in the event of its assignment. Each
subadvisory agreement also may be terminated by the subadviser upon 90 days'
notice and automatically terminates upon termination of the related advisory
agreement. In addition, each advisory agreement will automatically terminate if
the Trust or the Fund shall at any time be required by the Distributor to
eliminate all reference to the words "New England" or the letters "TNE" in the
name of the relevant Trust or the relevant Fund, unless the continuance of the
agreement after such change of name is approved by a majority of the outstanding
voting securities of the relevant Fund and by a majority of the trustees who are
not interested persons of the relevant Trust or the Fund's adviser or
subadviser.
Each Fund's advisory agreement and subadvisory agreement provides that NEFM or
Back Bay Advisors(R) shall not be subject to any liability in connection with
the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
Prior to January 2, 1996, Back Bay Advisors(R) had contracted with New
England Securities for New England Securities to provide certain administrative
services to the Funds, at Back Bay Advisors'(R) expense.
13
<PAGE>
Certain officers and employees of Back Bay Advisors(R) have responsibility for
portfolio management of other advisory accounts and clients of Back Bay
Advisors(R) (including other registered investment companies and accounts of
affiliates of Back Bay Advisors(R)) that may invest in securities in which the
Funds also invest. If Back Bay Advisors(R) determines that an investment
purchase or sale opportunity is appropriate and desirable for more than one
advisory account, purchase and sale orders may be executed separately or may be
combined and, to the extent practicable, allocated by Back Bay Advisors(R) to
the participating accounts.
It is believed that the ability of the Funds to participate in larger
volume transactions in this manner will in some cases produce better executions
for the Funds. However, in some cases, this procedure could have a detrimental
effect on the price and amount of a security available to a Fund or the price at
which a security may be sold. The trustees are of the view that the benefits of
retaining Back Bay Advisors(R) as subadviser to each of the Funds outweigh the
disadvantages, if any, that may result from participating in such transactions.
Where advisory accounts have competing interests in a limited investment
opportunity, Back Bay Advisors(R) will allocate an investment purchase
opportunity based on the relative time the competing accounts have had funds
available for investment, and the relative amounts of available funds, and will
allocate an investment sale opportunity based on relative cash requirements and
the relative time the competing accounts have had investments available for
sale. It is Back Bay Advisors'(R) policy to allocate, to the extent practicable,
investment opportunities to each client over a period of time on a fair and
equitable basis relative to its other clients.
Distribution Agreement
Under separate agreements with each Fund, the Distributor, 399 Boylston
Street, Boston, Massachusetts 02116, acts as the distributor of the Funds'
shares, which are sold at net asset value without any sales charge. The
Distributor receives no compensation from the Funds or purchasers of Fund shares
for acting as distributor. The agreements do not obligate the Distributor to
sell a specific number of shares. Under the agreements, the Distributor pays
promotion and distribution expenses relating to the sale of Fund shares,
including the cost of preparing, printing and distributing prospectuses used in
offering shares of the Funds for sale.
The Distributor pays investment dealers a service fee in order to
compensate them for services they provide and expenses they incur in connection
with the establishment or maintenance of shareholder accounts in the Funds. The
service fee is paid quarterly at an annual rate equal to 0.10% of average Fund
net assets, including reinvested dividends, in accounts serviced by the
investment dealer during the year. In order to receive a fee for a particular
quarter, the investment dealer's clients' average daily net asset balance in a
Fund must equal or exceed $1 million. The Distributor pays the service fee; the
fee is not a direct or indirect expense of the Funds or their shareholders and
does not affect the Funds' yields.
The Distributor controls the words "New England" in the names of the
Trusts and the Funds and if it should cease to be the distributor, New England
Cash Management Trust, New England Tax Exempt Money Market Trust or the affected
Fund may be required to change their names and delete these words or letters.
The Distributor also acts as general distributor for New England Funds Trust I
and New England Trust II.
The Distributor may publish information about the Funds in the
publications described in Appendix D and may include information in advertising
and sales literature as described in Appendix E.
Independent Accountants
The Funds' independent accountants are Price Waterhouse LLP, 160 Federal
Street, Boston, Massachusetts 02110. Price Waterhouse LLP conducts an annual
audit of the Funds' financial statements, assists in the preparation of the
Funds' federal and state income tax returns and consults with the Funds as to
matters of accounting and federal and state income taxation. The information
concerning Financial Highlights in the Prospectus, and the financial statements
incorporated by reference in this Statement, have been so included in reliance
on the reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
14
<PAGE>
Custodian
State Street Bank and Trust Company ("State Street Bank"), 225 Franklin
Street, Boston, Massachusetts 02110, is the custodian for each Fund. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to each Fund and, in such capacity, is the registered owner of
securities in book-entry form belonging to each Fund. Upon instruction, State
Street Bank receives and delivers cash and securities in connection with
transactions of each Fund and collects all dividends and other distributions
made with respect to each Fund's portfolio securities. State Street Bank also
maintains certain accounts and records of the Funds and calculates the total net
asset value, total net income and net asset value per share of the Funds. State
Street Bank does not determine the investment policies of the Funds or decide
which securities a Fund will buy or sell.
Other Services
Pursuant to a contract between the Funds and the Distributor, the
Distributor acts as shareholder servicing and transfer agent for the Funds and
is responsible for services in connection with the establishment, maintenance
and recording of shareholder accounts, including all related tax and other
reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Funds' shares. The Funds
pay a per account fee to the Distributor for these services in the amount of
$21.50, annually, which may be increased with the approval of the Trusts'
Boards. The aggregate amount of fees paid by the Funds to the Distributor for
these services during the three most recent fiscal years of the Funds were as
follows:
Trust Fiscal Year Ended June 30,
- --------------------------------------------------------------------------------
1994 1995 1996
New England Cash Management Trust
Money Market Series $1,646,555 $2,011,935 $1,986,393
U.S. Government Series $ 74,257 $ 99,544 $ 98,617
New England Tax Exempt Money Market Trust $ 58,609 $ 6,391 $ 76,498
The Distributor has subcontracted with State Street Bank for it to
provide, through its subsidiary, Boston Financial Data Services, Inc. ("BFDS"),
transaction processing, mail and other services.
In addition, during the fiscal year ended June 30, 1996, the Distributor
received legal and accounting services fees paid by the Money Market Fund and
Tax Exempt Fund in the amount of $21,912 and $22,044, respectively. The
Distributor has voluntarily agreed to waive these legal and accounting services
fees for the Government Fund until further notice. As a result of this voluntary
waiver, the Distributor waived its entire fee for the Government Fund of $22,044
for the fiscal year ended June 30, 1996.
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PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
In General
In placing orders for the purchase and sale of portfolio securities for
each Fund, Back Bay Advisors(R) will always seek the best price and execution.
It is expected that the Funds' portfolio transactions will generally be with
issuers or dealers in money market instruments acting as principal. Accordingly,
the Funds do not anticipate that they will pay significant brokerage
commissions. During the year ended June 30, 1996, the Funds did not incur any
brokerage fees in connection with portfolio transactions.
Some of the portfolio transactions for each Fund are placed with dealers
who provide Back Bay Advisors(R) with supplementary investment and statistical
information or furnish market quotations to the Funds or other investment
companies advised by Back Bay Advisors(R). The business would not be so placed
if the Funds would not thereby obtain the best price and execution. Although it
is not possible to assign an exact dollar value to these research services, they
may, to the extent used, tend to reduce the expenses of Back Bay Advisors(R).
The research services may also be used by Back Bay Advisors(R) in connection
with its other advisory accounts and in some cases may not be used with respect
to the Funds.
15
<PAGE>
The Board of Trustees of each Trust has requested that Back Bay Advisors(R) seek
to reduce underwriting commissions or similar fees on Fund portfolio
transactions through certain methods currently available. It is not expected
that these methods will result in material reductions. The Boards have not
requested that Back Bay Advisors(R) or its affiliates attempt to join
underwriting syndicates to reduce underwriting commissions or fees.
Tax Exempt Fund
It is expected that the Tax Exempt Fund's portfolio securities will normally be
purchased directly from an underwriter or in the over-the-counter market from
the principal dealers in such securities, unless it appears that a better price
or execution may be obtained elsewhere. Purchases from underwriters will include
a commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include the spread between the bid and asked price.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time, the Funds may use performance data in advertisements
and promotional material. These results may include comparisons to the average
daily yields of money market funds reporting to IBC/Donoghue's Money Fund Report
("Donoghue's"), including comparisons of such average yields for funds
considered by Donoghue's to be in the same category as each of the Funds. See
"Net Income, Dividends and Valuation" below for an explanation of how the Funds
calculate yield and "effective" (or "compound") yield.
New England Funds, L.P. may make reference in its advertising and sales
literature to awards, citations and honor bestowed on it by industry
organizations and other observers and raters, including, but not limited to
Dalbar's Quality Tested Service Seal and Key Honors Award. Such reference may
explain the criteria for the award, indicate the nature and significance of the
honor and provide statistical and other information about the award and New
England Funds, L.P.'s selection, including, but not limited to, the scores and
categories in which New England Funds, L.P. excelled, the names of funds and
fund companies that have previously won the award and comparative information
and data about those against whom New England Funds, L.P.
competed for the award, honor or citation.
New England Funds, L.P. may publish, allude to or incorporate in its
advertising and sales literature testimonials from shareholders, clients,
brokers who sell or own shares, broker-dealers, industry organizations and
officials and other members of the public, including, but not limited to, fund
performance, features and attributes, or service and assistance provided by
departments within the organization, employees or associates of New England
Funds, L.P.
From inception of each Fund (Class A shares) or date of first offering
(Class B shares) through each of the dates set forth below, an investment of
$10,000 in each Fund grew, assuming the reinvestment of all dividends, to the
respective amounts set forth below. The periods covered included periods of
widely fluctuating interest rates and should not necessarily be considered
representative of performance of an investment in a Fund today.
16
<PAGE>
New England Cash Management Trust -- Money Market Series
($10,000 investment on 7/10/78)
(Class A Shares)
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
- ------------ ------------------- -------------------- -----------
12/31/78 $10,000 $ 385 $10,385
12/31/79 10,385 1,504 11,504
12/31/80 11,504 2,971 12,971
12/31/81 12,971 5,194 15,194
12/31/82 15,194 7,155 17,155
12/31/83 17,155 8,680 18,680
12/31/84 18,680 10,628 20,628
12/31/85 20,628 12,259 22,259
12/31/86 22,259 13,675 23,675
12/31/87 23,675 15,110 25,110
12/31/88 25,110 16,915 26,915
12/31/89 26,915 19,320 29,320
12/31/90 29,320 21,638 31,638
12/31/91 31,638 23,499 33,499
12/31/92 33,499 24,655 34,655
12/31/93 34,655 25,536 35,536
06/30/94 35,536 26,036 36,036
06/30/95 36,036 27,761 37,761
06/30/96 37,761 29,596 39,596
New England Cash Management Trust - U.S. Government Series
($10,000 investment on 9/20/93)
(Class B Shares)
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
- ------------ ------------------- -------------------- -----------
12/31/93 $10,000 $ 74 $10,074
06/30/94 10,074 216 10,216
06/30/95 10,216 705 10,705
06/30/96 10,705 1,125 11,225
17
<PAGE>
New England Cash Management Trust - U.S. Government Series
($10,000 investment on 6/2/82)
(Class A Shares)
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
- ------------ ------------------- -------------------- -----------
12/31/82 $10,000 $ 543 $10,543
12/31/83 10,543 1,435 11,435
12/31/84 11,435 2,559 12,559
12/31/85 12,559 3,550 13,550
12/31/86 13,550 4,402 14,402
12/31/87 14,402 5,213 15,213
12/31/88 15,213 6,232 16,232
12/31/89 16,232 7,610 17,610
12/31/90 17,610 8,925 18,925
12/31/91 18,925 10,009 20,009
12/31/92 20,009 10,694 20,694
12/31/93 20,694 11,213 21,213
06/30/94 21,213 11,500 21,500
06/30/95 21,500 12,496 22,496
06/30/96 22,496 13,570 23,570
New England Cash Management Trust - U.S. Government Series
($10,000 investment on 9/20/93)
(Class B Shares)
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
- ------------ ------------------- -------------------- -----------
12/31/93 $10,000 $ 67 $10,067
06/30/94 10,067 203 10,203
06/30/95 10,203 672 10,672
06/30/96 10,672 1,182 11,182
New England Tax Exempt Money Market Trust
($10,000 investment on 4/21/83)
(Class A Shares)
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
- ------------ ------------------- -------------------- -----------
12/31/83 $10,000 $ 371 $10,371
12/31/84 10,371 984 10,984
12/31/85 10,984 1,543 11,543
12/31/86 11,543 2,043 12,043
12/31/87 12,043 2,531 12,531
12/31/88 12,531 3,134 13,134
12/31/89 13,134 3,899 13,899
12/31/90 13,899 4,660 14,660
12/31/91 14,660 5,268 15,268
12/31/92 15,268 5,667 15,667
12/31/93 15,667 5,979 15,979
06/30/94 15,979 6,153 16,153
06/30/95 16,153 6,667 16,667
06/30/96 16,667 7,209 17,209
18
<PAGE>
New England Tax Exempt Money Market Trust
($10,000 investment on 9/13/93)
(Class B shares)
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
- ------------ ------------------- -------------------- -----------
12/31/93 $10,000 $ 60 $10,060
06/30/94 10,060 170 10,170
06/30/95 10,170 493 10,493
06/30/96 10,493 834 10,834
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS AND OWNERSHIP OF SHARES
- --------------------------------------------------------------------------------
New England Cash Management Trust was organized as a Massachusetts
business trust under the laws of Massachusetts by an Agreement and Declaration
of Trust (a "Declaration of Trust") dated June 5, 1980. The Trust commenced
operations on October 3, 1980 by acquiring all the assets and liabilities of NEL
Cash Management Account, Inc., which commenced operations on July 10, 1978. The
Trust was established with the same investment objective, policies, restrictions
and investment adviser as the NEL Cash Management Account, Inc. then had. On
June 2, 1982 the U.S. Government Series commenced operations as a separate
portfolio of New England Cash Management Trust, the Trust's then existing
portfolio having been redesignated the "Money Market Series." The Money Market
Fund and the Government Fund are the only series of New England Cash Management
Trust currently in existence. Each such Fund has two classes of shares available
for purchase.
New England Tax Exempt Money Market Trust was organized as a
Massachusetts business trust under the laws of Massachusetts by a Declaration of
Trust dated January 18, 1983, and commenced operations on April 21, 1983. Only
one series of shares of New England Tax Exempt Money Market Trust is currently
in existence; it has two classes of shares available for purchase.
Class A and B shares of each Fund are identical, except that the classes
have different exchange privileges, as set forth in detail in the Prospectus.
The Declarations of Trust currently permit the relevant trustees to
issue an unlimited number of full and fractional shares of each Fund. Each Fund
is represented by a particular series of shares. The Declarations of Trust
further permit each Trust's trustees to divide the shares of each series into
any number of separate classes, each having such rights and preferences relative
to other classes of the same series as the trustees may determine. The shares of
each Fund have no pre-emptive rights. Upon termination of any Fund, whether
pursuant to liquidation of the Fund or otherwise, shareholders of each series of
shares are entitled to share pro rata in the net assets belonging to that series
then available for distribution to such shareholders.
The assets received by each series of New England Cash Management Trust
from the issue or sale of shares of each series thereof and all income,
earnings, profits, losses and proceeds therefrom, subject only to the rights of
creditors, are allocated to, and constitute the underlying assets of, that
series. The underlying assets of each series are segregated and are charged with
the expenses in respect of that series and with a share of the general expenses
of New England Cash Management Trust. Any general expenses of the Trust not
readily identifiable as belonging specifically to a particular series are
allocated by or under the direction of the trustees in such manner as the
trustees determine to be fair and equitable. While the expenses of the Trust are
allocated to the separate books of account of each series of the Trust, certain
expenses may be legally chargeable against the assets of both series.
The Declarations of Trust also permit the trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The Declarations of Trust also permit the trustees, without shareholder
approval, to subdivide any series or class of shares into various sub-series or
sub-classes participating in the same portfolio with such
19
<PAGE>
dividend preferences and other rights as the trustees may designate. While the
trustees have no current intention to exercise this power, it is intended to
allow them to provide for an equitable allocation of the impact of any future
regulatory requirements which might affect various classes of shareholders
differently. The trustees may also, without shareholder approval, establish one
or more additional series or classes or merge two or more series or classes. At
such time as the trustees of New England Tax Exempt Money Market Trust create
another series, the Trust would become a "series" company as that term is used
in Section 18(f) of the 1940 Act. Currently, New England Cash Management Trust
is such a "series" company.
The Declarations of Trust provide for the perpetual existence of the Trusts.
Either Trust or any Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Fund affected or by the
relevant trustees upon written notice to the shareholders. Similarly, any class
within a Fund may be terminated by vote of at least two-thirds of the
outstanding shares of such class or by the trustees upon written notice.
VOTING RIGHTS
General
As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for fractional shares held) and
may vote (to the extent described below) in the election of trustees and the
termination of the Funds and on other matters submitted to the vote of
shareholders.
The Declaration of Trust for each Trust provides that, on any matter
submitted to a vote of all Trust shareholders, all of a Trust's shares entitled
to vote shall be voted together irrespective of series or class unless the
rights of a particular series or class would be adversely affected by the vote,
in which case a separate vote of that series or class shall also be required to
decide the question. Also, a separate vote shall be held whenever required by
the 1940 Act or any rule thereunder. Rule 18f-2 under the 1940 Act provides in
effect that a series or class shall be deemed to be affected by a matter unless
it is clear that the interests of each series or class in the matter are
substantially identical or that the matter does not affect any interest of such
series or class. On matters affecting an individual series or class, only
shareholders of that series or class are entitled to vote.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that in accordance with the 1940 Act (i) each Trust
will hold a meeting of its shareholders for the election of trustees at such
time as less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, trustees of the Tax Exempt Fund may be removed from office by a
written consent signed by the holders of two-thirds of the outstanding shares
and filed with the Fund's custodian or by a vote of the holders of two-thirds of
the outstanding shares at a meeting duly called for the purpose, which meeting
shall be held upon the written request of the holders of not less than 10% of
the outstanding shares.
Upon written request by the holders of shares having a net asset value
of $25,000 or constituting 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Tax Exempt Fund has undertaken to provide a list of shareholders or
to disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as set forth above, the trustees shall continue to hold office
and may appoint successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declarations of Trust without the
affirmative vote of a majority of the outstanding shares of the applicable Trust
except (i) to change the name of the Trust or a series thereof or to cure
technical problems in the Declaration of Trust, (ii) to establish and designate
new series or classes of shares, and (iii) to establish, designate or modify new
and existing series or classes of shares or modify other provisions relating to
Trust shares in response to applicable laws or regulations, or, in the case of
the Tax Exempt Fund, in order to convert the Fund into a "series" company. If
one or more new series of either Trust is established and designated by the
trustees, the shareholders having beneficial interests in the Funds described in
the Prospectus and this Statement shall not be entitled to vote on matters
exclusively affecting such new series, such matters
20
<PAGE>
including, without limitation, the adoption of or any change in the investment
objectives, policies or restrictions of the new series and the approval of the
investment advisory contracts of the new series. Similarly, the shareholders of
the new series shall not be entitled to vote on any such matters as they affect
the Funds.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, a Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declarations of Trust disclaim shareholder liability for acts or
obligations of a Fund and require that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by a Trust or
its trustees. The Declarations of Trust provide for indemnification out of the
assets of a Fund for all loss and expense of any shareholder held personally
liable for the obligations of that Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered
remote since it is limited to circumstances in which the disclaimer is
inoperative and the Fund itself would be unable to meet its obligations.
The Declarations of Trust further provide that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declarations of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office. The By-Laws of each Trust provide for indemnification by the
Trust of the trustees and the officers of such Trust except with respect to any
matter as to which any such person did not act in good faith in the reasonable
belief that his or her action was in or not opposed to the best interests of the
Trust. Such person may not be indemnified against any liability to the Trust or
its shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
OWNERSHIP OF SHARES
At August 1, 1996, there were 675,363,983 shares of the Money Market
Fund, 53,720,046 shares of the Government Fund and 65,243,042 shares of the Tax
Exempt Fund issued and outstanding. One account registered to National Financial
Services Corp. (For the Exclusive Benefit of its Customers), 200 Liberty St., 1
World Financial Center; New York, NY 10281-1003 owned 67,149,508 shares of the
Money Market's Class A shares, about 10.1% of the total Class A shares then
outstanding. Two accounts registered to National Financial Services Corp. (For
the Exclusive Benefit of its Customers), 200 Liberty St., 1 World Financial
Center; New York, NY 10281-1003 and one account registered to Kevin M. Mahony
and Mary S. Mahony, 228 Common St., Belmont, MA 02178-2916 owned 6,621,101 and
3,139,611 Class A shares of the Government Fund, respectively, about 12.6% and
6.0%, respectively, of the Class A shares then outstanding. Seven accounts
registered to Brady Diesel Inc. 401K Savings Plan, P.O. Box 4417, Houma, LA
70361-4417, Smith Barney Inc, 388 Greenwich St., New York, NY 10013-2375, Thomas
Smith Co. Inc. 401K Plan, 288 Grove St. Worcester, MA 01605-3908, Jean Magill
(Guardian, Amy L. Magill), P.O. Box 1673, Snellville, GA 30278-1673, Jean Magill
(Guardian, James C. Magill, Jr.), P.O. Box 1673, Snellville, GA 30278-1673,
Mable Snell, 2145 North Rd., Snellville GA 30278-2630 and Winnie S. Escoe, 2610
Glendale Ct., Conyers, GA 30208-1460 owned 114,612, 105,122, 87,965, 87,699,
87,669, 83,581 and 50,715 Class B shares of the fund, respectively, about 11.8%,
10.8%, 9.0%, 9.0%, 9.0%, 8.6% and 5.2% of the total Class B shares then
outstanding. For the Tax Exempt Fund's Class A shares, there were two accounts
registered to National Financial Services Corp.(For the Exclusive Benefit of its
Customers) and Mark Henkin, 265 East 66th St. #19-C, New York, NY 10021-6406
which owned 12,031,753 and 4,620,279 shares, respectively, about 18.5% and 7.1%
of the fund's Class A shares then outstanding. Five accounts registered to Harry
Graff (Trustee of the Harry Graff Trust DTD 7/27/90), 17 Raven Ln., Gloucester,
MA 01930-4177, Ruth L. Graff (Trustee of the Ruth L. Graff Trust DTD 7/27/90),
17 Raven Ln., Gloucester, MA 01930-4177, Henry S. Belber, 229 Lancaster Ave.,
Devon, PA 19333-1589, National Financial Services Corp.( For the Benefit of
Richard J. Broggi and Ellen Ann Broggi), P.O. Box 366, Bridgewater Hill,
Bridgewater Corners, VT 05035-0366 and Dorothy Kosiba Temple and Raymond Kosiba,
1548 William Peters Rd., Bogalusa, LA 70427-6053 owned 65,166, 65,001, 47,322,
37,318 and 25,000 Class B shares of the fund, respectively, about 18.2%, 18.1%,
13.2%, 10.4% and 7.0%, respectively, of the Class B shares of the fund.
21
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The procedures for purchasing shares of the Funds are summarized in the
Prospectus under the caption "6 Ways to Buy Fund Shares." Shares may also be
purchased either in writing, by phone or by electronic funds transfer, or by
exchange as described in the Prospectus, through firms that have selling
agreements with the Distributor.
Shares of each Fund are offered for sale continuously at their
respective net asset values, which the Funds seek to maintain at a constant $1
per share. See "Net Income, Dividends and Valuation." There is no sales charge.
The minimum initial investment is $1,000, with a $50 minimum for
subsequent investments. There are reduced initial investment minimums for
certain investments described below under "Shareholder Services."
Banks may charge a fee for transmitting funds by wire or through the
Automated Clearing House ("ACH") system. With respect to shares purchased by
federal funds wire, shareholders should bear in mind that wire transfers may
take two or more hours to complete.
A shareholder may purchase additional shares electronically through the
ACH system so long as the shareholder's bank or credit union is a member of the
ACH system and the shareholder has a completed, approved ACH application on
file.
In all instances where checks are sent for the purchase of shares, they must be
drawn on U.S. banks and payable in U.S. dollars.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Open Accounts
Except for investors who own shares through certain broker "street name"
or retirement plan arrangements, each shareholder's investment is automatically
credited to a separate open account maintained for the shareholder by the
Distributor, and the shareholder will receive a monthly statement disclosing the
current balance of shares owned in the shareholder's account and the details of
all transactions in that account during the month; however, if there were no
transactions other than dividend declarations during a month, the shareholder
will receive a quarterly statement instead of a monthly statement. After the
close of each calendar year, the Distributor will send the shareholder a
statement for each of his or her accounts providing federal tax information on
dividends and distributions paid during the year including information as to
that percentage, if any, of Tax Exempt Fund dividends that are not exempt from
federal income taxation. Shareholders should retain this as a permanent record.
The Distributor reserves the right to charge a fee for providing duplicate
information.
Automatic Investment Plans
As described in the Prospectus, shareholders may, after opening an
account, authorize automatic monthly transfers of a least $50 from the
shareholder's bank account to purchase shares of a Fund. These transfers are
effected through checks drawn under Investment Builder, a program designed to
facilitate such periodic payments.
Under Investment Builder, funds normally are credited to the Fund not
later than the fourth business day after the check is drawn. An Investment
Builder application must be completed to open an automatic investment plan. An
application is included in the Prospectus or may be obtained from your
investment dealer or from New England Funds by calling 1-800-225-5478. The plan
may be discontinued by written notice to New
22
<PAGE>
England Funds, L.P., which must be received at least five business days prior to
any payment date. The plan may be discontinued by State Street Bank at any time
without prior notice if any check is not paid upon presentation; or by written
notice to shareholders at least thirty days prior to any payment date. State
Street Bank is under no obligation to notify shareholders as to the nonpayment
of any check.
Retirement Plans Offering Tax Benefits - Money Market Fund and Government Fund
The federal tax laws provide for a variety of retirement plans offering
tax benefits. These plans may be funded with shares of the Money Market Fund or
the Government Fund, or with certain other investments. The plans include H.R.
10 (Keogh) plans for self-employed individuals and partnerships, individual
retirement accounts (IRAs), corporate pension and profit sharing plans,
including 401(k) plans, and retirement plans for public school systems and
certain tax exempt organizations (403(b) plans).
Initial investments in either Fund must be at least $250 for each
participant in corporate pension and profit sharing plans, IRAs and Keogh plans
and $50 for subsequent investments. There is a special initial and subsequent
investment minimum of $25 for payroll deduction investment programs for 401(k),
SARSEP, 403(b) and certain other retirement plans. Income dividends and capital
gain distributions will be automatically reinvested (unless the investor is age
59 1/2 or disabled). Plan documents can be obtained from the Distributor.
An investor should consult a competent tax or other adviser as to the
suitability of either Fund's shares as a vehicle for funding a plan, in whole or
in part, under the Employee Retirement Income Security Act of 1974 and as to the
eligibility requirements for a specific plan and its state as well as federal
tax aspects.
Systematic Withdrawal Plans
A shareholder owning shares having a value of $5,000 or more in any Fund
may establish a Systematic Withdrawal Plan providing for periodic payments of a
fixed or variable amount from the shareholder's account. There is no minimum
account size where payments are made directly to The New England or the
Distributor. There is no charge for this service, and the shareholder may
terminate his or her plan at any time. Shareholders can establish the plan on
the account application or obtain a Service Options Form for establishing such a
plan by calling New England Funds at 1-800-225-5478.
Under a Systematic Withdrawal Plan, shareholders may elect to receive or
direct payments monthly, quarterly, semiannually or annually for a fixed amount
of not less than $100 or a variable amount based on (1) a specified percentage
of an account's market value or (2) a specified number of years for liquidating
an account (e.g., a 20-year program of 240 monthly payments would be liquidated
at a monthly rate of 1/240, 1/239, 1/238, etc.). Under a variable payment
option, the initial payment from an account for each Fund must be $100 or more.
In addition, shareholders who have purchased insurance or annuity products of
The New England may elect to have amounts withdrawn from a Fund monthly to pay
the necessary premiums. Withdrawals may be paid to a person other than the
shareholder if a signature guarantee is provided. On Systematic Withdrawal Plans
for accounts subject to a contingent deferred sales charge ("CDSC"), the
redemption of shares will not be subject to a CDSC if the amount or percentage
you specify does not exceed, on an annualized basis, 10% of the value of your
account with the Fund (based on the day you established your Plan). In the case
of Class A and B shares not subject to a CDSC, there is no limit on the
percentage of an account that may be redeemed. Please consult your investment
dealer or New England Funds for additional information.
No share certificates will be issued for an account that is subject to a
Systematic Withdrawal Plan. Income dividends and capital gain distributions will
be reinvested.
Since Systematic Withdrawal Plan payments represent proceeds from the
liquidation of shares, withdrawals may reduce and possibly exhaust the initial
investment, particularly in the event of a period of low earnings. Accordingly,
the shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and New England Funds make no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a Plan. See "Redemptions" and "Tax Status," below, for
certain information as to federal income taxes. New England Funds may modify or
terminate this program at any time.
23
<PAGE>
Exchange Privilege
Class A shares of a Fund may be exchanged for shares of either class of
the other Funds and Class B shares of a Fund may be exchanged for Class B shares
of any other Funds, subject to the minimum investment and eligibility
requirements of the Funds into which you are exchanging and state securities law
requirements. Shareholders may also exchange their shares in the Funds for
shares of the same class of any other fund in the New England Funds listed
below, subject to those funds' eligibility requirements and sales charges. Class
A shares of a Fund may also be exchanged for Class C shares of the New England
Stock or Bond Funds, subject to the applicable sales charge. The Stock Funds of
the New England Funds are: New England Capital Growth Fund, New England Value
Fund, New England Balanced Fund, New England Growth Opportunities Fund, New
England International Equity Fund, New England Star Advisers Fund, New England
Star Worldwide Fund, New England Growth Fund and Growth Fund of Israel; the Bond
Funds of the New England Funds are: New England Government Securities Fund, New
England Limited Term U.S. Government Fund, New England Adjustable Rate U.S.
Government Fund, New England Strategic Income Fund, New England Bond Income
Fund, New England High Income Fund, New England Municipal Income Fund, New
England Massachusetts Tax Free Income Fund, New England Intermediate Term Tax
Free Fund of California and New England Intermediate Term Tax Free Fund of New
York.
Shareholders of any of the other funds in the New England Funds may
exchange all or any portion of their shares (including the proceeds of shares of
the other funds redeemed within 120 days before the exchange) for shares of the
same class of the Funds. However, Class A or Class B shares of a Fund acquired
by exchange either from the New England Stock or Bond Funds or another Fund will
be subject to a CDSC if, and to the extent as, the shares exchanged were subject
to a CDSC. Shareholders of Class C shares of the New England Stock or Bond Funds
may exchange those shares only for Class A shares of the Funds. Such exchanges
may be made by telephoning or writing New England Funds or certain investment
dealers. Such an exchange in the case of the Class B shares of the New England
Funds stops the aging period for purposes of determining the CDSC and conversion
to Class A, and the aging resumes only when an exchange is made back into a
non-money market fund in the New England Funds.
Shares of any Fund acquired through an exchange from the New England
Funds listed above may be re-exchanged for shares of the same class of those New
England Funds. Any such exchange will be based on the respective current net
asset values of the shares involved and no sales charge will be imposed.
Shareholders making such exchanges must provide New England Funds with
sufficient information to permit verification of their prior ownership of
shares.
An exchange may be effected, provided that neither the registered name
nor address of the accounts are different and provided that a certificate
representing the shares being exchanged has not been issued to the shareholder,
by (1) a telephone request to New England Funds at 1-800-225-5478 or (2) a
written request to New England Funds, using the Service Options Form available
from your investment dealer. In any event, a current prospectus of the fund
whose shares will be received must be delivered to the shareholder before the
transaction can be completed.
Automatic Exchange Plan
Shareholders may establish an Automatic Exchange Plan under which shares
are automatically redeemed each month and immediately reinvested in shares of
the same class of one or more of the New England Funds listed below, subject to
the investor eligibility requirement of that other fund and the exchange rules
regarding Class A and Class B above. Also, proceeds of automatic redemptions of
Class A shares of the Funds may be reinvested in Class C shares of those New
England Funds' Stock or Bond Funds that offer Class C shares. Registrations on
all accounts must be identical. The two dates each month on which exchanges may
be made are the 15th or 28th (or the first business day thereafter if the 15th
or the 28th are not business days) and are made until the account is exhausted
or until New England Funds is notified in writing to terminate the plan.
Exchanges may be made in amounts of $50 or more from any Fund. A sales charge
will be imposed on such exchanges unless the shares being exchanged were
previously acquired through an exchange from one of the New England Funds listed
below. Complete the account application or the Service Options Form available
from New England Funds to establish an Automatic Exchange Plan.
24
<PAGE>
Every exchange constitutes a sale of fund shares for federal income tax
purposes, on which an investor may realize a long- or short-term capital gain or
loss.
The other New England Funds and their investment objectives are as follows:
Stock Funds:
New England Growth Fund seeks long-term growth of capital through
investments in equity securities of companies whose earnings are expected to
grow at a faster rate than the United States economy.
New England Capital Growth Fund seeks long-term growth of capital.
New England Value Fund seeks a reasonable long-term investment return
from a combination of market appreciation and dividend income from equity
securities.
New England Balanced Fund seeks a reasonable long-term investment return
from a combination of long-tern capital appreciation and moderate current
income.
New England Growth Opportunities Fund seeks opportunities for long-term
growth of capital and income.
New England International Equity Fund seeks total return from long-term
growth of capital and dividend income primarily through investment in a
diversified portfolio of marketable international equity securities.
New England Star Advisers Fund seeks long-term growth of capital.
New England Star Worldwide Fund seeks long-term growth of capital.
Growth Fund of Israel seeks long-term growth of capital.
Bond Funds:
New England Government Securities Fund seeks a high level of current
income consistent with safety of principal by investing in U.S. Government
securities and engaging in transactions involving related options, futures and
options on futures.
New England Limited Term U.S. Government Fund seeks a high current
return consistent with preservation of capital.
New England Adjustable Rate U.S. Government Fund seeks a high level of
current income consistent with low volatility of principal.
New England Strategic Income Fund seeks high current income with a
secondary objective of capital growth.
New England Bond Income Fund seeks a high level of current income
consistent with what the Fund considers reasonable risk. The Bond Income Fund
invests primarily in corporate and U.S. Government bonds.
New England High Income Fund seeks high current income plus the
opportunity for capital appreciation to produce a high total return.
New England Municipal Income Fund seeks as high a level of current
income exempt from federal income taxes as is consistent with reasonable risk
and protection of shareholders' capital. The Municipal Income Fund invests
primarily in debt securities of municipal issuers, the interest of which is
exempt from federal income tax but may be subject to the federal alternative
minimum tax, and may engage in transactions in financial futures contracts and
options on futures.
25
<PAGE>
New England Massachusetts Tax Free Income Fund seeks as high a level of
current income exempt from federal income tax and Massachusetts personal income
taxes as Back Bay Advisors, the Fund's subadviser, believes is consistent with
preservation of capital.
New England Intermediate Term Tax Free Fund of California seeks as high
a level of current income exempt from federal income tax and its state personal
income tax as is consistent with preservation of capital.
New England Intermediate Term Tax Free Fund of New York seeks as high a
level of current income exempt from federal income tax and its state personal
income tax and New York City personal income tax as is consistent with
preservation of capital.
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus following the caption "Selling Fund Shares." As described in the
Prospectus, under "Contingent Deferred Sales Charges," a CDSC may be imposed in
certain instances upon the redemption of Fund shares which were acquired through
an exchange of shares of the New England Funds. For purposes of the CDSC, an
exchange of shares from one Fund to another Fund is not considered a redemption
or purchase. Any applicable CDSC will be calculated in the manner described in
the relevant prospectus of the New England Funds and the related Statement of
Additional Information.
Except as noted below, signatures on redemption requests must be
guaranteed by an "Eligible Guarantor Institution" as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. Signature guarantees by notaries
public are not acceptable. However, as noted in the Prospectus, a signature
guarantee will not be required if the proceeds of the redemption do not exceed
$100,000 and the proceeds check is made payable to the registered owner(s) and
mailed to the record address.
In order to have redemption proceeds sent to your bank by telephone, you
either must select this service when completing the new account application or
must do so subsequently on the Service Options Form (with a signature
guarantee), available from New England Funds or your investment dealer. When
selecting the service, you must designate a bank account to which the redemption
proceeds should be sent. Any change in the bank account so designated may be
made by furnishing to New England Funds or your investment dealer a completed
Service Options Form with a signature guarantee. Telephone redemptions proceeds
may be wired to a bank account only if the designated bank is a member of the
Federal Reserve System or has a correspondent bank that is a member of the
System. If the account is with a savings bank, it must have only one
correspondent bank that is a member of the System. The Funds, the Distributor
and State Street Bank are not responsible for the authenticity of withdrawal
instructions received by telephone.
In order to redeem shares electronically through the ACH system, a
shareholder's bank or credit union must be a member of the ACH system and the
shareholder must have a completed, approved ACH application on file. In
addition, the telephone request must be received no later than 4:00 p.m.
(Eastern time). Upon receipt of the required information, the appropriate number
of shares will be redeemed and the monies forwarded to the bank designated on
the shareholder's application through the ACH system. The redemption will be
processed the day the telephone call is made and the monies generally will
arrive at the shareholder's bank within three business days. The availability of
these monies will depend on the individual bank's rules.
The redemption price will be the net asset value per share next
determined after the redemption request and any necessary special documentation
are received by New England Funds in proper form. Payment normally will be made
by State Street Bank on behalf of the Fund within seven days thereafter.
However, payment of the redemption proceeds may be delayed if the purchase of
shares was made by a check or an electronic funds transfer, which was deposited
or initiated, respectively, less than ten days prior to the redemption request
(unless the Fund is aware that the check or transfer has cleared).
The Funds will normally redeem shares for cash. However, each of the
Funds reserves the right to pay the redemption price wholly or partly in kind if
the Board of Trustees of the relevant Trust determines it to be
26
<PAGE>
advisable in the interest of the remaining shareholders. If portfolio securities
are distributed in lieu of cash, the shareholder may be unable to sell the
securities for the full value placed on them when held by the Fund and will
probably have to pay a "dealer spread" or other brokerage amounts in order to
liquidate such securities. However, each Trust has elected to be governed by
Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to redeem
shares solely in cash for any shareholder during any 90-day period up to the
lesser of $250,000 or 1% of the total net asset value of the Fund at the
beginning of such period.
- --------------------------------------------------------------------------------
NET INCOME, DIVIDENDS AND VALUATION
- --------------------------------------------------------------------------------
Determination of Net Income
The net income of each Fund is determined as of the close of regular
trading on the New York Stock Exchange (the "Exchange") on each day that the
Exchange is open for trading. The Exchange is expected to be closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net income
includes (i) all interest accrued and discount earned on the portfolio
investments of the Fund, minus (ii) amortized premium on such investments, plus
or minus (iii) all realized gains and losses on such investments, and minus (iv)
all expenses of the Fund.
Determination of Yield
Yield. Each Fund's yield, as it may appear in advertisements or written
sales material, represents the net change, exclusive of capital changes, in the
value of a hypothetical account having a balance of one share at the beginning
of the period for which yield is determined (the "base period"). Current yield
for the base period (for example, seven calendar days) is calculated by dividing
(i) the net change in the value of the account for the base period by (ii) the
number of days in the base period. The resulting number is then multiplied by
365 to determine the net income on an annualized basis. This amount is divided
by the value of the account as of the beginning of the base period, normally $1,
in order to state the current yield as a percentage. Yield may also be
calculated on a compound basis ("effective" or "compound" yield) which assumes
continual reinvestment throughout an entire year of net income earned at the
same rate as net income is earned by the account for the base period.
Each Fund's yield for the seven days ended June 30, 1996 and effective
yield based on such seven-day period were, respectively, 4.46% and 4.56% (Money
Market Fund), 4.03% and 4.11% (Government Fund) and 3.08% and 3.13% (Tax Exempt
Fund).
Taxable-Equivalent Yield. The Tax Exempt Fund may also advertise a
taxable-equivalent yield or taxable-equivalent effective yield, calculated as
described above, except that, for any given tax bracket, net investment income
will be calculated using as gross investment income an amount equal to the sum
of (i) any taxable income of the Fund plus (ii) the tax exempt income of the
Fund divided by the difference between 1 and the effective federal income tax
rate for taxpayers in that tax bracket.
Taxable-Equivalent Yield and Taxable-Equivalent
Effective Yield for the 7 day period ended 6/30/96
Federal Taxable-Equivalent Taxable-Equivalent
Tax Rate Yield Effective Yield
15% 3.62% 3.68%
28% 4.28% 4.35%
31% 4.46% 4.54%
36% 4.81% 4.89%
39.6% 5.10% 5.18%
27
<PAGE>
- --------------------------------------------------------------------------------
TAX-FREE INVESTING
- --------------------------------------------------------------------------------
The table below compares taxable and tax-free yields, based on tax rates
for 1996:
<TABLE>
<CAPTION>
Federal
TAXABLE INCOME Marginal
-------------- Tax IF TAX EXEMPT YIELD IS
Joint Single Rate ----------------------
Return Return (1996) 2% 3% 4% 5% 6%
Then the Equivalent Taxable Yield Would Be
<S> <C> <C> <C> <C> <C> <C> <C>
$0 - $40,100 $0 - $24,000 15% 2.35% 3.53% 4.71% 5.88% 7.06%
$40,101 - $96,900 $24,001 - $58,150 28% 2.78% 4.17% 5.56% 6.94% 8.33%
$96,901 - $147,700 $58,151 - $121,300 31% 2.90% 4.35% 5.80% 7.25% 8.70%
$147,701 - $263,750 $121,301 - $263,750 36% 3.13% 4.69% 6.25% 7.81% 9.38%
over $263,751 over $263,751 39.6% 3.31% 4.97% 6.62% 8.28% 9.93%
</TABLE>
The table above does not take into account the effect of state and local
taxes, if any, or federal income taxes on social security benefits which may
arise as a result of receiving tax exempt income.
In General
Yield is calculated without regard to realized and unrealized gains and
losses. The yield of each Fund will vary depending on prevailing interest rates,
operating expenses and the quality, maturity and type of instruments held in the
portfolio of that Fund. Consequently, no yield quotation should be considered as
representative of what the yield of the applicable Fund may be for any future
period. The Funds' yields are not guaranteed.
Shareholders comparing Fund yield with that of alternative investments
(such as savings accounts, various types of bank deposits, and other money
market funds) should consider such things as liquidity, minimum balance
requirements, checkwriting privileges, the differences in the periods and
methods used in the calculation of the yields being compared, and the impact of
taxes on alternative types of investments.
Yield information may be useful in reviewing each Fund's performance and
providing a basis for comparison with other investment alternatives. However,
unlike bank deposits, traditional corporate or municipal bonds or other
investments which pay a fixed yield for a stated period of time, money market
and tax exempt money market fund yields fluctuate.
Daily Dividends
As described in the Prospectus, the net income of each Fund is declared
as a dividend, at the closing of regular trading on the Exchange each day that
the Exchange is open. Dividends will be paid in cash to the shareholder if the
shareholder has notified State Street Bank in writing of the election on or
before payable date. The net income for Saturdays, Sundays and other days on
which the Exchange is closed is declared as a dividend on the immediately
preceding business day. Although the Funds do not expect to realize any
long-term capital gains, if such gains are realized they will be distributed
once a year.
Valuation of the Funds' Portfolio Investments
The total net asset value of each Fund (the excess of the Fund's assets
over its liabilities) is determined by State Street Bank as of the close of
regular trading on the Exchange on each day the Exchange is open for trading.
(See "Determination of Net Income.") The portfolio securities of each Fund are
valued at their fair
28
<PAGE>
value as determined in good faith by the relevant Trust's Board of Trustees or
persons acting at their direction. Under normal market conditions, portfolio
securities will be valued at amortized cost as described below. Expenses of each
Fund are paid or accrued each day.
Under the amortized cost method of valuation, securities are valued at cost on
the date of purchase. Thereafter, the value of securities purchased at a
discount or premium is increased or decreased incrementally each day so that at
maturity the purchase discount or premium is fully amortized and the value of
the security is equal to its principal amount. Due to fluctuations in interest
rates, the amortized cost value of the securities of a Fund may at times be more
or less than their market value.
By using amortized cost valuation, the Funds seek to maintain a constant
net asset value of $1.00 per share despite minor shifts in the market value of
their portfolio securities. The yield on a shareholder's investment may be more
or less than that which would be recognized if the net asset value per share
were not constant and were permitted to fluctuate with the market value of the
portfolio securities of each Fund. However, as a result of the following
procedures, it is believed that any difference will normally be minimal. The
trustees monitor quarterly the deviation between the net asset value per share
of each Fund as determined by using available market quotations and its
amortized cost price per share. Back Bay Advisors(R) makes such comparisons at
least weekly and will advise the trustees promptly in the event of any
significant deviation. If the deviation exceeds 1/2 of 1% for any Fund, the
relevant Board of Trustees will consider what action, if any, should be
initiated to provide fair valuation of the portfolio securities of that Fund and
prevent material dilution or other unfair results to shareholders. Such action
may include redemption of shares in kind; selling portfolio securities prior to
maturity; withholding dividends; or using a net asset value per share as
determined by using available market quotations. There is no assurance that each
Fund will be able to maintain its net asset value at $1.00.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
In General
The tax status of the Funds and the distributions that each Fund may
make are summarized in the text of the Prospectus titled "Income Tax
Considerations." Each Fund intends to qualify as a regulated investment company
under the Code. This means that the Fund is not subject to federal income tax on
net income and net realized capital gains distributed to shareholders provided
it distributes annually substantially all its net investment income and net
realized short-term capital gains.
To avoid certain excise taxes, each Fund must distribute by December 31
each year virtually all of its ordinary income realized in that year, and any
previously undistributed capital gains it realized in the twelve months ended on
October 31 of that year. Certain dividends declared by a Fund in December but
not actually received by you until January will be treated for federal tax
purposes as though you had received them in December.
Money Market Fund and Government Fund
It is not expected that either Fund will realize any long-term capital
gains. However, to the extent that distributions of any net realized long-term
capital gains are made to shareholders of either Fund, such gains are taxable to
such shareholders as long-term capital gains, whether received in cash or
additional shares and regardless of how long shareholders have held their
shares. Such distributions are not eligible for the dividends received deduction
for corporations.
The Money Market Fund and the Government Fund are treated as separate
entities for federal income tax purposes.
Tax Exempt Fund
The Fund intends to have at least 50% of its total assets invested in
Municipal Securities at the close of each quarter of its taxable year so that
dividends paid by the Fund which are derived from interest on Municipal
29
<PAGE>
Securities will be "exempt-interest dividends" within the meaning of the Code.
Exempt-interest dividends may be treated by shareholders as interest excludable
from gross income under Section 103(a) of the Code. Dividends derived from
income which is not exempt from federal income tax, including interest earned on
investments in taxable money market securities or in repurchase agreements and
any net short-term capital gains realized by the Fund, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
See the Prospectus for information concerning the federal income tax treatment
of interest on "private activity bonds" and certain other limitations on the
tax-exempt status of interest on Municipal Securities.
Net long-term capital gain distributions, if any, will be taxable to
shareholders as long-term capital gains, regardless of the length of time the
shareholder has held shares of the Fund.
None of the Funds' dividends or distributions are expected to be
eligible for the dividends-received deduction available to corporations.
Under the Code, investors may not deduct interest on indebtedness
incurred or continued to purchase or carry shares of an investment company
paying exempt-interest dividends, such as the Fund. (See Section 265(4) of the
Code.) Further, entities or persons who are "substantial users" (or persons
related to "substantial users") of facilities financed by industrial development
bonds (see Appendix A-2) should consult their tax advisers before purchasing
shares of the Fund.
Shareholders are advised to consult their own tax advisers for more detailed
information concerning the federal income taxation of the Fund and the income
tax consequences to its shareholders.
All Funds
The foregoing relates only to federal income taxation of individuals and
corporations. Prospective shareholders should consult their tax advisers as to
the possible application of state and local income tax laws to Fund dividends
and capital gain distributions and the tax consequences of retirement plans
offering tax benefits. Information regarding the tax status of distributions
made by the Funds will be sent to shareholders shortly after the end of each
calendar year.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Financial Statements of each of the Funds and the related reports of
the independent accountants included in the annual reports of the Funds for the
year ended June 30, 1996, are incorporated herein by reference.
30
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NEW ENGLAND CASH MANAGEMENT TRUST INVESTMENTS:
Obligations Backed by Full Faith and Credit of the U.S. Government --
are bills, certificates of indebtedness, notes and bonds issued by (i) the U.S.
Treasury or (ii) agencies, authorities and instrumentalities of the U.S.
Government or other entities and backed by the full faith and credit of the U.S.
Government. Such obligations include, but are not limited to, obligations issued
by the Government National Mortgage Association, the Farmers' Home
Administration and the Small Business Administration.
Other U.S. Government Obligations -- are bills, certificates of
indebtedness, notes and bonds issued by agencies, authorities and
instrumentalities of the U.S. Government which are supported by the right of the
issuer to borrow from the U.S. Treasury or by the credit of the agency,
authority or instrumentality itself. Such obligations include, but are not
limited to, obligations issued by the Tennessee Valley Authority, the Bank for
Cooperatives, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and the Federal National Mortgage Association.
Repurchase Agreements -- are agreements by which the Fund purchases a
security (usually a U.S. Government Obligation) and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date. The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford an
opportunity for the Fund to earn a return on temporarily available cash at
minimal market risk, although the Fund may be subject to various delays and
risks of loss if the seller is unable to meet its obligation to repurchase.
Certificates of Deposit -- are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return and are normally negotiable.
Bankers' Acceptances -- are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
Yankeedollar Obligations -- obligations of U.S. branches of foreign
banks.
Eurodollar Obligations -- dollar-denominated obligations of foreign
banks (including U.S. and London branches of foreign banks) and foreign branches
of U.S. banks.
Commercial Paper -- refers to promissory notes issued by corporations in
order to finance their short-term credit needs. (See Appendix C.)
Corporate Obligations -- include bonds and notes issued by corporations
in order to finance longer-term credit needs. (See Appendix C.)
- ------------
(1) These obligations, together with related repurchase agreements, are the only
obligations that may be purchased by the U.S. Government Series.
A-1
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NEW ENGLAND TAX-EXEMPT MONEY MARKET TRUST INVESTMENTS
The three principal classifications of Municipal Securities are "Notes,"
"Bonds" and "Commercial Paper."
Municipal Notes. Municipal Notes are generally issued to finance
short-term capital needs and generally have maturities of one year or less.
Municipal Notes include:
1. Project Notes. Project Notes are issued by public bodies (called "local
issuing agencies") created under the laws of a state, territory or U.S.
possession. They have maturities that range up to one year from the date of
issuance. These Notes provide financing for a wide range of financial assistance
programs for housing, redevelopment and related needs (such as low-income
housing programs and urban renewal programs). While they are the primary
obligations of the local public housing agencies or the local urban renewal
agencies, they are also backed by the full faith and credit of the U.S.
Government. Accordingly, investment restriction (1) of New England Tax Exempt
Money Market Trust is not applicable to Project Notes. See "Investment
Restrictions."
2. Tax Anticipation Notes. Tax Anticipation Notes are issued to finance working
capital needs of states, counties, municipalities and other public bodies which
have the legal power to tax. Generally, they are issued in anticipation of
various seasonal tax revenues, such as real and personal property, income,
sales, use and business taxes, and are payable from some or all of these
specific future taxes.
3. Revenue Anticipation Notes. Revenue Anticipation Notes are issued to provide
interim financing in expectation of receipt of various types of non-tax revenue,
such as revenues available to the issuer under various federal revenue sharing
programs. In some cases, Revenue Anticipation Notes may be payable additionally
from tax revenues.
4. Bond Anticipation Notes. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds, when sold and issued, then provide the money for repayment of
the Notes.
5. Construction Loan Notes. Construction Loan Notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration
under "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae"
(the Government National Mortgage Association) programs.
Municipal Bonds. Municipal Bonds, which meet longer-term capital needs
and generally have maturities of more than one year when issued, have two
principal classifications: General Obligation Bonds and Limited Obligation or
Revenue Bonds. One type of Municipal Revenue Bonds is referred to as Industrial
Development Bonds. These three are discussed below.
1. General Obligation Bonds. Issuers of General Obligation Bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. General Obligation Bonds are not payable from any
particular fund or source. The characteristics and method of enforcement of
General Obligation Bonds vary according to the law applicable to the particular
issuer and payment may be dependent upon an appropriation by the issuer's
legislative body. The taxes that can be levied for the payment of debt service
may be limited or unlimited as to rate or amount. Such bonds may be additionally
secured by special assessments.
B-1
<PAGE>
2. Limited Obligation or Revenue Bonds. The principal source for repayment of a
Revenue Bond is generally the net revenues derived from a particular facility or
group of facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue Bonds have been or may be issued to finance a
wide variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port facilities; colleges and
universities; and hospitals. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service reserve
fund whose money may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidies and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. Some authorities provide further security in the form of a state's
ability (without obligation) to make up deficiencies in the debt service reserve
fund.
3. Industrial Development Bonds. Prior to the Tax Reform Act of 1986, certain
debt obligations known as Industrial Development Bonds could be issued by or on
behalf of public authorities to raise money to finance various
privately-operated facilities for business and manufacturing, housing, sports
and pollution control; such obligations are included within the term Municipal
Bonds if the interest paid thereon is, in the opinion of bond counsel, exempt
from federal income tax. These bonds also have been or may be used to finance
public facilities, which may be privately used and operated, such as airports,
mass transit systems, ports and parking. The payment of the principal and
interest on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real or personal
property so financed as security for such payment. The Tax Reform Act of 1986
eliminated some types of industrial revenue bonds but retained others under the
general category of "private activity bonds."
Tax-Exempt Commercial Paper. Tax-Exempt Commercial Paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by agencies
of state and local governments to finance seasonal working capital needs or as
short-term financing in anticipation of longer term financing. Tax-Exempt
Commercial Paper is often renewed or refunded at its maturity by the issuance of
other short or long-term obligations.
Other Types of Municipal Securities. The foregoing describes types of
Municipal Securities which are presently available. New England Tax Exempt Money
Market Trust may, to the extent consistent with its investment objective,
policies and restrictions, invest in other types of Municipal Securities as they
become available in the future.
B-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
- --------------------------------------------------------------------------------
RATINGS OF CORPORATE AND MUNICIPAL BONDS, COMMERCIAL PAPER AND
SHORT-TERM TAX-EXEMPT OBLIGATIONS
Set forth below are descriptions of the highest ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") for
corporate and municipal bonds, commercial paper and short-term tax-exempt
obligations. Ratings for commercial paper have been included since certain of
the obligations which the Funds are authorized to purchase have characteristics
of commercial paper and have been rated as such by Moody's and S&P.
MOODY'S RATINGS
Corporate and Municipal 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 edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be 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.
Short-Term Municipal Notes
The two highest ratings of Moody's for short-term municipal notes are MIG-1 and
MIG-2: MIG-1 denotes "best quality, enjoying strong protection from established
cash flows;" MIG-2 denotes "high quality," with margins of protection ample
although not so large as in the preceding group.
Commercial Paper
The rating P-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Issuers rated Prime-1 are judged to be of the best quality. Their short-term
debt obligations carry the smallest degree of investment risk. Margins of
support for current indebtedness are large or stable with cash flow and asset
protection well assured. Current liquidity provides ample coverage of near-term
liabilities and unused alternative financing arrangements are generally
available. While protective elements may change over the intermediate or long
term, such changes are most unlikely to impair the fundamentally strong position
of short-term obligations.
C-1
<PAGE>
S&P RATINGS
Corporate and Municipal Bonds
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
Short-Term Municipal Notes
S&P does not rate short-term municipal notes as such.
Commercial Paper
Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt is rated
"A" or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Commercial paper within the A-1 category
which has overwhelming safety characteristics is denoted "A-1+."
C-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX D
- --------------------------------------------------------------------------------
PUBLICATIONS THAT MAY BE REFERRED TO IN FUND ADVERTISEMENTS OR
SALES LITERATURE
ABC and affiliates Fitch Insights
Adam Smith's Money World Forbes
America On Line Fort Worth Star-Telegram
Anchorage Daily News Fortune
Atlanta Constitution Fox Network and affiliates
Atlanta Journal Fund Action
Arizona Republic Fund Decoder
Austin American Statesman Global Finance
Baltimore Sun (the) Guarantor
Bank Investment Marketing Hartford Courant
Barron's Houston Chronicle
Bergen County Record (NJ) INC
Bloomberg Business News Indianapolis Star
B'nai B'rith Jewish Monthly Individual Investor
Bond Buyer Institutional Investor
Boston Business Journal International Herald Tribune
Boston Globe Internet
Boston Herald Investment Advisor
Broker World Investment Company Institute
Business Radio Network Investment Dealers Digest
Business Week Investment Profiles
CBS and affiliates Investment Vision
CFO Investor's Daily
Changing Times IRA Reporter
Chicago Sun Times Journal of Commerce
Chicago Tribune Kansas City Star
Christian Science Monitor KCMO (Kansas City)
Christian Science Monitor News Service KOA-AM (Denver)
Cincinnati Enquirer Los Angeles Times
Cincinnati Post Leckey, Andrew (syndicated column)
CNBC Lear's
CNN Life Association News
Columbus Dispatch Lifetime Channel
CompuServe Miami Herald
Dallas Morning News Milwaukee Sentinel
Dallas Times-Herald Money
Denver Post Money Maker
Des Moines Register Money Management Letter
Detroit Free Press Morningstar
Donoghues Money Fund Report Mutual Fund Market News
Dorfman, Dan (syndicated column) Mutual Funds Magazine
Dow Jones News Service National Public Radio
Economist National Underwriter
FACS of the Week NBC and affiliates
Financial News Network New England Business
Financial Planning New England Cable News
Financial Planning on Wall Street New Orleans Times-Picayune
Financial Research Corp. New York Daily News
Financial Services Week New York Times
Financial World Newark Star Ledger
D-1
<PAGE>
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO
D-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX E
- --------------------------------------------------------------------------------
CERTAIN INFORMATION THAT MAY BE INCLUDED IN ADVERTISING AND
PROMOTIONAL LITERATURE
References may be included in New England Funds' advertising and
promotional literature to NEIC and its affiliates that perform advisory or
subadvisory functions for New England Funds including, but not limited to: New
England Funds Management, L.P., Back Bay Advisors(R), Loomis, Sayles & Company,
L.P., Capital Growth Management Limited Partnership, Draycott Partners, Ltd. and
Westpeak Investment Advisors, L.P.
References may be included in New England Funds' advertising and
promotional literature to NEIC affiliates that do not perform advisory or
subadvisory functions for the Funds including, but not limited to, New England
Investment Associates, L.P., Copley Real Estate Advisors, L.P., Marlborough
Capital Advisors, L.P., Reich & Tang Capital Management and Reich & Tang Mutual
Funds Group.
References to subadvisers unaffiliated with NEIC that perform
subadvisory functions on behalf of New England Funds may be contained in New
England Funds' advertising and promotional literature including, but not limited
to, Berger Associates, Inc., Janus Capital Corporation, Founders Asset
Management, Inc. and Montgomery Asset Management, L.P.
New England Funds' advertising and promotional material may include, but
is not limited to, discussions of the following information about the above
entities:
[bullet] Specific and general investment emphasis, specialties, competencies,
operations and functions
[bullet] Specific and general investment philosophies, strategies, processes and
techniques
[bullet] Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
[bullet] The corporate histories, founding dates and names of founders of the
entities
[bullet] Awards, honors and recognition given to the firms
[bullet] The names of those with ownership interest and the percentage of
ownership
[bullet] Current capitalization, levels of profitability and other financial
information
[bullet] Identification of portfolio managers, researchers, economists,
principals and other staff members and employees
[bullet] The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and
degrees, awards and honors
[bullet] Specific identification of, and general reference to, current
individual, corporate and institutional clients, including pension and
profit sharing plans
[bullet] Current and historical statistics about:
-total dollar amount of assets managed
-New England Funds' assets managed in total and by fund
-the growth of assets
E-1
<PAGE>
-asset types managed
-numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers,
economists, technicians and support staff
-the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or the subadviser
In addition, communications and materials developed by New England Funds
may make reference to the following information about NEIC and its affiliates:
NEIC is the fifth largest publicly traded money manager in the U.S.
listed on the New York Stock Exchange. NEIC maintains over $87 billion in assets
under management. Clients serviced by NEIC and its affiliates, besides New
England Funds, include wealthy individuals, major corporations and large
institutions.
Back Bay Advisors(R) employs a conservative style of management
emphasizing short and intermediate term securities to reduce volatility, adds
value through careful, continuous credit analysis and has expertise in
government, corporate and tax-free municipal bonds and equity securities. Among
its clients are Boston City Retirement System, Public Service Electric & Gas of
New Jersey, Petrolite Corp. and General Mills.
Capital Growth Management Limited Partnership seeks to deliver
exceptional growth for its clients through the selection of stocks with the
potential to outperform the market and grow at a faster rate than the U.S.
economy. Among its approaches are pursuit of growth 50% above the Standard &
Poor's Index of 500 Common Stocks, prompt responses to changes in the market or
economy and aggressive, highly concentrated portfolios.
Loomis, Sayles & Company, L.P. is one of the oldest and largest
investment firms in the U.S. and has provided investment counseling to
individuals and institutions since 1926. Characteristic of Loomis, Sayles &
Company, L.P. is that it has one of the largest staffs of research analysts in
the industry, practices strict buy and sell disciplines and focuses on sound
value in stock and bond selection. Among its clients are large corporations such
as Chrysler, Mobil Oil and Revlon.
Westpeak Investment Advisors, L.P. ("Westpeak") employs proprietary
research and a disciplined stock selection process that seeks rigorously to
control unnecessary risk. Its investment process is designed to evaluate when
value and growth styles two primary approaches to stock investing - hold
potential for reward. Over seventy fundamental attributes are continuously
analyzed by Westpeak's experienced analysts and sophisticated computer systems.
The results are assessed against Wall Street's consensus thinking, in pursuit of
returns in excess of appropriate benchmarks. The value/growth strategy is a
unique blend of investment styles, seeking opportunities for increased return
with reduced risk. Among the keys to Westpeak's investment process are
continuous review of timely, accurate data on over 3600 companies, analysis of
dozens of factors for excess return potential and identification of overvalued
and undervalued stocks.
Harris Associates L.P. is a Chicago-based investment management company
with more than $9.5 billion in assets under management, including the $5.4
billion Oakmark Fund Group and $4.1 billion in multi-manager partnerships,
individual accounts and institutional assets. Harris Associates L.P.'s
investment philosophy is predicated on the belief that over time market price
and value converge and that investment in securities prices significantly below
long-term value presents the best opportunity to achieve long-term growth of
capital.
On June 30, 1995, NEIC purchased the assets of Graystone Partners, L.P.
("Graystone"), a Chicago-based consulting firm focusing exclusively on working
with the wealthiest families in the country. Founded in 1993, Graystone
specializes in assisting high net worth families in developing asset allocation
strategies, identifying appropriate portfolio managers and the monitoring of
investment performance.
References may be included in New England Funds' advertising and
promotional literature about its 401(k) and retirement plans. The information
may include, but is not limited to:
E-2
<PAGE>
[box] Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms including, but not limited to, DC Xchange,
William Mercer and other organizations involved in 401(k) and retirement
programs with which New England Funds may or may not have a relationship.
[box] Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the New England Funds
as a 401(k) or retirement plan funding vehicle produced by, including, but
not limited to, Access Research, Dalbar, Investment Company Institute and
other industry authorities, research organizations and publications.
[box] Specific and general discussion of economic, legislative and other
environmental factors affecting 401(k) and retirement plans, including but
not limited to, statistics, detailed explanations or broad summaries of:
-past, present and prospective tax legislation and IRS requirements and
rules, including, but not limited to, reporting standards, minimum
distribution notices, Forms 5500, Form 1099R and other relevant forms and
documents, Department of Labor rules and standards and other regulations.
This includes past, current and future initiatives, interpretive releases
and positions of regulatory authorities about the past, current or future
eligibility, availability, operations, administration, structure,
features, provisions or benefits of 401(k) and other retirement plans
-information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations and
administration, structure and design, features, provisions, benefits and
costs
-current and prospective ERISA regulations and requirements.
[box] Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the New England Funds 401(k) and
retirement plans, to the participant and plan sponsor, including
explanations, statistics and other data about:
-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services, materials and efforts, including, but not limited
to, videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.
[box] Specific and general reference to the benefits of investing in mutual
funds for 401(k) and retirement plans, and, in particular, New England
Funds and its 401(k) and retirement plan offerings, including but not
limited to:
-the significant economies of scale experienced by mutual fund companies
in the 401(k) and retirement benefits arena
-broad choice of investment options and competitive fees
-plan sponsor and participant statements and notices
E-3
<PAGE>
-the plan prototype, summary descriptions and board resolutions
-plan design and customized proposals
-trusteeship, record keeping and administration
-the services of State Street Bank, including but not limited to, trustee
services and tax reporting
-the services of DST Systems, Inc. and BFDS, including but not limited to
mutual fund processing support, participant 800 numbers and participant
401(k) statements
-the services of Trust Consultants Inc., including but not limited to,
sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.
[box] Specific and general reference to the role of the investment dealer and
the benefits and features of working with a financial professional
including:
-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients, including participants, during
enrollment and on an ongoing basis after enrollment
-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.
E-4
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Highlights for the Registrant are included in the prospectus
filed as Part A hereof. The following financial statements are
incorporated in Part II of the statement of additional information
included in Part B hereof by reference to the annual report to
shareholders for the fiscal year ended June 30, 1996, which was filed
with the Commission on August 19, 1996.
(i) Portfolio Composition
(ii) Statement of Assets & Liabilities
(iii) Statement of Operations
(iv) Statement of Changes in Net Assets
(v) Per Share Data and Ratios
(b) Exhibits:
1. Second Amended and Restated Agreement and Declaration of Trust dated
September 10, 1993 and Amendment No. 2 thereto dated January 28, 1996
is filed herewith.
2. Amended By-Laws dated May 8, 1985 are filed herewith.
3. None.
4. Not applicable.
5. (a) Advisory Agreement between Registrant and New England Funds
Management, L.P. ("NEFM") dated January 2, 1996 is filed
herewith.
(b) Subadvisory Agreement between NEFM and Back Bay Advisors, L.P.
dated January 2, 1996 is filed herewith.
6. Distribution Agreement between the Registrant and New England Funds,
L.P. dated May 1, 1991 is filed herewith.
7. None.
8. Custodian Agreement between Registrant and State Street Bank and
Trust Company dated April 21, 1983 and Amendment thereto dated
September 12, 1991 is filed herewith.
9. (a) Shareholder Servicing and Transfer Agency Agreement between
Registrant and TNE Investment Services Corporation dated
September 1, 1993 is filed herewith.
(b) Sub-Transfer Agency and Service Agreement between TNE Investment
Services Corporation and State Street Bank and Trust Company
dated September 1, 1993 is filed herewith.
1
<PAGE>
(c) Powers of Attorney designating Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly as attorneys to sign
for Daniel M. Cain and Richard Darman are filed herewith.
10. Opinion and consent of counsel is filed herewith.
11. Consent of Price Waterhouse LLP is filed herewith.
12. None.
13. None.
14. The following are filed herewith: (i) New England Funds, L.P. Tax
Sheltered Custodial Account Agreement; (ii) New England Funds, L.P.
Keogh Plan; (iii) New England Funds, L.P. Simplified Employee Pension
Plan; (iv) New England Funds, L.P. Individual Retirement Account
Prototype.
15. Not applicable.
16. Schedule for calculation of performance data is filed herewith.
17. Financial Data Schedule is filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
The following table sets forth the number of record holders of each
class of securities of the Registrant as of June 30, 1996:
(1) (2)
Title of Class Number of Record Holders
Class A Class B
Shares of beneficial 2,879 33
interest, no par value
Item 27. Indemnification
See Item 4 of Part II to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1 (File No. 2-81614)
filed on May 5, 1983, which is incorporated herein by reference.
Item 28: Business and Other Connections of Investment Adviser
(a) Back Bay Advisors, L.P. ("Back Bay Advisors"), which serves as
subadviser to the Registrant, is a registered investment adviser that
is wholly-owned by New England Investment Companies, L.P. ("NEIC"), a
New York Stock Exchange listed company. Back Bay Advisors serves as
investment adviser to a number of other registered investment
companies.
Back Bay Advisors' general partner and officers have been engaged
during the past two fiscal years in the following businesses,
professions, vocations or employments of a substantial nature (former
affiliations are marked with an asterisk):
2
<PAGE>
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Back Bay Advisors Other Affiliations Connection
-------------------- ------------------- ---------
<S> <C> <C>
Back Bay Advisors, Inc. General Partner None None
Charles T. Wallis, President and Chief NEF Corporation Director
Executive Officer 399 Boylston Street
Boston, MA 02116
Back Bay Advisors, Inc. President, CEO and Director
399 Boylston Street
Boston, MA 02116
Edgar M. Reed, Executive Vice President Aetna Capital Management* Head of Fixed Income Management Group
and Chief Investment Officer 151 Farmington Avenue
Hartford, CT 06156
Scott A. Millimet, Executive Vice Back Bay Advisors, Inc. Executive Vice President
President 399 Boylston Street
Boston, MA 02116
Kimberly J. Forsyth, Senior Vice Legg Mason, Incorporated* Senior Vice President and Director of
President 7 East Redwood Street Tax-Exempt Credit Research
Baltimore, MD 21202
Via International City/County Independent Consultant to Bulgaria
Management Association*
777 North Capital Street, NE
Washington, DC 20002
Charles G. Glueck, Senior Vice President None None
Catherine Bunting, Senior Vice President None None
J. Scott Nicholson, Senior Vice President None None
Harold B. Bjornson, Vice President None None
Peter Palfrey, Vice President None None
Nathan R. Wentworth, Vice President None None
Paul Zamagni, Vice President and None
Treasurer
Eric Gutterson, Vice President None None
</TABLE>
(b) New England Funds Management, L.P., ("NEFM") a registered
investment adviser that is wholly-owned by NEIC, serves as investment
adviser to the Registrant. NEFM, organized in 1995, also serves as
investment adviser to most of the series of New England Funds Trust
I, all of the series of New England Funds Trust II, New England
3
<PAGE>
Cash Management Trust and New England Equity Income Fund. NEFM's
general partner, directors and officers have been engaged during the
past two fiscal years in the following businesses, professions,
vocations or employments of a substantial nature (former affiliations
are marked with an asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
NEFM Other Affiliations Connection
---- ------------------ ----------
<S> <C> <C>
NEF Corporation New England Funds, L.P. General Partner
General Partner 399 Boylston Street
Boston, MA 02116
Henry L.P. Schmelzer, New England Funds, L.P. President and Chief Executive Officer
President and Chief Executive Officer
NEF Corporation President, Chief Executive Officer
and Director
Back Bay Advisors, Inc. Director
New England Securities Corporation* Director
399 Boylston Street
Boston, MA 02116
Frank Nesvet, New England Funds, L.P. Senior Vice President and Chief
Senior Vice President, Chief Financial Financial Officer
Officer and Treasurer
NEF Corporation Senior Vice President, Chief
Financial Officer and Treasurer
Robert P. Connolly, NEF Corporation Senior Vice President, General
Senior Vice President, General Counsel, Counsel, Secretary and Clerk
Assistant Secretary and Clerk
New England Funds, L.P. Senior Vice President, General
Counsel, Secretary and Clerk
Kroll Associates, Inc.* Managing Director and General Counsel
900 3rd Avenue
New York, NY 10022
Bruce R. Speca, NEF Corporation Executive Vice President
Executive Vice President
New England Funds, L.P. Executive Vice President
Peter H. Duffy, NEF Corporation Vice President
Vice President
New England Funds, L.P. Vice President
Martin G. Dyer NEF Corporation Vice President
4
<PAGE>
Name and Office with Name and Address of Nature of
NEFM Other Affiliations Connection
---- ------------------ ----------
New England Funds, L.P. Vice President
Ralph M. Greggs NEF Corporation Vice President
New England Funds, L.P. Vice President
Beatriz A. Pina-Smith NEF Corporation Assistant Controller
New England Funds, L.P. Assistant Controller
</TABLE>
Item 29. Principal Underwriters
(a) New England Funds, L.P., the Registrant's principal underwriter, also
serves as principal underwriter for:
New England Funds Trust I
New England Funds Trust II
New England Funds Trust III
New England Cash Management Trust
(b) The general partner and officers of the Registrant's principal
underwriter, New England Funds, L.P., and their addresses are as follows:
<TABLE>
<CAPTION>
Positions and Offices with Positions and Offices
Name Principal Underwriter with Registrant
---- --------------------- ---------------
<S> <C> <C>
NEF Corporation General Partner None
Henry L.P. Schmelzer President and Chief Executive Officer President and Trustee
Bruce R. Speca Executive Vice President Executive Vice President
Robert P. Connolly Senior Vice President, General Counsel, Secretary
Secretary and Clerk
Frank Nesvet Senior Vice President and Chief Financial Treasurer
Officer
Munish Agrawal Vice President None
Elizabeth P. Burns Vice President None
James H. Davis Vice President None
Peter H. Duffy Vice President None
Martin G. Dyer Vice President None
Tracy A. Fagan Vice President None
William H. Finnegan Vice President None
Raymond K. Girouard Vice President, Treasurer and Controller None
5
<PAGE>
Positions and Offices with Positions and Offices
Name Principal Underwriter with Registrant
---- --------------------- ---------------
Ralph M. Greggs Vice President None
Lynne H. Johnson Vice President None
Caren I. Leedom Vice President None
Marie G. McKenzie Vice President None
Robert E. O'Hare Vice President and Senior Counsel None
Bernard M. Shavelson Vice President None
Christine L. Swanson Vice President None
Kristine E. Swanson Vice President None
Beatriz A. Pina-Smith Assistant Controller None
</TABLE>
The principal business address of all the above persons or entities is
399 Boylston Street, Boston, MA 02116.
(c) Not Applicable.
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents required by
the specified rules:
(a) Registrant
Rule 31a-1(b) (4)
Rule 31a-2(a)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a-1(b) (1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)
(c) Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(a) (9), (10), (11); (f)
Rule 31a-2(a); (e)
(d) New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a - 1(d)
Rule 31a - 2(c)
6
<PAGE>
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Not Applicable.
7
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 22 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 22 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, in the Commonwealth of Massachusetts on the
22nd day of August, 1996.
NEW ENGLAND TAX EXEMPT
MONEY MARKET TRUST
By: /s/ PETER S. VOSS*
---------------------------------------
Peter S. Voss
Chief Executive Officer
*By: /s/ ROBERT P. CONNOLLY
---------------------------------------
Robert P. Connolly
Attorney-in-Fact
8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 22 to Registration Statement No. 2-81614 has been
signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
- --------- ----- ----
PETER S. VOSS* Chairman of the Board; August 22, 1996
- ----------------------- Chief Executive Officer;
Peter S. Voss Principal Executive
Officer; Trustee
/s/ FRANK NESVET Treasurer August 22, 1996
- -----------------------
Frank Nesvet
HENRY L. P. SCHMELZER* Trustee and President August 22, 1996
- -----------------------
Henry L. P. Schmelzer
GRAHAM T. ALLISON, JR.* Trustee August 22, 1996
- -----------------------
Graham T. Allison, Jr.
DANIEL M. CAIN* Trustee August 22, 1996
- -----------------------
Daniel M. Cain
KENNETH J. COWAN* Trustee August 22, 1996
- -----------------------
Kenneth J. Cowan
RICHARD DARMAN* Trustee August 22, 1996
- -----------------------
Richard Darman
SANDRA O. MOOSE* Trustee August 22, 1996
- -----------------------
Sandra O. Moose
JOHN A. SHANE* Trustee August 22, 1996
- -----------------------
John A. Shane
PENDLETON P. WHITE* Trustee August 22, 1996
- -----------------------
Pendleton P. White
*By: /s/ ROBERT P. CONNOLLY
-----------------------
Robert P. Connolly
Attorney-In-Fact
August 22, 1996
9
<PAGE>
N-1A EXHIBITS ITEM 24(B)
EXHIBIT NUMBER EXHIBIT
- -------------- -------
EX-99.B1 Second Amended and Restated Agreement and Declaration of Trust and
Amendment 2 thereto
EX-99.B2 Amended By-Laws
EX-99.B5(A) Advisory Agreement between Registrant and New England Funds
Management, L.P.
EX-99.B5(B) Sub-advisory Agreement between New England Funds Management, L.P.
and Back Bay Advisors, L.P.
EX-99.B6 Distribution Agreement between Registrant and New England Funds,
L.P.
EX-99.B8 Custodian Agreement between Registrant and State Street Bank and
Trust Company and Amendment thereto
EX-99.B9(A) Shareholder Servicing and Transfer Agency Agreement between
Registrant and TNE Investment Services Corporation
EX-99.B9(B) Sub-Transfer Agency and Service Agreement between TNE Investment
Services Corporation and State Street Bank and Trust Company
EX-99.B9(C) Powers of Attorney for Trustees, Daniel M. Cain and Richard Darman
EX-99.B10 Opinion and Consent of Counsel
EX-99.B11 Consent of Price Waterhouse LLP
EX-99.B14 New England Funds, L.P. Tax Sheltered Custodial Account Agreement;
New England Funds, L.P. Keogh Plan; New England Funds, L.P.
Simplified Employee Pension Plan; New England Funds, L.P.
Individual Retirement Account Prototype
EX-99.B16 Schedule for Calculation of Performance Data
EX-27.B17 Financial Data Schedule
10
EXHIBIT 99.B1
SECOND AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST AND
AMENDMENT 2 THERETO
<PAGE>
TNE TAX EXEMPT MONEY MARKET TRUST
Amendment No. 2 to Second Amended and Restated
Agreement and Declaration of Trust
The undersigned, being at least a majority of the Trustees of TNE Tax
Exempt Money Market Trust (the "Trust"), having determined it to be consistent
with the fair and equitable treatment of all shareholders of the Trust, hereby
amend the Trust's Second Amended and Restated Agreement and Declaration of Trust
(the "Declaration of Trust"), a copy of which is on file in the office of the
Secretary of State of The Commonwealth of Massachusetts, as follows:
The phrase "TNE Tax Exempt Money Market Trust" is hereby deleted in each
and every place where it appears in the Declaration of Trust, and the phrase
"New England Tax Exempt Money Market Trust" is hereby inserted in lieu thereof
in each and every such place.
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and for
our successors and assigns as of this 28th day of January, 1994.
/s/ SANDRA O. MOOSE /s/ HENRY L.P. SCHMELZER
- ------------------------- -----------------------
Sandra O. Moose Henry L.P. Schmelzer
/s/ KENNETH J. COWAN /s/ JAMES H. SCOTT
- ------------------------- -----------------------
Kenneth J. Cowan James H. Scott
/s/ JOSEPH M. HINCHEY /s/ JOHN A. SHANE
- ------------------------- -----------------------
Joseph M. Hinchey John A. Shane
/s/ RICHARD S. HUMPHREY, JR /s/ JOSEPH F. TURLEY
- ------------------------- -----------------------
Richard S. Humphrey, Jr. Joseph F. Turley
/s/ ROBERT B. KITTREDGE /s/ PETER S. VOSS
- ------------------------- -----------------------
Robert B. Kittredge Peter S. Voss
/s/ LAURENS MACLURE /s/ PENDLETONP. WHITE
- ------------------------- -----------------------
Laurens MacLure Pendleton P. White
-1-
<PAGE>
SECOND AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
TNE TAX EXEMPT MONEY MARKET TRUST
WHEREAS, Section 8 of Article VIII of the First Amended and Restated
Agreement and Declaration of Trust, as amended by Amendments Nos. 1 and 2
thereto (the "Extant Declaration of Trust"), of TNE Tax Exempt Money Market
Trust (the "Trust"), provides that the Extant Declaration of Trust may be
amended at any time by an instrument in writing signed by a majority of the
Trustees when authorized so to do by a majority of the Shares entitled to vote;
WHEREAS, Section 6(d) of Article III of the Extant Declaration of Trust
provides that the Shareholders of any particular Series shall not be entitled to
vote on any matters as to which such Series is not affected;
WHEREAS, a majority of the Shares of the Trust have authorized the
Trustees to amend the Extant Declaration of Trust to permit each Series of the
Trust to issue one or more classes of shares of such Series having such
preferences or special or relative rights and privileges as the Trustees may
determine; and
WHEREAS, the Trustees of the Trust have determined that such amendments
shall take the form of a complete restatement of the Trust's Agreement and
Declaration of Trust.
NOW, THEREFORE, the undersigned, constituting a majority of the Trustees
of the Trust, direct that this Second Amended and Restated Agreement and
Declaration of Trust be filed with the Secretary of The Commonwealth of
Massachusetts and that the Trust's Declaration of Trust made as of January 18,
1983, as amended and restated by the First Amended and Restated Agreement and
Declaration of Trust dated June 18, 1985 and by Amendments Nos. 1 and 2 thereto,
be further amended to read in its entirety as follows, such amendment to be
effective as of September 13, 1993:
THIS SECOND AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made
as of the 10th day of September 1993 by the Trustees hereunder and the holders
of shares of beneficial interest issued hereunder and to be issued hereunder as
hereinafter provided:
WITNESSETH that
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets, which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and
<PAGE>
conditions for the pro rata benefit of the holders from time to time of Shares
in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. This Trust shall be known as TNE Tax Exempt Money Market
Trust and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided
(a) The "Trust" refers to the Massachusetts business trust established
by this Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust elected in accordance
with Article IV hereof;
(c) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust or in the Trust property belonging to any
Series of the Trust or in any class of Shares of the Trust (as the context may
require) shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Commission" and "principal underwriter" shall have the
meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(i) "Series Company" refers to the form of registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in any
successor statutory provision;
(j) "Series" refers to Series of Shares established and designated under
or in accordance with the provisions of Article III;
(k) "Multi-Class Series" refers to Series of Shares established and
designated under or in accordance with the provisions of Article III, Section 6;
and
<PAGE>
(l) The terms "class" and "class of Shares" refer to the division of
Shares representing any Multi-Class Series into two or more classes in
accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities and debt instruments.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into an unlimited number of Shares,
without par value. Subject to the provisions of Section 6 of this Article III,
each Share shall have voting rights as provided in Article V hereof, and holders
of the Shares of any Series shall be entitled to receive dividends, when and as
declared with respect thereto in the manner provided in Article VI, Section 1
hereof. Except as otherwise provided in Section 6 of this Article III with
respect to Shares of Multi-Class Series, no Share shall have any priority or
preference over any other Share of the same Series with respect to dividends or
distributions upon termination of the Trust or of such Series made pursuant to
Article VIII, Section 4 hereof. Except as otherwise provided in Section 6 of
this Article III with respect to Shares of Multi-Class Series, all dividends and
distributions shall be made ratably among all Shareholders of a particular
Series or from the assets belonging to such Series according to the number of
Shares of such Series held of record by such Shareholder on the record date for
any dividend or distribution or on the date of termination, as the case may be.
Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust. The Trustees may from
time to time divide or combine the Shares of any particular Series or class into
a greater or lesser number of Shares of that Series or class without thereby
changing the proportionate beneficial interest of the Shares of that Series or
class in the assets belonging to that Series or attributable to that class or in
any way affecting the rights of Shares of any other Series or class.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series and
class. No certificates certifying the ownership of Shares shall be issued except
as the Trustees may otherwise determine from time to time. The Trustees may make
such rules as they consider appropriate for the transfer of Shares of each
Series and class and similar matters. The record books of the Trust as kept by
the Trust or any transfer or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders of each Series or class and as to the
number of Shares of each Series and class held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept
investments in the Trust from such persons and on such terms and for such
consideration as they from time to time authorize.
<PAGE>
Section 4. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the same nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but entitles such representative
only to the rights of said deceased Shareholder under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholders, nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
Section 5. Power of Trustees to Change Provisions Relating to Shares.
Notwithstanding any other provisions of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as provided
elsewhere herein, the Trustees shall have the power to amend this Declaration of
Trust, at any time and from time to time, in such manner as the Trustees may
determine in their sole discretion, without the need for Shareholder action, so
as to add to, delete, replace or otherwise modify any provisions relating to the
Shares contained in this Declaration of Trust for the purpose of (i) responding
to or complying with any regulations, orders, rulings or interpretations of any
governmental agency or any laws, now or hereafter applicable to the Trust, or
(ii) designating and establishing Series or classes in addition to those
established under or in accordance with the provisions of Section 6 of this
Article III; provided that before adopting any such amendment without
Shareholder approval the Trustees shall determine that it is consistent with the
fair and equitable treatment of all Shareholders. The establishment and
designation of any series of Shares in addition to those Series established and
designated in Section 6 of this Article III shall be effective upon the
execution by a majority of the then Trustees of an amendment to this Declaration
of Trust, taking the form of a complete restatement or otherwise, setting forth
such establishment and designation and the relative rights and preferences of
such Series, or as otherwise provided in such instrument. The establishment and
designation of any class of Shares shall be effective upon either the execution
by a majority of the then Trustees of an amendment to this Declaration of Trust
or the adoption by vote or written consent of a majority of the then Trustees of
a resolution setting forth such establishment and designation and the relative
rights and preferences of such class and such eligibility requirements for
investment therein as the Trustees may determine, or as otherwise provided in
such amendment or resolution.
Without limiting the generality of the foregoing, the Trustees may, for
the above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series or classes of Shares (in addition to any
Series or classes already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment therein as the
Trustees shall determine and reclassify any or all
<PAGE>
outstanding Shares as shares of particular Series or classes in accordance with
such eligibility requirements;
(b) amend any of the provisions set forth in paragraphs (a) through (i)
of Section 6 of this Article III;
(c) combine one or more Series or classes of Shares into a single Series
or class on such terms and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment in
Shares of any Series or class, including without limitation the power to provide
for the issue of Shares of any Series or class in connection with any merger or
consolidation of the Trust with another trust or company or any acquisition by
the Trust of part or all of the assets of another trust or company;
(e) change the designation of any Series or class of Shares;
(f) change the method of allocating dividends among the various Series
and classes of Shares;
(g) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series or
classes of Shares; and
(h) specifically allocate assets to any or all Series or classes of
Shares or create one or more additional Series or classes of Shares which are
preferred over all other Series or classes of Shares in respect of assets
specifically allocated thereto or any dividends paid by the Trust with respect
to any net income, however determined, earned from the investment and
reinvestment of any assets so allocated or otherwise and provide for any special
voting or other rights with respect to such Series or classes.
Section 6. Establishment and Designation of Series and Classes. Without
limiting the authority of the Trustees set forth in Section 5, inter alia, to
establish and designate any further Series or classes or to modify the rights
and preferences of any Series or class, each of the following Series shall be,
and is hereby established and designated: the "Money Market Series" and the
"U.S. Government Series"; and the Money Market Series is hereby designated a
Multi-Class Series.
Shares of each Series established in this Section 6 shall have the
following rights and preferences relative to Shares of each other Series, and
Shares of each class of a Multi-Class Series shall have such rights and
preferences relative to other classes of the same Series as are set forth below,
together with such other rights and preferences relative to such other classes
as are set forth in this resolution of the Trustees establishing and designating
such class of Shares:
(a) Assets Belonging to Series. Subject to the provisions of paragraph
(c) of this Section 6:
All consideration received by the Trust for the issue or sale of Shares
of a particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof from
whatever source derived, including, without
<PAGE>
limitation, any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" that Series. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair and
equitable, and any General Asset so allocated to a particular Series shall
belong to that Series. Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all Series for all purposes.
(b) Liabilities Belonging to Series. Subject to the provisions of
paragraph (c) of this Section 6:
The assets belonging to each particular Series shall be charged with the
liabilities of the Trust in respect to that Series and all expenses, costs,
charges and reserves attributable to that Series, and any general liabilities of
the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time in a manner and
on such basis as the Trustees in their sole discretion deem fair and equitable.
The liabilities, expenses, costs, charges and reserves (including Reserve
Requirements, if any) so charged to a Series are herein referred to as
"liabilities belonging to" that Series. Each allocation of liabilities,
expenses, costs, charges and reserves (including Reserve Requirements, if any)
by the Trustees shall be conclusive and binding upon the holders of all Series
for all purposes.
(c) Apportionment of Assets etc. in Case of Multi-Class Series. In the
case of any Multi-Class Series, to the extent necessary or appropriate to give
effect to the relative rights and preferences of any classes of Shares of such
Series, (i) any assets, income, earnings, profits, proceeds, liabilities,
expenses, charges, costs and reserves belonging or attributable to that Series
may be allocated or attributed to a particular class of Shares of that Series or
apportioned among two or more classes of Shares of that Series; and (2) Shares
of any class of such Series may have priority or preference over shares of other
classes or such Series with respect to dividends or distributions upon
termination of the Trust or of such Series or class or otherwise, provided that
no Share shall have any priority or preference over any other Shares of the same
class and that all dividends and distributions to shareholders or a particular
class shall be made ratably among all Shareholders of such class according to
the number of Shares and such class held of record by such Shareholders on the
record date for any dividend or distribution or on the date of termination, as
the case may be.
(d) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration, including, without
limitation, Article VI, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any Series
or class) with respect to, nor any redemption or repurchase of, the Shares of
<PAGE>
any Series or class shall be effected by the Trust other than from the assets
belonging to such Series or attributable to such class, nor shall any
Shareholder of any particular Series or class otherwise have any right or claim
against the assets belonging to any other Series or attributable to any other
class except to the extent that such Shareholder has such a right or claim
hereunder as a Shareholder of such other Series or class.
(e) Voting. Notwithstanding any of the other provisions of this
Declaration, including, without limitation, Section 1 of Article V, the
Shareholders of any particular Series or class shall not be entitled to vote on
any matters as to which such Series or class is not affected. Except with
respect to matters as to which any particular Series or class is adversely
affected, all of the Shares of each Series and class shall, on matters as to
which it is entitled to vote, vote with other Series and classes so entitled as
a single class. Notwithstanding the foregoing, with respect to matters which
would otherwise be voted on by two or more Series or classes as a single class,
the Trustees may, in their sole discretion, submit such matters to the
Shareholders of any or all such Series or classes, separately.
(f) Equality. Except to the extent necessary or appropriate to give
effect to the relative rights and preferences of any classes of Shares of a
Multi-Class Series, all the Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series. All the Shares of each
particular class of Shares within a Multi-Class Series shall represent an equal
proportionate interest in the assets belonging to such Series that are
attributable to such class (subject to the liabilities attributable to such
class), and each Share of any particular class within a Multi-Class Series shall
be equal to each other Share of such class.
(g) Fractions. Any fractional Share of a Series or class shall carry
proportionately all the rights and obligations of a whole share of that Series
or class, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.
(h) Exchange Privilege. The Trustees shall have the authority to provide
that the holders of Shares of any Series or class shall have the right to
exchange said Shares for Shares of one or more other Series or classes of Shares
in accordance with such requirements and procedures as may be established by the
Trustees.
(i) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series unless otherwise required
by applicable law, to combine the assets and liabilities belonging to any two or
more Series into assets and liabilities belonging to a single series or class.
(j) Elimination of Series or Class. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and to
rescind the establishment and designation thereof, such amendment to be effected
in the manner provided in Section 5 of this Article III. At any time that there
are no Shares outstanding of any particular class previously established and
designated of a Multi-Series Class, the Trustees may abolish that class and
rescind the establishment and designation thereof, either by amending this
Declaration of Trust in the
<PAGE>
manner provided in Section 5 of this Article III (if such class was established
and designated by an amendment to this Declaration of Trust), or by vote or
written consent of a majority of the then Trustees (if such class was
established and designated by Trustee vote or written consent).
Section 7. Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of his
or her being or having been a Shareholder of the Trust or of a particular Series
or class and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Series (or attributable to the class) or which he or she is a
Shareholder or former Shareholder to be held harmless from and indemnified
against all loss and expense arising from such liability.
Section 8. No Preemptive Rights. Shareholders shall have no preemptive
or other rights to subscribe to any additional Shares or other securities
issued by the Trust.
ARTICLE IV
The Trustees
Section 1. Election and Tenure. The Trustees may fix the numbers of
Trustees, fill vacancies in the Trustees, including vacancies arising from an
increase in the number of Trustees, or remove Trustees with or without cause.
Each Trustee shall serve during the continued lifetime of the Trust until he
dies, resigns or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and until the election
and qualification of his successor. Any Trustee may resign at any time by
written instrument signed by him and delivered to any officer of the Trust or to
a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee resigning
and no Trustee removed shall have any right to any compensation for any period
following his resignation or removal, or any right to damages on account of such
removal. The Shareholders may fix the number of Trustees and elect Trustees at
any meeting of Shareholders called by the Trustees for that purpose and to the
extent required by applicable law, including paragraphs (a) and (b) of Section
16 of the 1940 Act.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal or incapacity of the Trustees, or
any of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
including the power to engage in securities transactions of all kinds on behalf
of the Trust. Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the Shareholders; they may
fill vacancies in or remove from their number (including any vacancies created
by an increase in the number of
<PAGE>
Trustees); they may elect and remove such officers and appoint and terminate
such agents as they consider appropriate; they may appoint from their own number
and terminate one or more committees consisting of two or more Trustees which
may exercise the powers and authority of the Trustees to the extent that the
Trustees determine; and they may employ one or more custodians of the assets of
the Trust and may authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems for the central
handling of securities or with a Federal Reserve Bank, retain a transfer agent
or a Shareholder servicing agent, or both, provide for the distribution of
Shares by the Trust, through one or more principal underwriters or otherwise,
set record dates for the determination of Shareholders with respect to various
matters, and in general delegate such authority as they consider desirable to
any officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease
or write options with respect to or otherwise deal in any property
rights relating to any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute
and deliver proxies or powers of attorney to such person or persons as
the Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in
its own name or in the name of a custodian or subcustodian or a nominee
or nominees or otherwise;
(f) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer of
any security of which is held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or
issuer, to pay calls or subscriptions with respect to any security held
in the Trust;
(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security to,
any such committee, depositary or trustee, and to delegate to them such
power and authority with relation to any security (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and compensation
of such committee, depositary or trustee as the Trustees shall deem
proper;
<PAGE>
(h) To compromise, arbitrate or otherwise adjust claims in favor
of or against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(i) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(j) To borrow funds or other property;
(k) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including without limitation, insurance policies insuring
the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment
advisers, principal underwriters or independent contractors of the Trust
individually against all claims and liabilities of every nature arising
by reason of holding, being or having held any such office or position,
or by reason of any action alleged to have been taken or omitted by any
such person as Trustee, officer, employee, agent, investment adviser,
principal underwriter or independent contractor, including any action
taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person
against liability; and
(m) To pay pensions as deemed appropriate by the Trustees and to
adopt, establish and carry out pension, profit-sharing, share bonus,
share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement
and other benefits, for any or all of the Trustees, officers, employees
and agents of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. The Trustees shall
not be required to obtain any court order to deal with any assets of the Trust
or take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are authorized
to pay or cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or arising in connection
with the Trust, or in connection with the management thereof, including but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditor, counsel, custodian, transfer agent, Shareholder
servicing agent and such other agents or independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any
<PAGE>
particular Series or class, to pay directly, in advance or arrears, for charges
of the Trust's custodian or transfer, Shareholder servicing or similar agent, an
amount fixed from time to time by the Trustees, by setting off such charges due
from such Shareholder from declared but unpaid dividends owed such Shareholder
and/or by reducing the number of Shares in the account of such Shareholder by
that number of full and/or fractional Shares which represents the outstanding
amount of such charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets
of the Trust shall at all times be considered as vested in the Trustees.
Section 7. Advisory, Management and Distribution Contracts. Subject to
such requirements and restrictions as may be set forth in the By-Laws, the
Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory and/or management services for the Trust or for any Series
or class with New England Mutual Life Insurance Company or any other
corporation, trust, association or other organization (the "Manager"); and any
such contract may contain such other terms as the Trustees may determine,
including without limitation, authority for the Manager to determine from time
to time without prior consultation with the Trustees what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to time, contract
with NEL Equity Services Corporation, the Manager or other corporation, trust,
association or other organization, appointing it exclusive or nonexclusive
distributor or principal underwriter for the Shares, every such contract to
comply with such requirements and restrictions as may be set forth in the
By-Laws; and any such contract may contain such other terms as the Trustees may
determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is
a shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, distributor or affiliate or agent of or
for any corporation, trust, association, or other organization, or of or
for any parent or affiliate of any organization, with which an advisory
or management contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder servicing or other agency contract
may have been or may hereafter be made, or that any such organization,
or any parent or affiliate thereof, is a Shareholder or has an interest
in the Trust, or that
(ii) any corporation, trust, association or other organization
with which an advisory or management contract or principal underwriter's
or distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be made also has an
advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract with one or more other corporations, trusts,
associations or other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
<PAGE>
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article IV, Section 1 and as may
otherwise be provided by the 1940 Act, including without limitation Sections
16(a) and 16(b) thereof, (ii) with respect to any amendment of this Declaration
of Trust to the extent and as provided in Article VIII, Section 8, (iii) to the
same extent as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, (iv) with respect to the termination of the Trust or any
Series or class to the extent and as provided in Article VIII, Section 4, (v)
with respect to the removal of one or more Trustees to the extent and as
provided in Article V, Section 7 and (vi) with respect to such additional
matters relating to the Trust as may be required by this Declaration of Trust,
the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. At any time when no Shares of a Series
or class are outstanding the Trustees may exercise all rights of Shareholders of
that Series with respect to matters affecting that Series and may with respect
to that Series take any action required by law, this Declaration of Trust or the
By-Laws to be taken by the Shareholders.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may
be called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least seven days before
such meeting, postage prepaid, stating the time and place of the meeting, to
each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by law, by the By-Laws or by this Declaration of Trust, 40% of the
Shares entitled to vote shall constitute a quorum at a Shareholders' meeting.
When any one or more Series or classes is to vote as a single class separate
from any other Shares which are to vote on the same matters as a separate class
or classes, 40% of the Shares of each such class entitled to vote shall
constitute a
<PAGE>
quorum at a Shareholders' meeting of that class. Any meeting of Shareholders may
be adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original meeting
without further notice. When a quorum is present at any meeting, a majority of
the Shares voted shall decide any questions and a plurality shall elect a
Trustee, except when a larger vote is required by any provision of this
Declaration of Trust or the By-Laws or by law. If any question on which the
Shareholders are entitled to vote would adversely affect the rights of any
Series or class of Shares, the vote of a majority (or such larger vote as is
required as aforesaid) of the Shares of such Series or class which are entitled
to vote, voting separately, shall also be required to decide such question.
Section 4. Action by Written Consent. Any action taken by Shareholders
may be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the
By-Laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series or class entitled to vote separately on the matter consent
to the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the Shareholders
of any Series or class who are entitled to vote or act at any meeting or any
adjournment thereof, the Trustees may from time to time fix a time, which shall
be not more than 60 days before the date of any meeting of Shareholders, as the
record date for determining the Shareholders of such Series or class having the
right to notice of and to vote at such meeting and any adjournment thereof, and
in such case only Shareholders of record on such record date shall have such
right, notwithstanding any transfer of shares on the books of the Trust after
the records date. For the purpose of determining the Shareholders of any Series
or class who are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a date, which shall be
before the date for the payment of such dividend or such other payment, as the
record date for determining the Shareholders of such Series or class having the
right to receive such dividend or distribution. Without fixing a record date the
Trustees may for voting and/or distribution purposes close the register or
transfer books for one or more Series or classes for all or any part of the
period between a record date and a meeting of shareholders or the payment of a
distribution. Nothing in this section shall be construed as precluding the
Trustee from setting different record dates for different Series or classes.
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
Section 7. Removal of Trustees. A Trustee may be removed (i) by vote of
at least 66-2/3% of the Shares entitled to vote, voting together without regard
to series at a meeting of Shareholders duly called for the purpose or (ii) by a
written consent filed with the custodian of the Trust's portfolio securities and
executed by the holders of 66-2/3% of the Shares entitled to vote, voting
together without regard to series. The Trustees shall call a meeting of
shareholders for the purpose set forth in clause (i) if requested to do so in
writing by the holders of not less than 10% of the outstanding Shares.
<PAGE>
ARTICLE VI
Net Income, Distributions, and Redemptions and Repurchases
Section 1. Distributions of Net Income. The Trustees shall each year, or
more frequently if they so determine in their sole discretion, distribute to the
Shareholders of each Series, in shares of that Series, cash or otherwise, an
amount approximately equal to the Net Income attributable to the assets
belonging to such Series, and may from time to time distribute to the
shareholders of each Series, in shares of that Series, cash or otherwise, such
additional amounts, but only from the assets belonging to such Series, as they
may authorize. Except as otherwise permitted by paragraph (c) of Section 6 of
Article III in the case of a Multi-Class Series, all dividends and distributions
on Shares of a particular Series shall be distributed pro rata to the holders of
that Series in proportion to the number of Shares of that Series held by such
holders and recorded on the books of the Trust at the date and time of record
established for that payment of such dividend or distributions.
So long as any Series or class thereof shall use the amortized cost
method of determining its net asset value, the term "Net Income" as used with
respect to that particular Series or class shall mean (i) all interest income
(including both original issue and market discount accrued ratably to the date
of maturity) accrued on portfolio investments belonging to the Series or
attributable to the class, plus or minus (ii) realized gains and losses on
portfolio investments belonging to such Series or attributable to such class and
less (iii) all actual and accrued expenses and liabilities (including amortized
premium determined in accordance with accounting principles generally accepted
at the time) belonging to such Series or attributable to such class. At any
other time the term "Net Income" shall, subject to the last paragraph of this
section, mean: (i) such interest income plus or minus (ii) realized or
unrealized gains and losses on portfolio investments belonging to the Series or
attributable to such class determined by valuing the portfolio investments
belonging to the Series or attributable to such class in a manner consistent
with the requirements of the 1940 Act and any applicable provisions of the
By-Laws, and less (iii) all actual and accrued expenses and liabilities
belonging to such Series or attributable to such class. Such Net Income shall be
determined by the Trustees or by such person as they may authorize at the times
and in the manner provided in the By-Laws, and all of the Net Income of each
Series or class, to the extent there is a positive amount thereof since the last
determination of Net Income, shall be declared as a dividend to the Shareholders
of that Series or class. Determinations of Net Income of any Series or class
made by the Trustees, or by such person as they may authorize, in good faith,
shall be binding on all parties concerned. The foregoing sentence shall not be
construed to protect any Trustee, officer or agent of the Trust against any
liability to the Trust or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. If, for
any reason, the Net Income of any Series or class determined at any time is a
negative amount, the pro rata share of such negative amount allocable to each
Shareholder of such Series or class shall constitute a liability of such
Shareholder to that Series or class which shall be paid at such times and in
such manner as the Trustees may from time to time determine (i) out of the
accrued dividend account of such Shareholder, (ii) by reducing the number of
Shares of that Series or class in the account of such Shareholder or (iii)
otherwise. As a result of such determinations and declarations as a dividend of
the Net Income of any Series or class, the net asset value per Share of each
Series or class (the value of all the assets belonging to such Series or
attributable
<PAGE>
to such class, less total liabilities belonging to such Series or attributable
to such class, divided by the number of Shares of that Series or class
outstanding) is intended to remain at a consent amount immediately after each
such determination and declaration subject, however, to the power of the
Trustees as provided in Section 1 of Article III hereof to divide or combine the
Shares of any Series or class into a greater or lesser number.
The manner of determining Net Income of any Series or class may from
time to time be altered as necessary or desireable in the judgment of the
Trustees to conform such manner of determination to any other matter prescribed
or permitted by applicable law.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the Trust
or a person designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the Trustees may from
time to time authorize; and the Trust will pay therefor the net asset value
thereof, as determined in accordance with the By-Laws, next determined. Payment
for said Shares shall be made by the Trust to the Shareholder within seven days
after the date on which the request is made. The obligation set forth in this
Section 2 is subject to the provision that in the event that any time the New
York Stock Exchange is closed for other than weekends or holidays, or if
permitted by the rules of the Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets belonging to such Series or attributable to a
particular class thereof or during any other period permitted by order of the
Commission for the protection of investors, such obligations may be suspended or
postponed by the Trustees. The Trust may also purchase or repurchase Shares at a
price not exceeding the net asset value of such Shares in effect when the
purchase or repurchase or any contract to purchase or repurchase is made.
The redemption price may in any case or cases be paid wholly or partly
in kind if the Trustees determine that such payment is advisable in the interest
of the remaining Shareholders of the Series or class the Shares of which are
being redeemed. In making any such payment wholly or partly in kind, the Trust
shall, so far as may be practicable, deliver assets which approximate the
diversification of all of the assets belonging at the time to the Series (or
attributable to the class) the Shares of which are being redeemed. Subject to
the foregoing, the fair value, selection and quantity of securities or other
property so paid or delivered as all or part of the redemption price may be
determined by or under authority of the Trustees. In no case shall the Trust be
liable for any delay of any corporation or other person in transferring
securities selected for delivery as all or part of any payment in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in Section 1 of this Article VI: (i) if
at such times such Shareholder owns Shares of any Series or class having an
aggregate net asset value of less than an amount, determined from time to time
by the Trustees; or (ii) to the extent that such Shareholder owns Shares equal
to or in excess of a percentage determined from time to time by the Trustees of
the outstanding Shares of the Trust or of any Series or class.
<PAGE>
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, Manager or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
but nothing herein contained shall protect any Trustee against any liability to
which he would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust or any Series shall look only to the assets of the Trust, or, to the
extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series, only to the assets belonging to
the relevant Series, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee against
any liability to which such Trustee would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued on behalf of the Trust by the Trustees, by any officers or officer or
otherwise shall give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite that the same
was executed or made by or on behalf of the Trust or by them as Trustee or
Trustees or as officers or officer or otherwise and not individually and that
the obligations of such instrument are not binding upon any of them or the
shareholders individually but are binding only upon the assets and property of
the Trust or upon the assets belonging to the Series for the benefit of which
the Trustees have caused the note, bond, contract, instrument, certificate or
undertaking to be made or issued, and may contain such further recital as he or
they may deem appropriate, but the omission of any such recital shall
<PAGE>
not operate to bind any Trustee or Trustees or officers or officer or
Shareholders or any other person individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust, Series or Class. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by vote of at least 66-2/3% of the Shares of each
Series entitled to vote and voting separately by Series or by the Trustees by
written notice to the Shareholders. Any Series or class may be terminated at any
time by vote of at least 66-2/3% of the Shares of that Series or class or by the
Trustees by written notice to the Shareholders of that Series or class
Upon termination of the Trust (or any Series or class, as the case may
be), after paying or otherwise providing for all charges, taxes, expenses and
liabilities belonging, severally, to each Series (or the applicable Series or
attributable to the particular class, as the case may be), whether due or
accrued or anticipated as may be determined by the Trustees, the Trust shall in
accordance with such procedures as the Trustees consider appropriate reduce the
remaining assets belonging, severally, to each Series (or the applicable Series
or attributable to the particular class, as the case may be), to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds belonging to each Series (or the applicable Series or
attributable to the particular class, as the case may be), to the Shareholders
of that Series or class, as a Series or class, ratably according to the number
of Shares of that Series or class held by the several Shareholders on the date
of termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust to
be merged into or consolidated with another trust or company or its shares
exchanged under or pursuant to any state or federal statute, if any, or
otherwise to the extent permitted by law, if such merger or consolidation or
share exchange has been authorized by vote of a majority of the outstanding
Shares; provided that in all respects not governed by statute or applicable law,
the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation.
Section 6. Filing of Copies, References, Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto
<PAGE>
shall be filed by the Trust with the Secretary of The Commonwealth of
Massachusetts and with any other governmental office where such filing may from
time to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such amendments
have been made and as to any matters in connection with the Trust hereunder;
and, with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment, references to
this instrument, and all expressions like "herein," "hereof" and "hereunder",
shall be deemed to refer to this instrument as amended or affected by any such
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
Section 7. Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then Trustees when
authorized so to do by vote of a majority of the Shares entitled to vote, except
that amendments described in Article III, Section 5 hereof or having the purpose
of changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision contained herein shall not require authorization by Shareholder vote.
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and for
our successors and assigns this 10th day of September, 1993.
/s/ KENNETH J. COWAN /s/ HENRY L.P. SCHMELZER
- ------------------------- -----------------------
Kenneth J. Cowan Henry L.P. Schmelzer
/s/ JOSEPH M. HINCHEY /s/ JAMES H. SCOTT
- ------------------------- -----------------------
Joseph M. Hinchey James H. Scott
/s/ RICHARD S. HUMPHREY JR /s/ JOSEPH F. TURLEY
- ------------------------- -----------------------
Richard S. Humphrey, Jr. Joseph F. Turley
/s/ ROBERT B. KITTEREDGE /s/ PETER S. VOSS
- ------------------------- -----------------------
Robert B. Kitteredge Peter S. Voss
/s/ LAURENS MACLURE /s/ PENDLETON P. WHITE
- ------------------------- -----------------------
Laurens MacLure Pendleton P. White
/s/ SANDRA O. MOOSE
- -------------------------
Sandra O. Moose
<PAGE>
BY-LAWS
OF
NEL TAX EXEMPT MONEY MARKET TRUST
(Amended as of May 8, 1985)
ARTICLE 1
Agreement and Declaration
of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of NEL Tax Exempt Money Market Trust, the Massachusetts
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 Boston, Massachusetts.
ARTICLE 2
Meeting of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held, at any
time and at any place designated in the call of the meeting, when called by the
Chairman of the Board, if any, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Clerk or
an Assistant Clerk or by the officer or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special meeting
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his usual or
last known business or residence address or to give notice to him in person or
by telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither
<PAGE>
notice of a meeting nor a waiver of a notice need specify the purposes of the
meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees then
in office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
2.5 Action by Vote. When a quorum is present at any meeting, a majority of
Trustees present may take any action, except when a larger vote is expressly
required by law, by the Declaration of Trust or by these By-Laws.
2.6 Action by Writing. Except as required by law, any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting if a majority of the Trustees (or such larger proportion thereof as
shall be required by any express provision of the Declaration of Trust or these
By-Laws) consent to the action in writing and such written consents are filed
with the records of the meetings of Trustees. Such consent shall be treated for
all purposes as a vote taken at a meeting of Trustees.
2.7 Presence Through Communications Equipment. Except as required by law,
the Trustees may participate in a meeting of Trustees by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Clerk, and such other officers, if any, as the
Trustees from time to time may in their discretion elect. The Trust may also
have such agents as the Trustees from time to time may in their discretion
appoint. If a Chairman of the Board is elected, he shall be a Trustee and may
but need not be a shareholder; and any other officer may be but none need be a
Trustee or shareholder. Any two or more offices may be held by the same person.
3.2 Election and Tenure. The President, the Treasurer, the Clerk and such
other officers as the Trustees may in their discretion from time to time elect
shall each be elected by the Trustees to serve until his successor is elected or
qualified,
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or until he sooner dies, resigns, is removed or becomes disqualified. Each
officer shall hold office and each agent shall retain authority at the pleasure
of the Trustees.
3.3 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.4 President and Vice Presidents. The President shall have the duties and
powers specified in these By-Laws and shall have such other duties and powers as
may be determined by the Trustees. (5/8/85)
Any Vice President shall have such duties and powers as shall be designated
from time to time by the Trustees.
3.5 Chief Executive Officer. The Chief Executive Officer of the Trust shall
be the Chairman of the Board, the President or such other officer as is
designated by the Trustees and shall, subject to the control of the Trustees,
have general charge and supervision of the business of the Trust and, except as
the Trustees shall otherwise determine, preside at all meetings of the
stockholders and of the Trustees. If no such designation is made, the President
shall be the Chief Executive Officer. (5/8/85)
3.6 Chairman of the Board. If a Chairman of the Board of Trustees is
elected, he shall have the duties and powers specified in these By-Laws and
shall have such other duties and powers as may be determined by the Trustees.
(5/8/85)
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. (5/8/85)
3.8 Clerk. The Clerk shall record all proceedings of the shareholders and
the Trustees in books to be kept therefor, which books or a copy thereof shall
be kept at the principal office of the Trust. In the absence of the Clerk from
any meeting of the shareholders or Trustees, an assistant Clerk, or if there
be none or if he is absent, a temporary clerk chosen at
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such meeting shall record the proceedings thereof in the aforesaid books.
(5/8/85)
3.9 Resignations and Removals. Any officer may resign at any time by
written instrument signed by him and delivered to the President or the Clerk or
to a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. The Trustees may remove any
officer with or without cause. Except to the extent expressly provided in a
written agreement with the Trust, no officer resigning and no officer removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal.
(5/8/85)
ARTICLE 4
Indemnification
4.1 Trustees, Officers, etc. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of any alleged act or
omission as a Trustee or officer or by reason of his being or having been such a
Trustee or officer, except with respect to any matter as to which such Covered
Person shall have been finally adjudicated in any such action, suit or other
proceeding not to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interest of the Trust and except that no
Covered Person shall be indemnified against any liability to the Trust or its
shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person, may be paid from
time to time by the Trust in advance of the final disposition of any such
action, suit or proceeding on the condition that the amounts so paid shall be
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repaid to the Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article.
4.2 Compromise Payment. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 4.1 above, pursuant to
a consent decree or otherwise, no such indemnification either for said payment
or for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that it involved
such indemnification, (a) by a disinterested majority of the Trustees then in
office; or (b) by a majority of the disinterested Trustees then in office; or
(c) by any disinterested person or persons to whom the question may be referred
by the Trustees, provided that in the case of approval pursuant to clause (b) or
(c) there has been obtained an opinion in writing of independent legal counsel
to the effect that such Covered Person appears to have acted in good faith in
the reasonable belief that his or her action was in the best interests of the
Trust and that such indemnification would not protect such person against any
liability to the Trust or its shareholders to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of office; or (d) by
vote of shareholders holding a majority of the shares entitled to vote thereon,
exclusive of any shares beneficially owned by any interested Covered Person.
Approval by the Trustees pursuant to clause (a) or (b) or by any disinterested
person or persons pursuant to clause (c) of this Section shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
the best interests of the Trust or to have been liable to the Trust or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
4.3 Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article 4, the term "Covered
Person" shall include such person's heirs; executors and administrators; and
"interested Covered Person" is one against whom the action, suit or proceedings
in question or another action, suit or other proceeding on the same or similar
grounds is then or has been pending; and a "disinterested Trustee" or
"disinterested person" is a Trustee or a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been
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pending. Nothing contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers shall render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as from time to time otherwise provided by the
Trustees, the initial fiscal year of the Trust shall end on such date as is
determined in advance or in arrears by the Treasurer and subsequent fiscal years
shall end on such date in subsequent years.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced die with
the word "Massachusetts", together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all checks, notes, drafts
and other obligations and all registration statements and amendments thereto and
all
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applications and amendments thereto to the Securities and Exchange Commission
shall be signed by the Chairman, if any, the President, any Vice President or
the Treasurer or any of such other officers or agents as shall be designated for
that purpose by a vote of the Trustees.
ARTICLE 9
Provisions Relating to the
Conduct of the Trust's Business
9.1 Certain Definitions. When used herein the following words shall have
the following meanings: "Distributor" shall mean any one or more corporations,
firms or associations which have distributor's or principal underwriter's
contracts in effect with the Trust providing that redeemable shares of any class
or series issued by the Trust shall be offered and sold by such Distributor.
"Adviser" shall mean any corporation, firm or association which may at the time
have an advisory or management contract with the Trust.
9.2 Limitation on Dealings with Officers or Trustees. The Trust will not
lend any of its assets to the Distributor or Adviser or to any officer or
director of the Distributor or Adviser or any officer or Trustee of the Trust
and shall not permit any officer or Trustee or any officer or director of the
Distributor or Adviser, to deal for or on behalf of the Trust with himself as
principal or agent, or with any partnership, association or corporation in which
he has a financial interest; provided that the foregoing provisions shall not
prevent (a) officers and Trustees of the Trust or officers and directors of the
Distributor or Adviser from buying, holding or selling shares in the Trust or
from being partners, officers or directors of or otherwise financially
interested in the Distributor or the Adviser; (b) a purchase or sale of
securities or other property if such transaction is permitted by or is exempt or
exempted from the provisions of the Investment Company Act of 1940 and does not
involve any commission or profit to any security dealer who is, or one or more
of whose partners, shareholders, officers or directors is, an officer or Trustee
of the Trust or an officer or director of the Distributor or Adviser; (c)
employment of legal counsel, registrars, transfer agents, shareholder servicing
agents, dividend disbursing agents or custodians who are, or any one of which
has a partner, shareholder, officer or director who is, an officer or Trustee of
the Trust or an officer or director of the Distributor or Adviser if only
customary fees are charged for services to the Trust; (d) sharing of
statistical, research, legal and management expenses and office hire and
expenses with any other investment company in which an officer or Trustee of the
Trust or an officer or director of the Distributor or Adviser is an
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officer or director or otherwise financially interested.
9.3 Limitation on Dealing in Securities of the Trust by Certain Officers,
Trustees, Distributor or Adviser. Neither the Distributor nor Adviser, nor any
officer or Trustee of the Trust or officer or director of the Distributor or
Adviser shall take long or short positions in securities issued by the Trust;
provided, however, that:
(a) The Distributor may purchase from the Trust and otherwise deal in
shares issued by the Trust pursuant to the terms of its contract with the Trust;
(b) Any officer or Trustee of the Trust or officer or director of the
Distributor or Adviser or any trustee or fiduciary for the benefit of any of
them may at any time, or from time to time, purchase from the Trust or from the
Distributor shares issued by the Trust at the price available to the public or
to such officer, Trustee, director or fiduciary, no such purchase to be in
contravention of any applicable state or federal requirement; and
(c) The Distributor or the Adviser may at any time, or from time to time,
purchase for investment shares issued by the Trust.
9.4 Securities and Cash of the Trust to be held by Custodian Subject to
Certain Terms and Conditions.
(a) All securities and cash owned by the Trust shall, as hereinafter
provided, be held by or deposited with one or more banks or trust companies
having (according to its last published report) not less than $2,000,000
aggregate capital, surplus and undivided profits (any such bank or trust company
being hereby designated as "Custodian"), provided such a Custodian can be found
ready and willing to act. The Trust may, or may permit any Custodian to, deposit
all or any part of the securities owned by any class or series of shares of the
Trust in a system for the central handling of securities established by a
national securities exchange or national securities association registered with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, or such other person as may be permitted by said Commission, including,
without limitation, a clearing agency registered under Section 17A of said
Securities Exchange Act of 1934, pursuant to which system all securities of any
particular class or series of any issue deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry, without
physical delivery of such securities.
(b) The Trust shall enter into a written contract with
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each Custodian regarding the powers, duties and compensation of such Custodian
with respect to the cash and securities of the Trust held by such Custodian.
Said contract and all amendments thereto shall be approved by the Trustees.
(c) The Trust shall upon the resignation or inability to serve of any
Custodian or upon change of any Custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor Custodian;
(ii) require that the cash and securities owned by any class or series
of shares of the Trust and in the possession of the resigning or
disqualified Custodian be delivered directly to the successor Custodian;
and
(iii) in the event that no successor Custodian can be found, submit to
the shareholders, before permitting delivery of the cash and securities
owned by any class or series of shares of the Trust and in the possession
of the resigning or disqualified Custodian otherwise than to a successor
Custodian, the question whether that class or series shall be liquidated or
shall function without a Custodian.
9.5 Limitations on Investment by the Trust in Securities of Any One Issuer.
The Trust may not purchase for its portfolio or for the portfolio of any class
or series of the Trust's shares the securities of any issuer if immediately
after such purchase the Trust or that class or series would thereupon hold
securities representing more than 10% of the voting securities of such issuer as
disclosed in the last available financial statements of such issuer. This
limitation shall not apply to obligations issued or guaranteed by the government
of the United State of America or to obligations of any corporation organized
under a general Act of Congress if such corporation is an instrumentality of the
United States. For purposes of this limitation, each state and each political
subdivision, agency, authority or instrumentality thereof and each multistate
agency and authority shall be considered a separate issuer.
9.6 Determination of Net Asset Value. The Trustees or any officer or
officers or agent or agents of the Trust designated from time to time for this
purpose by the Trustees shall determine at least once daily the net income and
the value of all the assets attributable to any class or series of shares of the
Trust on each day upon which the New York Stock Exchange is open for
unrestricted trading and at such other times as the Trustees shall
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designate. The value of such assets so determined, less total liabilities of
belonging to that class or series or shares (exclusive of capital stock and
surplus) shall be the net asset value until a new asset value is determined by
the Trustees or such officers or agents. As a result of the provisions for the
determination and declaration as a dividend of net income provided for in the
Declaration of Trust, the net asset value per share of each class or series of
shares is intended to remain at a constant amount immediately after each such
determination and declaration. Subject to the Trustees' power to alter the
method for determining net asset value, all securities shall be valued in
accordance with the amortized cost method, as permitted by applicable law or
regulation from time to time, for purposes of determining net asset value. In
determining the net asset value the Trustees or such officers or agents may
include in liabilities such reserves for taxes, estimated accrued expenses and
contingencies in accordance with accounting principles generally accepted at the
time as the Trustees or such officers or agents may in their best judgment deem
fair and reasonable under the circumstances. The manner of determining net asset
value may from time to time be altered as necessary or desirable in the judgment
of the Trustees to conform it to any other method prescribed or permitted by
applicable law or regulation. Determinations of net asset value made by the
Trustees or such officers or agents in good faith shall be binding on all
parties concerned. The foregoing sentence shall not be construed to protect any
Trustee, officer or agent of the Trust against any liability to the Trust or its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE 10
Amendments to the By-Laws
10.1 General. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees.
A true copy.
ATTEST:
/s/WENDY WILES
------------------
Assistant Clerk
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EXHIBIT 99.B5(A)
ADVISORY AGREEMENT BETWEEN REGISTRANT AND NEW ENGLAND FUNDS
MANAGEMENT, L.P.
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
Advisory Agreement
AGREEMENT made this 2nd day of January, 1996 by and between NEW ENGLAND
TAX EXEMPT MONEY MARKET TRUST (the "Fund"), and NEW ENGLAND FUNDS MANAGEMENT,
L.P., a Delaware limited partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement
setting forth the terms upon which the Manager (or certain other parties acting
pursuant to delegation from the Manager) will perform certain services for the
Fund;
NOW, THEREFORE, in consideration of the premises and covenants
hereinafter contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own
expense, to furnish such services (either directly or pursuant to
delegation to other parties as permitted by Sections 1(b) and (c)
hereof) and to assume the obligations herein set forth, for the
compensation herein provided. The Manager shall, unless otherwise
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written
agreement with such Sub-Adviser that meets the requirements of Section
15 of the Investment Company Act of 1940 and the rules thereunder (the
"1940 Act") applicable to contracts for service as investment adviser of
a registered investment company (including without limitation the
requirements for approval by the trustees of the Fund and the
shareholders of the Fund), subject, however, to such exemptions as may
be granted by the Securities and Exchange Commission. Any Sub-Adviser
may (but need not) be affiliated with the Manager. If different
Sub-Adviser may (but need not) be affiliated with the Manager. If
different Sub-Advisers are engaged to provide Portfolio Management
Services with respect to different segments of the portfolio of the
Fund, the Manager shall determine, in the manner described in the
prospectus of the Fund from
<PAGE>
time to time in effect, what portion of the assets belonging to the Fund
shall be managed by each Sub-Adviser.
(C) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to
one or more other parties (each such party, an "Administrator") selected
by the Manager. Any Administrator may (but need not) be affiliated with
the Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Fund, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional
investment research as shall be necessary or advisable for the
management of the investment and reinvestment of the assets belonging to
the Fund in accordance with the Fund's investment objectives and
policies;
(b) taking such steps as are necessary to implement the
investment policies of the Fund by purchasing and selling of securities,
including the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Fund.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon
from time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the
affairs of the Fund (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are
directors, officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered investment
company) of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management
Services provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with
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applicable laws and with the Fund' investment policies, restrictions and
guidelines, if the Manager has delegated to one or more Sub-Advisers any or all
of its responsibilities hereunder with respect to the provision of Portfolio
Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered
investment company) of the Manager, any Sub-Adviser or any
Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is
a party;
(I) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meeting of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
3
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(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or
regulatory authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 0.40% of the first $100 million of the
average daily net assets of the Fund and 0.30% over $100 million of such assets,
respectively (or such lesser amount as the Manager may from time to time agree
to receive). Such compensation shall be payable monthly in arrears or at such
other intervals, not less frequently than quarterly, as the Board of Trustees of
the Fund may from time to time determine and specify in writing to the Manager.
The Manager hereby acknowledges that the Fund's obligation to pay such
compensation is binding only on the assets and property belonging to the Fund.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the Fund
are qualified for sale, the Manager shall pay such excess. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Fund or belonging to the Fund are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Fund.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the
4
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Fund; and that the existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder except as otherwise provided in
the Agreement and Declaration of Trust of the Fund, the partnership agreement of
the Manager or specific provisions of applicable law.
10. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Fund, and (ii) by
vote of a majority of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called
for the purpose of voting on, such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Manager either by vote of the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities
of the Fund;
(c) this Agreement shall automatically terminate in the event of
its assignment;
(d) this Agreement may be terminated by the Manager on ninety
days' written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Fund to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to
the provisions of the Fund's Distribution Agreement relating to the Fund
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically approved by
vote of a majority of the outstanding voting securities of the Fund and
by vote of a majority of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called
for the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the Fund
and by vote of a majority of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for the
purpose of voting on such approval.
5
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12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the 1940 Act. References in this Agreement to any
assets, property or liabilities "belonging to" the Fund shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
NEW ENGLAND TAX EXEMPT MONEY NEW ENGLAND
MARKET TRUST FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/HENRY L.P. SCHMELZER
- ---------------------------
Name: Henry L.P. Schmelzer
Title: President
By: /s/BRUCE R. SPECA
-------------------------
Name: Bruce R. Speca
Title: Executive Vice President
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Tax Exempt Money Market Trust (the "Fund") is on file with the Secretary
of The Commonwealth of Massachusetts, and notice is hereby given that this
Agreement is executed with respect to the Fund on behalf of the Fund by officers
of the Fund as officers and not individually and that the obligations of or
arising out of this Agreement are not binding upon any of the trustees, officers
or shareholders individually but are binding only upon the assets and property
belonging to the Fund.
EXHIBIT 99.B5(A)
SUB-ADVISORY AGREEMENT BETWEEN NEW ENGLAND FUNDS MANAGEMENT, L.P. AND
BACK BAY ADVISORS, L.P.
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
Sub-Advisory Agreement
(Back Bay Advisors)
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 2, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Back Bay Advisors, L.P., a Delaware
limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated January
2, 1996 (the "Advisory Agreement") with New England Funds Tax Exempt Money
Market Trust (the "Trust"), pursuant to which the Manager provides portfolio
management and administrative services to the Trust (the "Trust");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory Agreement
to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the Manager
and of any administrator appointed by the Manager (the "Administrator"),
manage the investment and reinvestment of the assets of the Trust, and
have the authority on behalf of the Trust to vote all proxies and exercise
all other rights of the Trust as a security holder of companies in which
the Trust from time to time invests. The Sub-Adviser shall manage the
Trust in conformity with (1) the investment objective, policies and
restrictions of the Trust set forth in the Trust's prospectus and
statement of additional information relating to the Trust, (2) any
additional policies or guidelines established by the Manager or by the
Trust's trustees that have been furnished in writing to the Sub-Adviser
and (3) the provisions of the Internal Revenue Cod (the "Code") applicable
to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"),
and with all applicable provisions of law, including without limitation
all applicable provisions of the Investment Company Act of 1940 (the "1940
Act") and the rules and regulations thereunder. Subject to the
<PAGE>
foregoing, the Sub-Adviser is authorized, in its discretion and without
prior consultation with the Manager, to buy, sell, lend and otherwise
trade in any stocks, bonds and other securities and investment instruments
on behalf of the Trust, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover or
any tax considerations; and the majority or the whole of the Trust may be
invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning portfolio transactions
and performance of the Trust in such form as may be mutually agreed upon,
and agrees to review the Trust and discuss the management of it. The
Sub-Adviser shall permit all books and records with respect to the Trust
to be inspected and audited by the Manager and the Administrator at all
reasonable times during normal business hours, upon reasonable notice. The
Sub-Adviser shall also provide the Manager with such other information and
reports as may reasonably be requested by the Manager from time to time,
including without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to have
authorized to give written and/or oral instructions to custodians of
assets of the Trust.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Trust' Custodian (as
defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Trust, cash requirements and cash available for investment in the Trust,
and all other information as may be reasonably necessary for the
Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Trust and agrees
during the continuance of this Agreement to furnish the Sub-Adviser copies
of any revisions or supplements thereto at, or, if practicable, before the
time the revisions or supplements become effective. The Manager agrees to
furnish the Sub-Adviser with minutes of meetings of the trustees of the
Trust applicable to the Trust to the extent they may affect the duties of
the Sub-Adviser, and with copies of any financial statements or reports
made by the Trust to its shareholders, and any further materials or
information which the Sub-Adviser may reasonably request to enable it to
perform its functions under this Agreement.
2
<PAGE>
3. Custodian. The Manager shall provide the Sub-Adviser with a copy
of the Trust's agreement with the custodian designated to hold the assets
of the Trust (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the
Sub-Adviser a reasonable time in advance of the effectiveness of such
modifications. The assets of the Trust shall be maintained in the custody
of the Custodian identified in, and in accordance with the terms and
conditions of, the Custody Agreement (or any sub-custodian properly
appointed as provided in the Custody Agreement). The Sub-Adviser shall
have no liability for the acts or omissions of the Custodian, unless such
act or omission is taken in reliance upon instruction given to the
Custodian by a representative of the Sub-Adviser properly authorized to
give such instruction under the Custody Agreement. Any assets added to the
Trust shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Back Bay Advisors, L.P." and
that all use of any designation consisting in whole or part of "Back Bay
Advisors, L.P." under this Agreement shall inure to the benefit of the
Sub-Adviser. The Manager on its own behalf and on behalf of the Trust
agrees not to use any such designation in any advertisement or sales
literature or other materials promoting the Trust, except with the prior
written consent of the Sub-Adviser. Without the prior written consent of
the Sub-Adviser, the Manager shall not, and the Manager shall use its best
efforts to cause the Trust not to, make representations regarding the
Sub-Adviser in any disclosure document, advertisement or sales literature
or other materials relating to the Trust. Upon termination of this
Agreement for any reason, the Manager shall cease, and the Manager shall
use its best efforts to cause the Trust to cease, all use of any such
designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to
be paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be
liable for any organizational, operational or business expenses of the
Manager or the Trust including, without limitation, (a) interest and
taxes, (b) brokerage commissions and other costs in connection with the
purchase or sale of securities or other investment instruments with
respect to the Trust, and (c) custodian fees and expenses. Any
reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or
participants in a joint venture. The Sub-Adviser will pay its own expenses
incurred in furnishing the services to be provided by it pursuant to this
Agreement. Neither the Sub-Adviser nor any affiliated person thereof shall
be entitled to any compensation from the Manager or the Trust with respect
to service by any affiliated person of the Sub-Adviser as an officer or
trustee of the Trust (other than the compensation to the Sub-Adviser
payable by the Manager pursuant to Section 7 hereof).
3
<PAGE>
6. Purchase and Sale of Assets. The Sub-Adviser shall place all
orders for the purchase and sale of securities for the Trust with brokers
or dealers selected by the Sub-Adviser, which may include brokers or
dealers affiliated with the Sub-Adviser, provided such orders comply with
Rule 17e-1 under the 1940 Act in all respects. To the extent consistent
with applicable law, purchase or sell orders for the Trust may be
aggregated with contemporaneous purchase or sell orders of other clients
of the Sub-Adviser. The Sub-Adviser shall use its best efforts to obtain
execution of transactions for the Trust at prices which are advantageous
to the Trust and at commission rates that are reasonable in relation to
the benefits received. However, the Sub-Adviser may select brokers or
dealers on the basis that they provide brokerage, research or other
services or products to the Trust and/or other accounts serviced by the
Sub-Adviser. To the extent consistent with applicable law, the Sub-Adviser
may pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission or dealer
spread another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research products and/or services provided by such broker or dealer. This
determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or
the overall responsibilities which the Sub-Adviser and its affiliates have
with respect to the Trust or to accounts over which they exercise
investment discretion. Not all such services or products need be used by
the Sub-Adviser in managing the Trust.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the
Sub-Adviser hereunder, the Manager shall pay the Sub-Adviser compensation
at the annual rate of 0.200% of the first $100 million of the average
daily net assets of the Trust and 0.150% in excess of $100 million of such
assets, respectively (or such lesser amount as the Sub-Adviser may from
time to time agree to receive). Such compensation shall be payable monthly
in arrears or at such other intervals , not less frequently than
quarterly, as the Manager is paid by the Trust pursuant to the Advisory
Agreement.
8. Non-Exclusivity. The Manager and the Trust agree that the
services of the Sub-Adviser are not to be deemed exclusive and that the
Sub-Adviser and its affiliates are free to act as investment manager and
provide other services to various investment companies and other managed
accounts, except as the Sub-Adviser and the Manager or the Administrator
may otherwise agree from time to time in writing before or after the date
hereof. This Agreement shall not in any way limit or restrict the
Sub-Adviser or any of its directors, officers, employees or agents from
buying, selling or trading any securities or other investment instruments
for its or their own account or for the account of others for whom it or
they may be acting, provided that such activities do not adversely affect
or otherwise impair the performance by the Sub-Adviser of its duties and
obligations under this Agreement. The Manager and the Trust recognize and
agree that
4
<PAGE>
the Sub-Adviser may provide advice to or take action with respect to other
clients, which advice or action, including the timing and nature of such
action, may differ from or be identical to advice given or action taken
with respect to the Trust. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise
provided or authorized, have no authority to act for or represent the
Trust or the Manager in any way or otherwise be deemed an agent of the
Trust or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its
officers, directors, partners, employees or agents (the "Indemnified
Parties") shall be subject to any liability to the Manager, the Trust, the
Trust or any shareholder of the Trust for any error of judgment, any
mistake of law or any loss arising out of any investment or other act or
omission in the course of, connected with, or arising out of any service
to be rendered under this Agreement, except by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser
of its obligations and duties hereunder. The Manager shall hold harmless
and indemnify the Sub-Adviser for any loss, liability, cost, damage or
expense (including reasonable attorneys fees and costs) arising from any
claim or demand by any past or present shareholder of the Trust that is
not based upon the obligations of the Sub-Adviser under this Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved
at least annually (I) by the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the
Trust, and (ii) by vote of a majority of the trustees of the Trust
who are not interested persons of the Trust, the Manager or the
Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Trust;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
5
<PAGE>
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by
law, such amendment shall also have been approved by vote of a majority of
the outstanding voting securities of the Trust and by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust,
the Manager or the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval.
12. Certain Definitions. For the purpose of this Agreement, the
terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have their
respective meanings defined in the 1940 Act, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission
under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in
the prospectus of the Trust shall perform the day-to-day portfolio
management duties described therein until the Sub-Adviser notifies
the Manager that one or more other employees, officers or agents of
the Sub-Adviser, identified in such notice, shall assume such duties
as of a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced to
the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS BACK BAY ADVISORS, L.P.
MANAGEMENT, L.P.
By NEF Corporation, its general partner By Back Bay Advisors, Inc.,
its general partner
By:/s/BRUCE R. SPECA By:/s/CHARLES T. WALLIS
- -------------------------------- ------------------------
Name: Bruce R. Speca Name: Charles T. Wallis
Title: Executive Vice President Title: President
EXHIBIT 99.B6
DISTRIBUTION AGREEMENT BETWEEN REGISTRANT AND NEW ENGLAND FUNDS, L.P.
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of May, 1991 by and between NEW ENGLAND TAX
EXEMPT MONEY MARKET TRUST, a Massachusetts business trust (the "Trust"), and TNE
INVESTMENT SERVICES CORPORATION, a Massachusetts corporation (the
"Distributor").
W I T N E S S E T H:
In consideration of the covenants hereinafter contained, the Trust and the
Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Shares") of the Trust
during the term of this Agreement. The Trust reserves the right, however,
to refuse at any time or times to sell any Shares hereunder for any reason
deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Shares:
(a) The Distributor shall have the right, as principal, to purchase
Shares from the Trust at their net asset value and to sell such
shares to the public against orders therefor and to dealers against
orders therefor, all at net asset value per share in accordance with
the provisions of the Trust's agreement and declaration of trust,
by-laws and current prospectus. No commission or other compensation
for selling or obtaining subscriptions for Shares shall be paid by
the Trust or charged as a part of the subscription or selling price
on any sale or subscription.
(b) Prior to the time of delivery of any shares by the Trust to, or
on the order of, the Distributor, the Distributor shall pay or cause
to be paid to the Trust or to its order an amount in Boston or New
York clearing house funds equal to the applicable net asset value of
such shares. The Distributor shall retain so much of any sales
charge or underwriting discount as is not allowed by it as a
concession to dealers.
3. Trust Issuance of Shares. The delivery of Shares shall be made promptly by
a credit to a shareholder's open account. The Trust reserves the right (a)
to issue Shares at any time directly to the shareholders of the Trust as a
stock dividend or stock split, (b) to issue to such shareholders shares of
the Trust, or rights to subscribe to shares of the Trust, as all or part
of any dividend that may be distributed to shareholders of the Trust or as
all or part of any optional or alternative dividend that may be
distributed to shareholders of the Trust, and (c) to sell Shares in
accordance with the current prospectus of the Trust.
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<PAGE>
4. Repurchase. The Distributor shall act as agent for the Trust in connection
with the repurchase of Shares by the Trust to the extent and upon the
terms and conditions set forth in the current prospectus of the Trust, and
the Trust agrees to reimburse the Distributor, from time to time upon
demand, for any reasonable expenses incurred in connection with such
repurchases.
5. Undertaking Regarding Sales. The Distributor shall use reasonable efforts
to sell Shares but does not agree hereby to sell any specific number of
Shares and shall be free to act as distributor of the shares of other
investment companies. Shares will be sold by the Distributor only against
orders therefor. The Distributor shall not purchase Shares from anyone
except in accordance with Section 4 and shall not take "long" or "short"
positions in Shares contrary to the agreement and declaration of trust or
by-laws of the Trust.
6. Compliance. The Distributor shall conform to the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (the "NASD") and
the sale of securities laws of any jurisdiction in which it sells,
directly or indirectly, any Shares. The Distributor agrees to make timely
filings, with the Securities and Exchange Commission in Washington, D.C.
(the "SEC"), the NASD, and such other regulatory authorities as may be
required, of any sales literature relating to the Trust and intended for
distribution to prospective investors. The Distributor also agrees to
furnish to the Trust sufficient copies of any agreements or plans it
intends to use in connection with any sales of Shares in adequate time for
the Trust to file and clear them with the proper authorities before they
are put in use (which the Trust agrees to use its best efforts to do as
expeditiously as reasonably possible), and not to use them until so filed
and cleared.
7. Registration and Qualification of Shares. The Trust agrees to execute
such papers and to do such acts and things as shall from time to time be
reasonably requested by the Distributor for the purpose of qualifying and
maintaining qualification of the Shares for sale under the so-called Blue
Sky Laws of any state or for maintaining the registration of the Trust and
of the Shares under the federal Securities Act of 1933 and the federal
Investment Company Act of 1940 (the "1940 Act"), to the end that there
will be available for sale from time to time such number of Shares as the
Distributor may reasonably be expected to sell. The Trust shall advise the
Distributor promptly of (a) any action of the SEC or any authorities of
any state or territory, of which it may be advised, affecting registration
or qualification of the Trust or the Shares, or rights to offer Shares for
sale, and (b) the happening of any event which makes untrue any statement
or which requires the making of any change in the Trust's registration
statement or its prospectus in order to make the statements therein not
misleading.
8. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its officers
or employees as such is or shall be an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control
and conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.
-2-
<PAGE>
9. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Shares, the
Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and
distributing any prospectus for use in offering Shares for sale, and
all other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Shares for sale.
10. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may be
a shareholder, director, officer, employee or agent of, or be otherwise
interested in, the Distributor, any affiliated person of the Distributor,
any organization in which the Distributor may have an interest or any
organization which may have an interest in the Distributor; that the
Distributor, any such affiliated person or any such organization may have
an interest in the Trust; and that the existence of any such dual interest
shall not affect the validity hereof or of any transaction hereunder
except as otherwise provided in the agreement and declaration of trust or
by-laws of the Trust, in the articles of organization or by-laws of the
Distributor or by specific provision of applicable law.
11. Words "New England" and Logo. New England Mutual Life Insurance Company
("The New England"), the parent of the Distributor, retains proprietary
rights in the words "New England" and the ship logos, both of which may be
used by the Trust only with the consent of the Distributor, which is
authorized by The New England to give such consent as provided herein. The
Distributor consents to the use by the Trust of the name "New England Tax
Exempt Money Market Trust" or any other name embodying the words "New
England" and of The New England's ship logos, in such forms as the
Distributor shall in writing approve, but only on condition and so long as
(i) this Agreement shall remain in full force and (ii) the Trust shall
fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No
such name shall be used by the Trust at any time or in any place or for
any purposes or under any conditions except as in this section provided.
The foregoing authorization by the Distributor as agent of The New England
to the Trust to use said words and ship logos as part of a business or
name is not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees that
as between the Distributor and the Trust, the Distributor has the
exclusive right so to use, or authorize others to use, said words and
logos, and the Trust agrees to take such action as may reasonably be
requested by the Distributor to give full effect to the provisions of this
section (including, without limitation, consenting to such use of said
words and logos). Without limiting the generality of the foregoing, the
Trust agrees that, upon any termination of this Agreement by either party
or upon the violation of any of its provisions by the Trust, the Trust
will, at the request of the Distributor made within six months after the
Distributor has knowledge of such termination or violation, use its best
efforts to change the name of the Trust so as to eliminate all reference,
if any, to the words "New
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<PAGE>
England" and will not thereafter transact any business in a name
containing the words "New England" in any form or combination whatsoever,
or designate itself as the same entity as or successor to any entity of
such name, or otherwise use the words "New England" or any other reference
to the Distributor. Such covenants on the part of the Trust shall be
binding upon it, its trustees, officers, shareholders, creditors and all
other persons claiming under or through it.
12. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect so long as such continuation is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by the
vote of a majority of the votes which may be cast by shareholders of
the Trust and (ii) by a vote of a majority of the Board of Trustees
of the Trust who are not interested persons of the Distributor or
the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days'
notice to the Distributor either by vote of a majority of the
Trust's Board of Trustees then in office or by the vote of a
majority of the votes which may be cast by shareholders of the
Trust.
(c) This Agreement shall automatically terminate in the event of
its assignment.
(d) This Agreement may be terminated by the Distributor on ninety
days' written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
13. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Trust" means (1) 67% or more of the votes of the
Trust present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares
of the Trust entitled to vote at such meeting are present; or (2)
the vote of the holders of more than 50% of the outstanding shares
of the Trust entitled to vote at such meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and
"assignment" shall have their respective meanings as defined in the
1940 Act subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
14. Amendment. This Agreement may be amended at any time by mutual consent of
the parties, provided that such consent on the part of the Trust shall be
approved (i) by the Board of Trustees of the Trust or by vote of a
majority of the votes which may be cast by
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<PAGE>
shareholders of the Trust and (ii) by a vote of a majority of the Board of
Trustees of the Trust who are not interested persons of the Distributor or
the Trust cast in person at a meeting called for the purpose of voting on
such approval.
15. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Shares
shall pass, in Boston, Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND CASH MANAGEMENT TRUST
By /s/ Henry L.P. Schmelzer
--------------------------------
TNE INVESTMENT SERVICES CORPORATION
By /s/ Bruce R. Speca
---------------------------------
A copy of the Agreement and Declaration of Trust establishing New England
Tax Exempt Money Market Trust is on file with the Secretary of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Trust.
-5-
EXHIBIT 99.B8
CUSTODIAN AGREEMENT BETWEEN REGISTRANT AND STATE STREET BANK AND TRUST
COMPANY AND AMENDMENT THERETO
<PAGE>
AMENDMENT TO THE
CUSTODIAN AGREEMENT
AGREEMENT made this 12th day of September, 1991 by and between STATE
STREET BANK AND TRUST COMPANY ("Custodian") and NEW ENGLAND TAX EXEMPT MONEY
MARKET TRUST, formerly NEL TAX EXEMPT MONEY MARKET TRUST, (the "Fund").
WITNESSETH THAT:
WHEREAS, the Custodian and the Fund are parties to a Custodian
Agreement dated April 21, 1983 (as amended to date, the "Agreement") which
governs the terms and conditions under which the Custodian maintains
custody of the securities and other assets of the Fund:
NOW THEREFORE, the Custodian and the Fund hereby amend the terms of the
Custodian Agreement and mutually agree to the following: Replace
paragraph 3.I of Section II Custodian with the following new paragraph
3.I:
I. Street Delivery. Upon receipt of proper instructions, which
in the case of registered securities may be standing
instructions, to release and deliver securities for the account
of the Fund, 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;
IN WITNESS WHEREOF, each of the parties has caused this Amendment to
be executed in its name and on its behalf by a duly authorized officer as
of the day and year first above written.
ATTEST NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
/s/SHEILA M. BARRY /s/HENRY L.P. SCHMELZER
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Assistant Secretary President
ATTEST STATE STREET BANK AND TRUST COMPANY
/S/M. FITZGERALD /s/T. B. HAGERTY
- --------------------- ---------------------------
Assistant Secretary Vice President
<PAGE>
AMENDMENT TO THE
CUSTODIAN AGREEMENT
AGREEMENT made this 12th day of September, 1991 by and between STATE
STREET BANK AND TRUST COMPANY ("Custodian") and NEW ENGLAND TAX EXEMPT
MONEY MARKET TRUST, formerly NEL TAX EXEMPT MONEY MARKET TRUST, (the
"Fund").
WITNESSETH THAT:
WHEREAS, the Custodian and the Fund are parties to a Custodian
Agreement dated April 21, 1983 (as amended to date, the "Agreement") which
governs the terms and conditions under which the Custodian maintains
custody of the securities and other assets of the Fund:
NOW THEREFORE, the Custodian and the Fund hereby amend the terms of
the Custodian Agreement and mutually agree to the following:
Insert as the final paragraph under Section II.6.A. Indemnification:
The Fund agrees to indemnify and hold harmless the Custodian and
its nominee from and against all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees)
incurred or assessed against it or its nominee in connection with
the performance of this Contract, except such as may arise from
it or its nominee's own negligent action, negligent failure to
act or willful misconduct. The Custodian is authorized to charge
any account of the Fund for such items and its fees. To secure
any such authorized charges and any advances of cash or
securities made by the Custodian to or for the benefit of the
Fund for any purposes which result in the Fund incurring an
overdraft at the end of any business day or for extraordinary or
emergency purposes during any business day, the Fund hereby
grants to the Custodian a security interest in and pledges to the
Custodian securities held for it by the Custodian, in an amount
not to exceed the lesser of the dollar amounts borrowed or ten
percent of the Fund's gross assets, the specific securities to be
designated in writing from time to time by the Fund or its
investment adviser; provided, however, that (1) if from time to
time neither the Fund nor its investment adviser shall have
designated in writing specific securities in an amount at least
equal to the lesser of the dollar amounts borrowed or ten percent
of the Fund's gross assets, or (2) if as a result of the delivery
by the Custodian out of its custody, pursuant to Proper
Instructions, of any securities previously so designated, the
remaining amount of securities so designated shall be less than
the lesser of the dollar amounts borrowed or ten percent of the
<PAGE>
Fund's gross assets then the Custodian shall have a security
interest in the Fund's securities; in an amount that, taken
together with amounts of securities from time to time designated
in writing by amounts of securities from time to time designated
in writing by the Fund or its investment adviser that have not
been delivered out of the custody of the Custodian pursuant to
Proper Instructions, does not exceed the lesser of the dollar
amounts borrowed or ten percent of the Fund's gross assets.
Should the Fund fail to repay promptly any advances of cash or
securities, the Custodian shall be entitled to use available cash
and to dispose of pledged securities and property as is necessary
to repay any such advances.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to
be executed in its name and on its behalf by a duly authorized officer as
of the day and year first above written.
ATTEST NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
/s/SHEILA M. BARRY /s/HENRY L.P. SCHMELZER
- --------------------- ---------------------------
Assistant Secretary President
ATTEST STATE STREET BANK AND TRUST COMPANY
/S/M. FITZGERALD /s/T. B. HAGERTY
- --------------------- ---------------------------
Assistant Secretary Vice President
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 21st day of April, 1983 by and among NEL TAX
EXEMPT MONEY MARKET TRUST, a Massachusetts business trust having its
principal place of business at 501 Boylston Street, Boston, Massachusetts
(hereinafter called the "Fund"), on behalf of its Tax Exempt Money Market
Series (the "Series"), NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY, a
Massachusetts corporation ("NEL"), and STATE STREET BANK AND TRUST COMPANY,
a Massachusetts banking corporation, having its principal place of business
at 225 Franklin Street, Boston, Massachusetts (hereinafter called "State
Street").
WITNESSETH THAT:
In consideration of the agreements herein contained, the Fund, NEL and
State Street, intending to be legally bound, hereby agree as follows:
I. DEPOSITORY
The Fund agrees to and does hereby appoint State Street the depository
of the Series subject to the provisions hereof, and likewise agrees to
deliver to State Street certified or authenticated copies of the Fund's
Agreement and Declaration of Trust and By-Laws, all amendments thereto, a
certified copy of the resolution of the Trustees appointing State Street to
act in the capacities covered by this Agreement authorizing the signing of
this Agreement and copies of such resolutions of its Trustees, contracts
and other documents as may be required by State Street in the performance
of its duties hereunder.
II. CUSTODIAN
1. The Fund agrees to and does hereby appoint State Street Custodian
of the assets belonging to the Series, subject to the provisions hereof,
and likewise, subject to the provisions hereof, agrees that State Street
shall retain all securities and cash now owned or hereafter acquired by the
Series, and the Fund also agrees to deliver and pay or cause to be
delivered and paid to State Street, as Custodian, all securities and cash
hereafter acquired by the Series.
2. All securities delivered to State Street (other than in bearer form)
shall be properly endorsed and in form for transfer or in the name of State
Street or of a nominee of State Street or in the name of the Series or of a
nominee of the Series.
<PAGE>
3. As Custodian, State Street shall have and perform the following
powers and duties:
A. Safekeeping. To keep safely in a separate account the
securities of the Series and on behalf of the Series, from time to time,
to receive delivery of certificates physically segregated at all times
from those of any other person. State Street shall maintain records of
all receipts, deliveries and locations of such securities, together with
a current inventory thereof and shall conduct periodic physical
inspections of certificates representing bonds and other securities held
by it under this Agreement in such manner as State Street shall
determine from time to time to be advisable in order to verify the
accuracy of such inventory. With respect to securities held by any agent
appointed pursuant to Paragraph 6-C of Section II hereof, and with
respect to securities held by any Sub-Custodian appointed pursuant to
Paragraph 6-D of Section II hereof, State Street of its responsibilities
under this Agreement. State Street will promptly report to the Fund the
results of such inspections, indicating any shortages or discrepancies
uncovered thereby, and take appropriate action to remedy any such
shortages or discrepancies.
B. Deposit of Series Assets in Securities Systems. State Street
may, upon approval of the Series, deposit and/or maintain securities
owned by the Series 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) State Street may keep securities of the Series in a Securities
System provided that such securities are represented in an account
("Account") of State Street in the Securities System which shall
not include any assets of State Street other than assets held as a
fiduciary, custodian or otherwise for customers;
(2) The records of State Street with respect to securities of the
Series which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Series;
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<PAGE>
(3) State Street shall pay for securities purchased for the account of
the Series 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 State Street to reflect such
payment and transfer for the account of the Series. State Street
shall transfer securities sold for the account of the Series 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 State Street to reflect such transfer
and payment for the account of the Series. Copies of all advices from
the Securities System of transfers of securities for the account of
the Series shall identify the Series, be maintained for the Series by
State Street and be provided to the Fund at its request. State Street
shall furnish the Fund confirmation of each transfer to or from the
account of the Series in the form of a written advice or notice and
shall furnish to the Fund copies of daily transactions sheets
reflecting each day's transactions in the Securities System for the
account of the Series on the next business day;
(4) State Street shall provide the Fund with any report obtained by State
Street on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the Securities System;
(5) Anything to the contrary in this Agreement notwithstanding, State
Street shall be liable to the Fund for any loss or damage to the
Series resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of State Street or any of its
agents or of any of its or their employees or from failure of State
Street 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 State Street with
respect to any claim against the Securities System or any other
person which State Street may have as a consequence of any such loss
or damage if and to the extent that the Series has not been made
whole for any such loss or damage.
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<PAGE>
C. Registered Name, Nominee. To register securities of the Series
held by State Street in the name of the Series or of any nominee of the
Series or in the name of State Street or of any nominee of State Street
or in the name of any agent or any nominee of such agent pursuant to
Paragraph 6-C of Section II hereof or in the name of any Sub-Custodian
or any nominee of any such Sub-Custodian appointed pursuant to Paragraph
6-D Section II hereof.
D. Purchases. Upon receipt of proper instructions, and insofar as
cash is available for the purpose, to pay for and receive all securities
purchased for the account of the Series, payment being made only upon
receipt of the securities by State Street (or by any bank, banking firm,
responsible commercial agent or trust company doing business in the
United Stated and/or any foreign country and appointed by State Street
pursuant to Paragraph 6-C of Section II hereof as State Street's agent
for this purpose or appointed as Sub-Custodian pursuant to Paragraph 6-D
of Section II hereof), registered as provided in Paragraph 3-C of
Section II hereof of in form for transfer satisfactory to State Street,
or in the case of repurchase agreements entered into between the Fund,
on behalf of the Series, and State Street, or another bank, (i) against
delivery of the securities either in certificate form or through an
entry crediting State Street's account at the Federal Reserve Bank with
such securities (which account shall comply with paragraph 3-B of
Section II hereof) or (ii) against delivery of the receipt evidencing
purchase by the Fund, on behalf of the Series, of securities owned by
State Street along with written evidence of the agreement by State
Street to repurchase such securities from the Fund, on behalf of the
Series. All securities from the Fund, on behalf of the Series. All
securities accepted by State Street shall be accompanied by payment of,
or a "due bill" for, any dividends, interest or other distributions of
the issuer, due the purchaser. Except as otherwise provided with respect
to repurchase agreements in this Paragraph 3-D of Section II hereof, in
any and every case of a purchase of securities for the account of the
Series where payment is made by State Street in advance of receipt of
the securities purchased, State Street shall be absolutely liable to the
Series for such securities to the same extent as if the securities had
been received by State Street.
E. Exchanges. Upon receipt of proper instructions, to exchange
securities or interim receipts or temporary
-4-
<PAGE>
securities held by it or by any agent appointed by it pursuant to
Paragraph 6-C of Section II hereof or any Sub-Custodian appointed
pursuant to Paragraph 6-D of Section II hereof for the account of the
Series for other securities alone or for other securities and cash, and
to expend cash insofar as cash is available, in connection with any
merger, consolidation, reorganization, recapitalization, split-up of
shares, changes of par value, conversion or in connection with the
exercise of warrants, subscription or purchase rights, or otherwise; to
deposit any such securities and cash in accordance with the terms of any
reorganization or protective plan or otherwise, and to deliver
securities to the designated depository or other receiving agent in
response to tender offers or similar offers to purchase received in
writing. Except as instructed by proper instructions received in timely
enough fashion for State Street to act thereon prior to any expiration
date (which shall be presumed to be three business days prior to such
date unless State Street has advised the Fund of a different period) and
giving full details of the time and method of submitting securities in
response to any tender or similar offer, exercising any subscription or
purchase right or making any exchange pursuant to this Paragraph and
subject to State Street having fulfilled its obligations under Paragraph
6-G of Section II hereof pertaining to notices or announcements, State
Street shall be under no obligation regarding any tender or similar
offer, subscription or purchase right or exchange except to exercise its
best efforts. When such securities are in the possession of an agent
appointed by State Street pursuant to Paragraph 6-C of Section II
hereof, the proper instructions referred to in the preceding sentence
must be received by State Street in timely enough fashion (which shall
be presumed to be three business days unless State Street has advised
the Fund of a different period) for State Street to notify the agent in
sufficient time to permit such agent to act prior to any expiration
date. When the securities are in the possession of a Sub-Custodian
appointed pursuant to Paragraph 6-D of Section II hereof, the proper
instructions must be received by the Sub-Custodian in timely enough
fashion as advised to the Fund by State Street or the Sub-Custodian to
permit the Sub-Custodian to act prior to any expiration date.
F. Sales. Upon receipt of proper instructions and upon receipt
of payment therefor to make delivery of securities which have been sold
for the account of the Series. All such payments are to be made in
cash, by a certified check upon or a treasurer's or cashier's check of
a bank, by effective bank wire transfer through the Federal Reserve
Wire System or, if
-5-
<PAGE>
appropriate, outside of the Federal Reserve Wire System and
subsequent credit to the Fund's Custodian account, or, in case of
delivery through a stock clearing company, by book-entry credit by the
stock clearing company in accordance with the then current street
custom.
G. Purchases by Issuer. Upon receipt of proper instructions to
release and deliver securities owned by the Series 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 State Street.
H. Changes of Name and Denomination. Upon receipt of proper
instructions to release and deliver securities owned by the Series to
the Issuer thereof or its agent for transfer into the name of the Series
or State Street or nominee of either, or for exchange for a different
number of bonds, certificates, or other evidence representing the same
aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such
case, the new securities are to be delivered to State Street.
I. Street Delivery. Upon receipt of proper instructions, which in
the case of registered securities may be standing instructions, to
release and deliver securities owned by the Series to the broker selling
the same for examination in accordance with the then current "street
delivery" custom.
J. Release of Securities for Use as Collateral. Upon receipt of
proper instructions, to release securities belonging to the Series to
any bank or trust company for the purpose of pledge or hypothecation to
secure any loan incurred by the Series; provided, however, that
securities shall be released only upon payment to State Street of the
monies borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose. Upon
receipt of proper instructions, to pay such loan upon redelivery to it
of the securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing the loan.
K. Release or Delivery of Securities for Other Purposes. Upon
receipt of proper instructions, to release or deliver any securities
held by it for the account of the Series for any
-6-
<PAGE>
other purpose (in addition to those specified in Paragraphs 3-E,
3-F, 3-G, 3-H, 3-I, and 3-J of Section II hereof) which the Fund
declares is a proper corporate purpose pursuant to the proper
instructions described in Paragraph 5-A of Section II hereof.
L. Miscellaneous. In general, to attend to all nondiscretionary
details in connection with the sale, exchange, substitution, purchase,
transfer or other dealing with such securities or property of the Series
except as otherwise from time to time directed by proper instructions.
State Street shall render to the Fund an itemized statement of the
securities for which it is accountable to the Fund under this Agreement
as of the end of each month, as well as a list of all security
transactions that remain unsettled at such time.
4. As Custodian, State Street shall have and perform the following
additional powers and duties:
A. Bank Account. To retain all cash of the Series, other than
cash maintained by the Series in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940, in
the banking department of State Street in a separate account or accounts
in the name of the Series, subject only to draft or order by State
Street acting pursuant to the terms of this Agreement. If and when
authorized by proper instructions in accordance with a vote of the
majority of the Trustees of the Fund, State Street may open and maintain
an additional account or accounts in such other bank or trust companies
as may be designated by such instructions, such account or accounts,
however, to be in the name of State Street in its capacity as Custodian
and subject only to its draft or order in accordance with the terms of
this Agreement. If requested by the Fund, State Street shall furnish the
Fund, not later than twenty (20) calendar days after the last business
day of each month, a statement reflecting the current status of its
internal reconciliation of the closing balance as of that day in all
accounts described in this Paragraph to the balance shown on the daily
cash report for that day rendered to the Fund.
B. Collections. Unless otherwise instructed by receipt of proper
instructions, to collect, receive and deposit in the bank account or
accounts maintained pursuant to Paragraph 4-A of Section II hereof all
income and other payments with respect to the securities held hereunder,
and to execute ownership and other certificates and affidavits for all
-7-
<PAGE>
Federal and State tax purposes in connection with the collection of bond
and note coupons, and to do all other things necessary or proper in
connection with the collection of such income, and without waiving the
generality of the foregoing, to:
(1) present for payment on the date of payment all coupons
and other income items requiring presentation:
(2) present for payment all securities which may mature
or be called, redeemed, retired or otherwise become payable
on the date such securities become payable;
(3) endorse and deposit for collection, in the name of the
Series, checks, drafts or other negotiable instruments on
the same day as received.
In any case in which State Street does not receive any such due
and unpaid income within a reasonable time after it has made proper
demands for the same (which shall be presumed to consist of at least
three demand letters and at least one telephonic demand), it shall so
notify the Fund in writing, including copies of all demand letters, any
written responses thereto, and memoranda of all oral responses thereto
and to telephonic demands, and await proper instructions; State Street
shall not be obliged to take legal action for collection unless and
until reasonably indemnified to its satisfaction. It shall also notify
the Fund as soon as reasonably practicable whenever income due on
securities is not collected in due course.
C. Sale of Shares of the Series. To make such arrangements with
the Transfer Agent of the Series, which may be State Street, as will
enable State Street to make certain it receives the cash consideration
due to the Series for shares of the Series as may be issued or sold from
time to time by the Fund, all in accordance with the Fund's Agreement
and Declaration of Trust. In connection with such issuance of shares of
the Series, State Street shall make such arrangements with the Transfer
Agent as shall insure the timely notification to the Transfer Agent and
to the Fund of the receipt of Federal funds by State Street by means of
the Federal Reserve Wire System or of the receipt of funds by other bank
wire transfers in payment for the issuance of such shares.
At 9:00 a.m. on the second business day after the deposit of a
check into the Series' account, State Street agrees to
-8-
<PAGE>
make Federal funds available to the Series in the amount of the check.
D. Dividends and Distributions. Upon receipt of proper
instructions, which may be continuing instructions when deemed
appropriate by the parties, to release or otherwise apply cash insofar
as available, for the payment of dividends or other distributions to
shareholders of the Series.
E. Redemption of Shares of the Series. From such funds as may be
available for the purpose but subject to the limitations of the
Agreement and Declaration of Trust, and applicable resolutions of the
Trustees of the Fund pursuant thereto, to make funds available for
payment to shareholders who have delivered to the Transfer Agent a
request for redemption of their shares by the Series pursuant to said
Agreement and Declaration of Trust.
In connection with the redemption of shares of the Series
pursuant to the Agreement and Declaration of Trust, State Street is
authorized and directed upon receipt of instructions from the Transfer
Agent for the Series to make funds available for transfer through the
Federal Reserve Wire System or by other bank wire to a commercial bank
account designated by the redeeming shareholder.
F. Disbursements. Upon receipt of proper instructions, to make or
cause to be made, insofar as cash is available for the purpose,
disbursements for the payment on behalf of the Series of interest,
taxes, management or supervisory fees and operating expenses, including
registration and qualification costs and other expenses of issuing and
selling shares or changing its capital structure, whether or not such
expenses shall be in whole or in part capitalized or treated as deferred
expenses.
G. Other Proper Corporate Purposes. Upon receipt of proper
instructions, to make or cause to be made, insofar as cash is available,
disbursements for any other purpose (in addition to the purposes
specified in Paragraphs 3-D. 3-E, 4-D, 4-E and 4-F of this Agreement)
which the Fund declares is a proper corporate purpose pursuant to the
proper instructions described in Paragraph 5-A below.
H. Records. To create, maintain and retain all records relating
to its activities and obligations under this Agreement in such manner as
will meet the obligations of the Fund (with respect to the Series) under
the Investment Company
-9-
<PAGE>
Act of 1940, particularly Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable Federal and State tax laws and any other
law or administrative rules or procedures which may be applicable to the
Fund. All records maintained by State Street in connection with the
performance of its duties under this Agreement will remain the property
of the Fund and in the event of termination of this Agreement will be
delivered in accordance with the terms of Paragraph 8 below.
I. Accounts. To keep books of account and render statements,
including interim monthly and complete quarterly financial statements,
or copies thereof from time to time as requested by the Treasurer or any
Executive Officer of the Fund.
J. Appraisals. Unless otherwise directed by receipt of proper
instructions, to compute and determine, as of the close of business of
the New York Stock Exchange, the "net asset value" of a share of the
Series, such computation and determination to be made pursuant to the
provisions of the Agreement and Declaration of Trust and/or By-Laws of
the Fund, by a vice president, assistant vice president or assistant
secretary of the Custodian; and promptly to notify the Fund of the
result of such computation and determination. In computing the "net
asset value" State Street shall rely upon security quotations received
by telephone or otherwise from sources designated by the Fund by proper
instruction and may further rely upon information furnished to it by any
officer of the Fund thereunto duly authorized relative (a) to
liabilities of the Series not appearing on its books of account, (b) to
the Series not appearing on its books of account, (b) to the existence,
status and proper treatment of any reserve or reserves and (c) to the
fair value of any security of other property for which market quotations
are not readily available.
K. Determination of Net Income. Upon receipt of proper
instructions, which may be continuing instructions when deemed
appropriate by the parties, State Street shall calculate daily the "net
income" of the Series in a manner consistent with the Agreement and
Declaration of Trust and in accordance with the then current prospectus
of the Fund applicable to the Series, and shall advise the Fund and the
Transfer Agent daily of the total amount of such "net income".
L. Miscellaneous. To assist generally in the preparation of
routine reports to holders of shares of the
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<PAGE>
Series, to the Securities and Exchange Commission, including forms N-1R
and N-1Q, to State "Blue Sky" authorities and to others in the auditing
of accounts and in other matters of like nature.
5. A. Proper Instructions. State Street shall be deemed to have
received proper instructions upon receipt of written instructions signed by
a majority of the Trustees of the Fund or by one or more person or persons
as the Trustees shall have from time to time authorized to give the
particular class of instructions in question. Different persons may be
authorized to give instructions for different purposes. A certified copy
of a resolution or action of the Trustees may be received and accepted by
State Street as conclusive evidence of the authority of any such person or
persons to act and may be considered as in full force and effect until
receipt of written notice to the contrary. Such instructions may be
general or specific in terms.
B. Investments, Limitations. In performing its duties generally,
and more particularly in connection with the purchase, sale and exchange
of securities made by or for the Series, State Street may take
cognizance of the provisions of the Agreement and Declaration of Trust
of the Fund as from time to time amended; however, except as otherwise
expressly provided herein, it may assume unless and until notified in
writing to the contrary that instructions purporting to be proper
instructions received by it are not in conflict with or in any way
contrary to any provision of the Agreement and Declaration of Trust and
By-Laws of the Fund as amended, or resolutions or proceedings of the
Trustees of the Fund.
6.A. Indemnification. State Street, as Depository and Custodian,
shall be entitled to receive and act upon advice of counsel (who may be
counsel for NEL) and shall be without liability for any action
reasonably taken or thing reasonably done pursuant to such advice,
provided that such action is not in violation of applicable Federal or
State laws or regulations, and shall be kept indemnified by NEL and be
without liability for any action taken or thing done by it in carrying
out the terms and provisions of this Agreement in good faith and without
negligence. In order that the indemnification provision contained in
this Paragraph 6-A of Section II shall apply, however, it is understood
that if in any case NEL may be asked to indemnify or save State Street
harmless, NEL shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood that
State Street will use all
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<PAGE>
reasonable care to identify and notify NEL promptly concerning
any situation which presents or appears likely to present the
probability of such a claim for indemnification against NEL. NEL shall
have the option to defend State Street against any claim which may be
the subject of this indemnification, and in the event that NEL so elects
it will so notify State Street, and thereupon NEL shall take over
complete defense of the claim, and State Street shall in such situations
initiate no further legal or other expenses for which it shall seek
indemnification under this Paragraph 6-A of Section II. State Street
shall in no case confess any claim or make any compromise in any case in
which NEL will be asked to indemnify State Street except with NEL's
prior written consent.
B. Expense Reimbursement. State Street shall be entitled to
receive from NEL on demand reimbursement for its cash disbursements,
expenses and charges in connection with its duties as Depository and
Custodian as aforesaid, but excluding salaries and usual overhead
expenses.
C. Appointment of Agents. State Street, as Custodian, may at any
time or times appoint (and may at any time remove) any other bank, trust
company or responsible commercial agent as its agent to carry out such
of the provisions of this Agreement as State Street may from time to
time direct, provided, however, that the appointment of such agent shall
not relieve State Street of any of its responsibilities under this
Agreement.
D. Appointment of Sub-Custodian. State Street, as the Custodian,
may from time to time employ one or more Sub-Custodians meeting the
terms and conditions set forth in Section 9.4(a) of the Fund's By-Laws,
subject to prior approval by the Fund, and provided that State Street
shall have no more 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 State Street.
E. Reliance on Documents. So long as and to the extent that it is
in the exercise of reasonable care, State Street, as Depository and
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 Agreement, and shall be protected in
acting upon any instructions, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be genuine and to
have been properly executed in accordance with
-12-
<PAGE>
Paragraph 5-A of Section II hereof and shall, except as otherwise
specifically provided in this Agreement, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by it
hereunder a certificate signed by any Trustee or the Secretary of the
Fund or any other person authorized by the Trustees.
F. Access to Records. Subject to security requirements of State
Street applicable to its own employees having access to similar records
within State Street and such regulations as to the conduct of such
monitors as may be reasonably imposed by State Street after prior
consultation with an officer of the Fund, the books and records of State
Street pertaining to its actions under this Agreement shall be open to
inspection and audit at reasonable times by the Trustees of, attorneys
for, and auditors employed by, the Fund.
G. Forwarding of Notices. State Street shall promptly forward to
the Fund all tender offers, exchange offers, notices and announcements
received by it relating to any securities held by it as Custodian for
the Series.
H. Record-Keeping. State Street shall maintain such records as
will enable the Fund to comply with the requirements of all Federal and
State Laws and regulations applicable to the Fund with respect to the
matters covered by this Agreement, including but not limited to the
requirements of Item 28 of Form N-1R.
I. 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 Series or a nominee of the Series, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
7. NEL shall pay to State Street as Depository and Custodian, the
compensation set forth on Exhibit A hereto until a different compensation
schedule shall be agreed upon in writing among NEL, the Fund and State Street.
8.A. Effective Period, Termination and Amendment, and
Interpretive and Additional Provisions. This Agreement shall become
effective as of the date of its execution, shall
-13-
<PAGE>
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by agreement of the parties hereto
and may be terminated by NEL and the Fund, on behalf of the Series, on
the one hand, and State Street, on the other hand, by an instrument in
writing delivered or mailed, postage prepaid, to NEL and the Fund or
State Street, as the case may be, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or mailing;
provided, however, that the Fund on behalf of the Series, and NEL shall
not amend or terminate this Agreement in contravention of any applicable
Federal or State laws or regulations, or any provision of the Agreement
and Fund's Declaration of Trust or By-Laws as the same may from time to
time be amended, and further provided, that NEL and the Fund by action
of its Trustees may, at any time, substitute another bank or trust
company for State Street by giving joint notice as above to State
Street.
In connection with the operation of this Agreement, State Street,
NEL and the Fund on behalf of the Series, may agree from time to time on
such provisions interpretive of or in addition to the provisions of this
Agreement as may in their collective opinion be consistent with the
general tenor of this Agreement, any such interpretive or additional
provisions to be signed by all three parties and annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable Federal or State laws or regulations, or any
provision of the Agreement and Declaration of Trust or By-Laws as the
same may from time to time be amended. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to
be an amendment of this Agreement.
B. Successor Custodian. Upon termination hereof NEL shall pay to
State Street such compensation as may be due as of the date of such
termination and shall likewise reimburse State Street for its costs,
expenses and disbursements incurred prior to such termination in
accordance with Section 6-B of Section II hereof and such reasonable
costs, expenses and disbursements as may be incurred by State Street in
connection with such termination.
If a successor custodian is appointed by the Trustees of the Fund
in accordance with its By-Laws, State Street shall, upon termination,
deliver to such successor custodian at the office of State Street, duly
endorsed and in form for transfer, all securities then held hereunder
and all funds or
-14-
<PAGE>
other properties of the Series deposited with or held by it hereunder.
If no such successor custodian is appointed, State Street shall,
in like manner at its office, upon receipt of a certified copy of a
resolution of the shareholders of the Series pursuant to the By-Laws,
deliver such securities, funds and other properties in accordance with
such resolution.
In the event that no written order designating a successor
custodian or certified copy of a resolution of the shareholders of the
Series shall have been delivered to State Street on or before the date
when such termination shall become effective, then State Street shall
have the right to deliver to a bank or trust company 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 State Street and all instruments held by it relative
thereto and all other property held by it under this Agreement.
Thereafter, such bank or trust company shall be the successor of State
Street under this Agreement.
In the event that securities, funds, and other properties remain
in the possession of State Street after the date of termination hereof
owing to failure of the Fund to procure the certified copy above
referred to, or of the Trustees to appoint a successor custodian, State
Street shall be entitled to fair compensation for its services during
such period and the provisions of this Agreement relating to the duties
and obligations of State Street shall remain in full force and effect.
9. The Fund shall not circulate any printed matter which contains any
reference to State Street without the prior written approval of State
Street, except such printed matter as merely identifies State Street as
Depository and/or Custodian. The Fund will submit printed matter requiring
approval to State Street in draft form, allowing sufficient time for review
by State Street and its counsel prior to any deadline for printing.
10. This instrument is executed and delivered in The Commonwealth of
Massachusetts and shall be subject to and be construed according to the
laws of said Commonwealth.
11. Notices and other writings delivered or mailed postage prepaid to
the Fund at 501 Boylston Street, Boston, Massachusetts,
-15-
<PAGE>
to NEL at 501 Boylston Street, Boston, Massachusetts, to State Street at
225 Franklin Street, Boston, Massachusetts, 02110 or to such other address
as the Fund, NEL or State Street may hereafter specify, shall be deemed to
have been properly delivered or given hereunder to the respective address.
12. This Agreement shall be binding on and shall inure to the benefit
of the Series, NEL and State Street and their respective successors.
13. This Agreement may be executed simultaneously in three or more
counterparts, each of which shall be deemed an original.
14. Upon notice from NEL to the Fund and State Street pursuant to
Section 11 hereof (the "Novation Date"), NEL shall cease to be a party
hereto and shall be released and discharged from all of its duties,
obligations and liabilities under, and all claims and demands in respect
of, this Agreement, including, without limitation, its obligation to
indemnify State Street pursuant to Section 6A hereof, its obligation to
reimburse State Street pursuant to Section 6B hereof and its obligation to
pay State Street compensation pursuant to Section 7 hereof; provided,
however, that NEL may not deliver such notice nor shall it cease to be a
party hereto nor be so released or discharged until the earlier of (a) one
year from the date upon which the Series first commences operations or (b)
the date upon which the Series has net assets of $30 million. In
consideration of the agreement of State Street to the foregoing, the Fund,
on behalf of the Series, undertakes and agrees with State Street that, with
effect from and as of the Novation Date, the Fund, on behalf of the Series,
will perform and observe all duties, obligations and liabilities of NEL
(and State Street agrees that the Fund, on behalf of the Series, will
succeed to all rights of NEL) under this Agreement as though the Fund, on
behalf of the Series, had been named herein in each place where NEL is
named. State Street hereby acknowledges that the Fund's obligation so to
perform and observe such duties, obligations and liabilities of NEL (and
State Street agrees that the Fund, on behalf of the Series, will succeed to
all rights of NEL) under this Agreement as though the Fund, on behalf of
the Series, had been named herein in each place where NEL is named. State
Street hereby acknowledges that the Fund's obligation so to perform and
observe such duties, obligations and liabilities is binding only on the
assets and property belonging to the Series. As of the Novation Date,
State Street releases and discharges NEL from all its duties, obligations
and liabilities under, and all claims and demands in respect of, this
Agreement; provided, however, that such release and discharge shall be
without prejudice to any claim or dispute which may have existed or arisen
hereunder
-16-
<PAGE>
in relation to any event or circumstance which occurs prior to the Novation
Date.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by a duly authorized
officer as of the day and year first above written.
ATTEST: NEL TAX EXEMPT MONEY MARKET TRUST,
on behalf of its Tax Exempt
Money Market Series
/s/HENRY L.P. SCHMELZER /s/DONALD C. DAY
- ------------------------- --------------------------------
Title: Secretary Title: Vice President
ATTEST: NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY
/s/HENRY L.P. SCHMELZER /s/DONALD C. DAY
- ------------------------- --------------------------------
Title: Counsel Title: Senior Vice President
ATTEST: STATE STREET BANK AND TRUST COMPANY
/s/A. KASSU /s/E. D. HAWKES, JR.
- ------------------------- --------------------------------
Title: Assistant Secretary Title: Vice President
A copy of the Agreement and Declaration of Trust establishing NEL TAX
EXEMPT MONEY MARKET TRUST is on file with the Secretary of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is
executed on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement
are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property belonging to
Tax Exempt Money Market Series of the Fund.
-17-
<PAGE>
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
NEL TAX EXEMPT MONEY MARKET TRUST
- --------------------------------------------------------------------------------
I. Administration
A. Custody and Portfolio Accounting Service - Maintain custody of
fund assets. Settle portfolio purchases and sales. Report buy
and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain investment
ledgers, provide selected portfolio transaction, position and
income reports.
The administration fee shown below is an annual charge, billed and
payable monthly, based on average net assets and calculated in the same manner
as the fund management fee.
Annual Fee
----------
A. Custody and
Fund Net Assets Portfolio Acctg.
- --------------- ----------------
First $20 million 1/20 of 1%
Next $80 million 1/40 of 1%
Excess 1/100 of 1%
Minimum Monthly charge:
- -----------------------
First Six Months $500.00
Second Six Months $1,000.00
Thereafter $1,500.00
II. Portfolio Trades - For each line item processed
State Street Bank Repos $ 6.00 Each Way
<PAGE>
All other trades $ 12.00
III. Interest Accrual and Appraisal Charge
For each issue maintained - monthly charge $ 5.00
IV. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments
and the preparation of special reports will be subject to negotiation.
V. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but
are not limited to the following:
Telephone
Wire charges ($3.65 per wire in and $3.50 out)
Postage and insurance
Courier service
Legal fees
Supplies related to fund records
Rush transfer - $8 each
Duplicating
DTC Eligibility Books
Transfer fees
Pricing services
Sub-custodian charges
Price Waterhouse Audit Letter
NEL TAX EXEMPT MONEY MARKET TRUST STATE STREET BANK AND TRUST
COMPANY
By /s/ DONALD C. DAY By /s/ E. D. HAWKES, JR.
- -------------------------- ---------------------------
Vice President
Date April 21, 1983 Date May 19, 1983
-------------------- ----------------------
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY
By /s/ DONALD C. DAY
---------------------------
Senior Vice President
EXHIBIT 99.B9(A)
SHAREHOLDER SERVICING AND TRANSFER AGENCY AGREEMENT BETWEEN REGISTRANT
AND TNE INVESTMENT SERVICES CORPORATION
<PAGE>
SHAREHOLDER SERVICING AND TRANSFER AGENT AGREEMENT
AGREEMENT made as of the 1st day of September, 1993, by and between each
of the TNE Funds listed in Appendix A hereto (as the same may from time to time
be amended to add one or more additional TNE Funds or to delete one or more of
such Funds), each of such Funds acting severally on its own behalf and not
jointly with any of such other Funds (each of such Funds being hereinafter
referred to as the "Fund"), and TNE Investment Services Corporation (the
"Agent").
W I T N E S S E T H:
WHEREAS, the Fund is an investment company registered under the
Investment Company Act of 1940, as amended; and
WHEREAS, the Fund desires to engage the Agent to provide all services
required by the Fund in connection with the establishment, maintenance and
recording of shareholder accounts, including without limitation all related tax
and other reporting requirements, and the implementation of investment and
redemption arrangements offered in connection with the sale of the Fund's
shares; and
WHEREAS, the Agent is willing to provide such services on the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. APPOINTMENT.
The Fund hereby appoints the Agent as its "Investor Servicing Agent" on
the terms and conditions set forth herein. In such capacity the Agent shall act
as transfer, distribution disbursing and redemption agent for the Fund and shall
act as agent for the shareholders of the Fund in connection with the various
shareholder investment and/or redemption plans from time to time made available
to shareholders. The Agent hereby accepts such appointment and agrees to perform
the respective duties and functions of such offices in accordance with the terms
of this agreement and in a manner generally consistent with the practices and
standards customarily followed by other high quality investor servicing agents
for registered investment companies. The Agent may subcontract certain
shareholder accounting and administrative servicing functions to State Street
Bank and Trust Company, pursuant to an agreement substantially in the form
attached hereto as Appendix B, or to such other entity and pursuant to such
agreement as approved by the Fund's Trustees.
1
<PAGE>
2. GENERAL AUTHORITY AND DUTIES.
By its acceptance of the foregoing appointment, the Agent shall be
responsible for performing all functions and duties which, in the reasonable
judgment of the Fund, are necessary or desirable in connection with the
establishment, maintenance and recording of the Fund's shareholder accounts and
the conduct of its relations with shareholders with respect to their accounts.
Without limiting the generality of the foregoing, the Agent shall be
responsible:
(a) as transfer agent, for performing all functions customarily
performed by transfer agents for registered investment companies, including
without limitation all functions necessary or desirable to establish and
maintain accounts evidencing the ownership of securities issued by the Fund and,
to the extent applicable, the issuance of certificates representing such
securities, the recording of all transactions pertaining to such accounts, and
effecting the issuance and redemption of securities issued by the Fund;
(b) as distribution disbursing agent, for performing all functions
customarily performed by distribution disbursing agents for registered
investment companies, including without limitation all functions necessary or
desirable to effect the payment to shareholders of distributions declared from
time to time by the Trustees of the Fund;
(c) as redemption agent for the Fund, for performing all functions
necessary or desirable to effect the redemption of securities issued by the Fund
and payment of the proceeds thereof; and
(d) as agent for shareholders of the Fund, for performing all functions
necessary or desirable to maintain all plans or arrangements from time to time
made available to shareholders to facilitate the purchase or redemption of
securities issued by the Fund.
In performing its duties hereunder, in addition to the provisions set
forth herein, the Agent shall comply with the terms of the Declaration of Trust,
the Bylaws and the current Prospectus and Statement of Additional Information of
the Fund, and with the terms of votes adopted from time to time by the Trustees
and shareholders of the Fund, relating to the subject matters of this Agreement,
all as the same may be amended from time to time.
3. STANDARD OF SERVICE; COMPLIANCE WITH LAWS.
The Agent will use its best efforts to provide high quality services to
the Fund's shareholders and in so doing will seek to take advantage of such
innovations and technological improvements as may be appropriate or desirable
with a view to improving the quality and, where possible, reducing the cost of
its services to the Fund. In performing its duties hereunder, the Agent shall
comply with the provisions of all applicable laws and regulations and shall
comply with the requirements of any
2
<PAGE>
governmental authority having jurisdiction over the Agent or the Fund with
respect to the duties of the Agent hereunder.
4. COMPENSATION.
The Fund shall pay to the Agent, for its services rendered and its costs
incurred in connection with the performance of its duties hereunder, such
compensation and reimbursements as may from time to time be approved by vote of
the Trustees of the Fund.
5. DUTY OF CARE; INDEMNIFICATION.
The Agent will at all times act in good faith and exercise reasonable
care in performing its duties hereunder. The Agent shall indemnify and hold the
Fund harmless from and against any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liability arising out of or
attributable to any action or failure or omission to act by the Agent as a
result of the Agent's lack of good faith, negligence or willful misconduct. The
Agent will not be liable or responsible for delays or errors resulting from
circumstances beyond its control, including acts of civil or military
authorities, national emergencies, labor difficulties, fire, mechanical
breakdown beyond its control, flood or catastrophe, acts of God, insurrection,
war, riots or failure beyond its control of transportation, communication or
power supply.
The Agent may rely on certifications of the Secretary, the President,
the Chairman, a Senior Vice President or the Treasurer of the Fund as to any
action taken by the shareholders or trustees of the Fund, and upon instructions
not inconsistent with this Agreement received from the President, the Chairman,
a Senior Vice President, the Treasurer or any other officer of the Fund
authorized by the Fund's Trustees to give such instructions. If any officer of
the Fund shall no longer be vested with authority to give instructions for the
Fund, written notice thereof shall forthwith be given to the Agent by the Fund
and, until receipt of such notice by it, the Agent shall be entitled to
recognize and act in good faith upon certificates or other instruments bearing
the signatures or facsimile signatures of such officers. The Agent may request
advice of counsel for the Fund, at the expense of the Fund, with respect to the
performance of its duties hereunder.
The Fund will indemnify and hold the Agent harmless from any and all
losses, claims, damages, liabilities and expenses (including reasonable fees and
expenses of counsel) arising out of (i) any action taken by the Agent in good
faith consistent with the exercise of reasonable care in accordance with such
certifications, instructions or advice, (ii) any action taken by the Agent in
good faith consistent with the exercise of reasonable care in reliance upon any
instrument or certificate for securities believed by it (a) to be genuine, and
(b) to be executed by any person or persons authorized to execute the same;
provided, however, that the Agent shall not be so indemnified in the event of
its failure to obtain a proper signature guarantee to the extent the same is
required by the Declaration of Trust, Bylaws, current Prospectus or Statement of
3
<PAGE>
Additional Information of the Fund or a vote of the Trustees of the Fund, and
such requirement has not been waived by vote of the Trustees of the Fund, or
(iii) any other action taken by the Agent in good faith consistent with the
exercise of reasonable care in connection with the performance of its duties
hereunder.
In the event that the Agent proposes to assert the right to be
indemnified under this Section 5 in connection with any action, suit or
proceeding against it, the Agent shall promptly after receipt of notice of
commencement of such action, suit or proceeding notify the Fund of the same,
enclosing a copy of all papers served. In such event, the Fund shall be entitled
to participate in such action, suit or proceeding, and, to the extent that it
shall wish, to assume the defense thereof, and the Fund shall not be liable to
the Agent for any legal or other expenses incurred after notice from the Fund to
the Agent of its election so to assume the defense thereof. The parties shall
cooperate with each other in the defense of any such action, suit or proceeding.
In no event shall the Fund be liable for any settlement of any action or claim
effected without its consent.
6. MAINTENANCE OF RECORDS.
The Agent will maintain and preserve all records relating to its duties
under this Agreement in compliance with the requirements of applicable statutes,
rules and regulations, including, without limitation, Rule 31a-1 under the
Investment Company Act of 1940. Such records shall be the property of the Fund
and shall at all times be available for inspection and use by the officers and
agents of the Fund. The Agent shall furnish to the Fund such information
pertaining to the shareholder accounts of the Fund and the performance of its
duties hereunder as the Fund may from time to time request. The Agent shall
notify the Fund promptly of any request or demand by any third party to inspect
the records of the Fund maintained by it and will act upon the instructions of
the Fund in permitting or refusing such inspection.
7. FUND ACCOUNTS.
All moneys of the Fund from time to time made available for the payment
of distributions to shareholders or redemptions of shares, or otherwise coming
into the possession or control of the Agent or its officers, shall be deposited
and held in one or more accounts maintained by the Agent solely for the benefit
of the Funds.
8. INSURANCE.
The Agent will at all times maintain in effect insurance coverage,
including, without limitation, Errors and Omissions, Fidelity Bond and
Electronic Data Processing coverages, at levels of coverage consistent with
those customarily maintained by other high quality investor servicing agents for
registered investment companies and with such policies as the Trustees of the
Fund may from time to time adopt.
4
<PAGE>
9. EMPLOYEES.
The Agent shall be responsible for the employment, control and conduct
of its agents and employees and for injury to such agents or employees or to
others caused by such agents or employees. The Agent shall assume full
responsibility for its agents and employees under applicable statutes and agrees
to pay all applicable employer taxes thereunder with respect to such agents and
employees, and such agents and employees shall in no event be considered to be
agents or employees of the Fund.
10. TERMINATION.
This Agreement shall continue indefinitely until terminated by not less
than ninety (90) days prior written notice given by the Fund to the Agent, or by
not less than six months prior written notice given by the Agent to the Fund.
Upon termination hereof, the Fund shall pay the Agent such compensation as may
be due to the Agent as of the date of such termination.
In the event that in connection with any such termination a successor to
any of the Agent's duties or responsibilities hereunder is designated by the
Fund by written notice to the Agent, the Agent will cooperate fully in the
transfer of such duties and responsibilities, including provision for assistance
by the Agent's personnel in the establishment of books, records and other data
by such successor. The Fund will reimburse the Agent for all expenses incurred
by the Agent in connection with such transfer.
11. MISCELLANEOUS.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of The Commonwealth of Massachusetts.
The captions in this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions of this Agreement or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
A copy of the Declaration of Trust (including any amendments thereto) of
the Fund is on file with the Secretary of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed in behalf of the
Trustees of the Fund as Trustees and not individually and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees or
officers or shareholders individually, but binding only upon the assets and
property of the Fund.
TNE Investment Services anticipates that it will be reorganized, on or
about September 15, 1993, into a new entity called TNE Investment Services, L.P.
Effective at the date of the reorganization, any and all benefits,
responsibilities and obligations of
5
<PAGE>
TNE Investment Services Corporation under this Agreement will be assumed by TNE
Investment Services, L.P.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written.
TNE FUNDS
By /s/HENRY L.P. SCHMELZER
--------------------------
Henry L.P. Schmelzer
President
TNE Investment Services Corporation
By /s/BRUCE R. SPECA
--------------------------
Bruce R. Speca
Senior Vice President
6
<PAGE>
Appendix A
New England Funds
(bullet) New England Growth Fund
(bullet) New England International Equity Fund
(bullet) New England Capital Growth Fund
(bullet) New England Value Fund
(bullet) New England Growth Opportunities Fund
(bullet) New England Balanced Fund
(bullet) New England Star Advisers Fund
(bullet) Growth Fund of Israel
(bullet) New England Star Worldwide Fund
(bullet) New England Equity Income Fund
(bullet) New England High Income Fund
(bullet) New England Government Securities Fund
(bullet) New England Bond Income Fund
(bullet) New England Limited Term U.S. Government Fund
(bullet) New England Adjustable Rate U.S. Government Fund
(bullet) New England Strategic Income Fund
(bullet) New England Tax Exempt Income Fund
(bullet) New England Massachusetts Tax Free Income Fund
(bullet) New England Intermediate Term Tax Free Fund of California
(bullet) New England Intermediate Term Tax Free Fund of New York
(bullet) New England Cash Management Trust
(bullet) Money Market Series
(bullet) U.S. Government Series
(bullet) New England Tax Exempt Money Market Trust
7
EXHIBIT 99.B9(B)
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT BETWEEN TNE INVESTMENT SERVICES
CORPORATION AND STATE STREET BANK AND TRUST COMPANY
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
between
TNE INVESTMENT SERVICES CORPORATION
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
-----
Article 1 Terms of Appointment; Duties of the Bank........... 2
Article 2 Fees and Expenses.................................. 6
Article 3 Representations and Warranties of the Bank......... 7
Article 4 Representations and Warranties of the Transfer
Agent.............................................. 8
Article 5 Data Access and Proprietary Information............ 9
Article 6 Indemnification................................... 11
Article 7 Standard of Care.................................. 14
Article 8 Covenants of the Fund and the Transfer Agent...... 14
Article 9 Termination of Agreement.......................... 16
Article 10 Assignment........................................ 16
Article 11 Amendment......................................... 17
Article 12 Massachusetts Law to Apply........................ 17
Article 13 Force Majeure..................................... 17
Article 14 Consequential Damages............................. 18
Article 15 Merger of Agreement............................... 18
Article 16 Counterparts...................................... 18
2
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of September, 1993, by and between TNE
INVESTMENT SERVICES CORPORATION, a Massachusetts corporation, having its
principal office and place of business at 399 Boylston Street, Boston,
Massachusetts 02116 (the "Transfer Agent"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Transfer Agent has been appointed by each of the investment
companies (including each series thereof) listed on Schedule A (the "Fund(s)"),
each an open-end management investment company registered under the Investment
Company Act of 1940, as amended, as transfer agent, dividend disbursing agent
and shareholder servicing agent in connection with certain activities, and the
Transfer Agent has accepted each such appointment;
WHEREAS, the Transfer Agent has entered into a Shareholder Servicing and
Transfer Agent Agreement with each of the Funds (including each series thereof)
listed on Schedule A pursuant to which the Transfer Agent is responsible for
certain transfer agency and dividend disbursing functions and the Transfer Agent
is authorized to subcontract for the performance of its obligations and duties
thereunder in whole or in part with the Bank;
3
<PAGE>
WHEREAS, the Transfer Agent is desirous of having the Bank perform certain
shareholder accounting, administrative and servicing functions (collectively
"Shareholder and Record-Keeping Services");
WHEREAS, the Transfer Agent desires to appoint the Bank as its agent, and
the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement, the
Transfer Agent hereby employs and appoints the Bank to act as, and the Bank
agrees to act as, the agent of the Transfer Agent for the Shares of each of the
Funds in connection with any accumulation, open-account, retirement plan or
similar plan provided to the shareholders of each Fund ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information ("Prospectus") of each such Fund, including without limitation any
periodic investment plan or periodic withdrawal program. As used herein, the
term "Shares" means the authorized and issued shares of common stock, or shares
of beneficial interest, as the case may be, for each of the Funds (including
each class thereof) enumerated in Schedule A hereto (as the same may from time
to time be amended to add one or more Funds or to delete one or more Funds).
1.02 The Bank agrees that it will perform the following Shareholder and
Record-Keeping services:
4
<PAGE>
(a) In accordance with procedures established from time to time by
agreement between the Transfer Agent and the Bank, the Bank shall:
(i) Receive for acceptance, order for the purchase of Shares, and promptly
deliver payment and appropriate documentation thereof to the Custodian
of the Fund authorized pursuant to the Articles of Incorporation or
Declaration of Trust of each Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption directions
and deliver the appropriate documentation thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii) above, the
Bank shall execute transactions directly with the Funds' principal
underwriter (the "Distributor") or with broker-dealers authorized by
the Distributor who shall thereby be deemed to be acting on behalf of
the Funds;
(v) At the appropriate time as and when it receives
5
<PAGE>
monies paid to it by the Custodian with respect to any redemption,
pay over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders, and calculate the
amount of and pay over or cause to be paid over to the Distributor
any applicable contingent deferred sales charges;
(vi) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by each Fund;
(viii) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Bank of
indemnification satisfactory to the Bank and protecting the Bank and
each Fund, and the Bank, at its option, may issue replacement
certificates in place of mutilated stock certificates upon
presentation thereof and without such indemnity;
(ix) Maintain records of account for and advise each Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of each Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record
6
<PAGE>
of the total number of shares of each Fund which are authorized, based
upon data provided to it by each Fund, and issued and outstanding. The
Bank shall also provide each Fund on a regular basis with the total
number of shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of shares, to
monitor the issuance of such shares or to take cognizance of any laws
relating to the issue or sale of such shares, which functions shall be
the sole responsibility of the Distributor.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing and tabulating
7
<PAGE>
proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required with respect to dividends
and distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable each Fund to monitor the total number of Shares sold in each
State.
(c) In addition, each Fund shall (i) identify to the Bank in writing those
transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for each Fund's blue sky State registration
8
<PAGE>
status is solely limited to the initial establishment of transactions
subject to blue sky compliance by each Fund and the reporting of such
transactions to each Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Article 1 may be established from time to time by agreement between
the Transfer Agent and the Bank per the attached service
responsibility schedule. The Bank may at times perform only a portion
of these services and the Transfer Agent, the Funds or their agent may
perform these services on each Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Transfer
Agent (i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this Agreement, the
Transfer Agent agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Transfer Agent and the Bank.
9
<PAGE>
2.02 In addition to the fee paid under Section 2.01
above, the Transfer Agent agrees to reimburse the Bank for out-of-
pocket expenses, including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating proxies,
records storage, or advances incurred by the Bank for the items set out
in the fee schedule attached hereto. In addition, any other expenses
incurred by the Bank at the request or with the consent of the Transfer
Agent will be reimbursed by the Transfer Agent.
2.03 The Transfer Agent agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice. Postage
for mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to the Bank by the Transfer Agent at
least seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Transfer Agent that:
3.01 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
10
<PAGE>
3.04 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
3.06 It has and will at all times maintain in effect insurance coverage,
including, without limitation, errors and omissions, fidelity bond and
electronic data processing coverage at levels of coverage consistent with those
customarily maintained by other high quality servicing agents for registered
investment companies.
Article 4 Representations and Warranties of the Transfer Agent
The Transfer Agent represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of Incorporation
and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
11
<PAGE>
4.04 Each Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as amended,
for each Fund is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made, with
respect to all Shares of each Fund being offered for sale.
Article 5 Data Access and Proprietary Information
5.01 The Transfer Agent acknowledges that the data bases, computer
programs, screen formats, report formats, interactive design techniques, and
documentation manuals furnished to the Transfer Agent by the Bank as part of the
Fund's ability to access certain Fund-related data ("Customer Data") maintained
by the Bank on data bases under the control and ownership of the Bank or other
third party ("Data Access Services") constitute copyrighted, trade secret, or
other proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Transfer Agent agrees to
treat all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Transfer Agent agrees for itself and its employees and agents:
12
<PAGE>
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance with
the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to - any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform the Bank in a timely manner of such fact and
dispose of such information in accordance with the Bank's
instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer facility
or other location, except with the prior written consent of the
Bank;
(e) that the Transfer Agent shall have access only to those
authorized transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal copyright
law and under other federal or state law.
13
<PAGE>
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article shall
survive any earlier termination of this Agreement.
5.02 If the Transfer Agent notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain certain
data included in the Data Access Services are solely responsible for the
contents of such data and the Transfer Agent agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS
AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS
IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Transfer Agent include the
ability to originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information then in such event the Bank shall be entitled
to rely on the validity and
14
<PAGE>
authenticity of such instruction without undertaking any further inquiry as long
as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and the Transfer Agent shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct.
(b) The Transfer Agent's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or
warranty of the Transfer Agent hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by
the Bank or its agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Transfer Agent or each Fund or any
other person or firm on behalf of the Transfer Agent or each Fund
including but not limited to any previous transfer agent or registrar
(other than the Bank).
(d) The carrying out by the Bank or its agents or
15
<PAGE>
subcontractors of any instructions or requests of the Transfer Agent
or each Fund, provided that such instructions or requests are
undertaken in conformity with security procedures established by the
Bank from time to time.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state
or in violation of any stop order or other determination or ruling by
any federal agency or by any state with respect to the offer or sale
of such Shares in such state.
6.02 At any time the Bank may apply to any officer of the Transfer Agent
for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Transfer Agent for any action taken or omitted by it
in reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in acting
upon any paper or document furnished by or on behalf of the Transfer Agent or
each Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine readable
input, telex, CRT
16
<PAGE>
data entry or other similar means authorized by the Transfer Agent and
reasonably believed to be genuine, and shall not be held to have notice of any
change of authority of any person, until receipt of written notice thereof from
the Transfer Agent. The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers of
each Fund, and the proper countersignature of the Transfer Agent or any former
transfer agent or former registrar, or of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in this Article
6 shall apply, upon the assertion of a claim for which the Transfer Agent may be
required to indemnify the Bank, the Bank shall promptly notify the Transfer
Agent of such assertion, and shall keep the Transfer Agent advised with respect
to all developments concerning such claim. The Transfer Agent shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank shall in
no case confess any claim or make any compromise in any case in which the
Transfer Agent may be required to indemnify the Bank except with the Transfer
Agent's prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no
17
<PAGE>
responsibility and shall not be liable for loss or damage due to errors unless
said errors are caused by its negligence, bad faith, or willful misconduct or
that of its employees.
Article 8 Covenants of the Transfer Agent and the Bank
8.01 The Transfer Agent shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors of the
Transfer Agent authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
8.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Transfer Agent for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.03 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of each Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to each Fund on and in accordance with its request.
18
<PAGE>
8.04 The Bank and the Transfer Agent agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records of any of the Funds, the Bank will endeavor to notify the
Transfer Agent and to secure instructions from an authorized officer of the
Transfer Agent as to such inspection. The Bank reserves the right, however, to
exhibit the Shareholder records to any person whenever it is advised by its
counsel that it may be held liable for the failure to exhibit the Shareholder
records to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Notwithstanding the foregoing,
this Agreement shall terminate concurrently with the termination of the
Shareholder Servicing and Transfer Agent Agreement in effect between the
Transfer Agent and the Funds.
9.02 Should the Transfer Agent exercise its right to terminate, all
out-of-pocket expenses associated with the movement of
19
<PAGE>
records and material will be borne by the Transfer Agent. Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated with
such termination.
Article 10 Assignment
10.01 Except as provided in Section 10.03 and 10.04 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the Transfer
Agent, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Transfer
Agent for the acts and omissions of any subcontractor as it is for its own acts
and omissions.
10.04 The Transfer Agent may, without further consent on the part of the
Bank, and upon written notice to the Bank assign this Agreement to any other
entity that (i) is then under common
20
<PAGE>
control with the Transfer Agent, (ii) is acting or has been appointed to act as
Transfer Agent for the Funds and (iii) is duly registered as a Transfer Agent
pursuant to Section 17A(c)(1).
Article 11 Amendment
11.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Transfer Agent.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable to the other for
any damages resulting from such failure to perform or otherwise from such
causes.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
21
<PAGE>
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 16 Counterparts
16.01 This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
TNE INVESTMENT SERVICES CORPORATION
BY:/s/ BRUCE R. SPECA
-------------------------------
ATTEST:
____________________________
STATE STREET BANK AND TRUST COMPANY
BY:/s/ STEPHEN J. NAZZARO
----------------------------------
Executive Vice President
ATTEST:
/s/ D. HUFNAGLE
______________________________
23
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
- ----------------- --------------------
Bank Fund
----------- --------
1. Receives orders for the purchase X Add-ons X New
of Shares.
2. Issue Shares and hold Shares in X
Shareholders accounts.
3. Receive redemption requests. X X
4. Effect transactions 1-3 above
directly with broker-dealers. X X
5. Pay over monies to redeeming X
Shareholders.
6. Effect transfers of Shares. X
7. Prepare and transmit dividends X
and distributions.
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and X
accurate control book for each
issue of securities.
12. Mail proxies. OTI
13. Mail Shareholder reports. X
14. Mail prospectuses to current
Shareholders. X
15. Withhold taxes on U.S. resident
and non-resident alien accounts. X
16. Prepare and file U.S. Treasury X
Department forms.
24
<PAGE>
Service Performed Responsibility
- ----------------- --------------------
Bank Fund
----------- --------
17. Prepare and mail account and
confirmation statements for
Shareholders. X
18. Provide Shareholder account
information. X
19. Blue sky reporting. X
* Such services are more fully described in Article 1.02 (a),
(b) and (c) of the Agreement.
TNE INVESTMENT SERVICES CORPORATION
BY: /s/ BRUCE R. SPECA
-----------------------------
ATTEST:
____________________________
STATE STREET BANK AND TRUST COMPANY
BY: /s/ STEPHEN J. NAZZARO
------------------------------
Executive Vice President
ATTEST:
/s/ D. HUFNAGLE
_____________________________
25
EXHIBIT 99.B9(C)
POWERS OF ATTORNEY FOR TRUSTEES, DANIEL M. CAIN AND RICHARD DARMAN
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly, each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me, and
in my name in the capacity indicated below, any and all registration statements
and any and all amendments thereto to be filed with the Securities and Exchange
Commission for the purpose of registering from time to time investment companies
of which I am now or hereafter a Director or Trustee and for which Capital
Growth Management Limited Partnership, Back Bay Advisors, L.P., Loomis, Sayles &
Company, L.P., New England Funds Management, L.P., Westpeak Investment Advisors,
L.P. and/or any other affiliate of New England Mutual Life Insurance Company
serves as adviser, sub-adviser or co-adviser, registering the shares of such
companies and generally to do all such things in my name and in my behalf to
enable such registered investment companies to comply with the provisions of the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
my said attorneys and any and all registration statements and amendments
thereto.
Witness my hand on the 1st day of April, 1996.
/s/DANIEL M. CAIN
------------------------
Daniel M. Cain - Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly, each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me, and
in my name in the capacity indicated below, any and all registration statements
and any and all amendments thereto to be filed with the Securities and Exchange
Commission for the purpose of registering from time to time investment companies
of which I am now or hereafter a Director or Trustee and for which Capital
Growth Management Limited Partnership, Back Bay Advisors, L.P., Loomis, Sayles &
Company, L.P., New England Funds Management, L.P., Westpeak Investment Advisors,
L.P. and/or any other affiliate of New England Mutual Life Insurance Company
serves as adviser, sub-adviser or co-adviser, registering the shares of such
companies and generally to do all such things in my name and in my behalf to
enable such registered investment companies to comply with the provisions of the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
my said attorneys and any and all registration statements and amendments
thereto.
Witness my hand on the 1st day of April, 1996.
RICHARD DARMAN
------------------------
Richard Darman - Trustee
EXHIBIT 99.B10
OPINION AND CONSENT OF COUNSEL
<PAGE>
ROPES & GRAY
One International Place
Boston, MA 02110-2624
(617) 951-7000
Fax: (617) 951-7050
August 22, 1996
New England Tax Exempt Money Market Trust
399 Boylston Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
You have informed us that you propose to offer and sell from time to time
6,631,815 of your shares of beneficial interest, no par value, belonging to
your Tax Exempt Money Market Series (the "Shares"), for cash or securities at
the net asset value per share, determined in accordance with your By-Laws, which
Shares are in addition to your shares of beneficial interest which you have
previously offered and sold or which you are currently offering.
We have examined your Second Amended and Restated Agreement and
Declaration of Trust and Amendments Nos. 1 and 2 thereto (together, the
"Agreement and Declaration of Trust") on file in the office of the Secretary of
State of The Commonwealth of Massachusetts and are familiar with the actions
taken by your Trustees to authorize the issuance and sale from time to time of
your authorized and unissued shares of beneficial interest at not less than net
asset value. We have also examined a copy of your By-Laws and such other
documents, receipts and records as we have deemed necessary for the purposes of
this opinion.
Based upon the foregoing, we are of the opinion that:
1. New England Tax Exempt Money Market Trust (the "Trust") is a legally
organized and validly existing voluntary association with transferable shares of
beneficial interest under the laws of The Commonwealth of Massachusetts and is
authorized to issue an unlimited number of shares of beneficial interest.
2. Upon the issue of any of the Shares for cash or securities at net asset
value, and the receipt of the appropriate consideration therefor as provided in
your By-Laws, such Shares so issued will be validly issued, fully paid and
nonassessable by the Trust.
<PAGE>
New England Tax Exempt
Money Market Trust -2- August 22, 1996
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or its Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the Trust for all loss and expense of any
shareholder held personally liable for the obligations of the Trust solely by
reason of his or her being or having been such a shareholder. Thus, the risk of
a shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
We understand that this opinion is to be used in connection with the
registration of the Shares for offering and sale pursuant to the Securities Act
of 1933, as amended, and the provisions of Rule 24e-2 under the Investment
Company Act of 1940, as amended. We consent to the filing of this opinion with
and as part of Post-Effective Amendment No. 22 to your Registration Statement
No. 2-81614.
Very truly yours,
Ropes & Gray
EXHIBIT 99.B11
CONSENT OF PRICE WATERHOUSE LLP
<PAGE>
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. 22 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 8, 1996, relating to the financial
statements and financial highlights appearing in the June 30, 1996 Annual Report
to Shareholders of New England Tax Exempt Money Market Trust, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the headings "Independent Accountants" and "Financial Statements" in
the Statement of Additional Information.
Price Waterhouse LLP
Boston, Massachusetts
August 21, 1996
EXHIBIT 99.B14
NEW ENGLAND FUNDS, L.P. TAX SHELTERED CUSTODIAL ACCOUNT AGREEMENT;
NEW ENGLAND FUNDS, L.P. KEOUGH PLAN;
NEW ENGLAND FUNDS, L.P. SIMPLIFIED EMPLOYEE PENSION PLAN;
NEW ENGLAND FUNDS, L.P. INDIVIDUAL RETIREMENT PLAN PROTOTYPE;
<PAGE>
4
#
1
- --------------------------------------------------------------------------------
New England Funds, L.P. Tax-Sheltered Custodial Account Agreement
- --------------------------------------------------------------------------------
This Tax-Sheltered Custodial Account Agreement (the "Agreement") is
intended to establish a separate investment custodial account under a qualified
Tax Sheltered Annuity Program (the "TSA Program") sponsored by the Employer
under Section 403(b) of the Internal Revenue Code (the "Code"). The Employer,
Participant and Custodian agree that the custodial account is intended to
satisfy the requirements of Section 403(b)(7) of the Code, and that
Contributions made thereto by the Employer on behalf of the Participant will be
accepted by the Custodian for investment in mutual fund shares for the benefit
of the Participant and/or his Beneficiaries. The Employer, Participant and
Custodian agree to perform any and all acts, and to execute any and all
documents which may be necessary or desirable for the proper administration of
this Agreement or any of its provisions.
- --------------------------------------------------------------------------------
ARTICLE I
Definition of Terms
Where used in this Agreement, the following words and phrases shall have the
following meanings unless the context clearly indicates otherwise. Singular
nouns may include the plural and the masculine gender the feminine, as
appropriate.
1.01 "Beneficiary" shall mean a person or entity designated by a Participant to
receive benefits from the Participant Account upon the death of the
Participant. In the case of a married Participant, the Beneficiary shall be
his Spouse unless the designation of a non-Spouse Beneficiary is consented to
by the Spouse in accordance with Section 5.08 of this Agreement.
1.02 "Code" shall mean the Internal Revenue Code of 1986, and regulations
thereunder, as amended from time to time.
1.03 "Contributions" shall mean any amount received by the Custodian for
investment under this Agreement, including Salary Reduction Contributions
Employer Contributions, and contributions resulting from a rollover and/or a
transfer as provided for in Article III of this Agreement.
1.04 "Custodian" shall mean the State Street Bank and Trust Company, or any
qualified successor custodian which meets the requirements of Section 6.01 of
this Agreement.
1.05 "Employee" shall mean a person who performs services for the Employer and
who is eligible to participate in the Employer's TSA program. A plan which
provides for Employer contributions may not require as a condition of
participation, that an employee complete a period of service with the
employer extending beyond the later of the following dates
(i) The date on which the employee attains the age of 21; or
(ii) The date on which the employee completes one year of service.
1.06 "Employer" shall mean the Employer named in the Employer Affiliation
Agreement, who must be an eligible organization under Section 403(b)(1)(A) of
the Code for purposes of purchasing tax sheltered annuities for its eligible
Employees.
1.07 "Employer Affiliation Agreement" or "Affiliation Agreement" shall mean the
agreement in which the Employer adopts this Agreement and appoints a
Custodian to the custodial account established thereunder.
1.08 "Employer Contributions" shall mean contributions attributable to the
Employer which are discretionary in nature and are not made pursuant to a
Salary Reduction Agreement.
1.09 "New England Funds" shall mean those Massachusetts business trusts
registered as open-end management investment companies for a series of mutual
fund shares which may be purchased through New England Funds, L.P. The term
New England Funds shall include New England Funds Trust I, New England Funds
Trust II, New England Cash Management Trust and New England Tax Exempt Money
Market Trust.
1.10 New England Funds, L.P., is a Massachusetts corporation which is a
broker-dealer and which is an indirect subsidiary of New England Mutual Life
Insurance Company.
1.11 "Participant" shall mean an Employee who is eligible to participate in the
Employer's TSA program and for whom the Custodial Account under this
Agreement is established,
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1.12 "Participant Custodial Account" or "Participant's Account" or "Account"
shall mean the custodial account established under this Agreement which is
intended to satisfy the requirements of Section 401(f)(2) of the Code, under
which Contributions attributable to the Employer are made for the benefit of
the Participant.
1.13 "Participant Investment Application" or "Investment Application" shall mean
the New England Funds form used to purchase shares of New England Funds with
the Contributions made to the Custodial Account as specified by the
Participant in such form.
1.14 "Salary Reduction Contributions" shall mean contributions attributable to
the Employer that are made to the Participant's Account pursuant to a Salary
Reduction Agreement.
1.15 "Salary Reduction Agreement" is a separate written agreement between the
Employer and the Participant to either reduce the Participant's salary or
forego increases so that such amounts could be contributed to the
Participant's Account.
1.16 "Spouse" shall mean the Spouse of the Participant; provided, however, that
to the extent required by any qualified domestic relations order (as defined
in Section 414(p) of the Code), a former Spouse of the Participant shall be
treated as Spouse of the Participant.
1.17 "TSA Custodial Account Agreement" or "Agreement" shall mean this Agreement,
together with the Employer Affiliation Agreement and each Participant
Investment Application, as hereby incorporated.
1.18 "Withdrawal" shall mean the partial liquidation of a Participant's Account
by virtue of the Participant's attainment of age 59 1/2 or financial hardship
as provided in Section 5.01 and 5.02 of this Agreement.
ARTICLE II
Establishment of Custodial Account
2.01 Participant's Custodial Account. Upon receipt of a signed Employer
Affiliation Agreement, Participant Investment Application and an initial
Contribution, the Custodian shall establish a separate investment account in
the name of the Participant and such account shall be maintained for the
exclusive benefit of the Participant and/or his Beneficiaries. The
Participant's Account shall include Contributions and such assets as may be
purchased by the Custodian on behalf of the Participant.
2.02 Participant's Rights are Nonforfeitable and Nontransferable. Except for
fees, expenses and any other charges as described in Section 6.04 of this
Agreement, the Participant's interest in the balance of his Account shall be
nonforfeitable and nontransferable by the Participant. The Participant's
Account shall not be subject to assignment, attachment, execution,
garnishment, pledge, encumbrance, charge, other legal or equitable process,
or otherwise alienable. Any attempt at such shall be void; provided, however,
the Custodian shall not be precluded from complying with a qualified domestic
relations order (as defined in Section 414(p) of the Code) with respect to
payment of alimony and/or child support. The Participant's Account shall not
be subject to the claims of the Employer's creditors.
ARTICLE III
Contributions
3.01 Discretionary Employer Contributions. The Employer may contribute to the
Participant's Account an amount which has been allocated according to the
allocation method specified in the Employer Affiliation Agreement which
allocation shall be nondiscriminatory within the meaning of the Section
403(b)(1) of the Code. Such Employer's Contributions shall be subject to the
following limitations:
(A) Payment. Employer Contributions made under this Agreement must be paid
to the Custodian in one or more installments not later than December 31
of each calendar year.
(B) Nonforfeitable. Such Employer Contributions shall be fully vested and
nonforfeitable when made to the Participant's Account.
(C) Participant's Investment Direction. Employer Contributions shall be
under the investment direction of the Participant in accordance with
Section 4.02 of this Agreement.
(D) Excess Contributions Resulting from Employer Contributions. In the
event the nondiscriminatory testing under Section 403(b)(12) of the
Code results in excess contributions in the Participant's Account, the
Employer must notify the Participant of such excess amounts and must
instruct the Participant to withdraw such amounts (and any earnings
thereon) as Excess Contributions in the manner prescribed in Section
3.08 of this Agreement.
3.02 Salary Reduction Contributions. The Employer shall make available to all
eligible Employees the opportunity to make Salary Reduction Contributions on
a basis that does not favor highly compensated Employees within the meaning
of Code Section 414(q). Each Participant may make Salary Reduction
Contributions by electing to reduce annually his or her salary by more than
$200 under a written Salary Reduction Agreement. Any such Salary Reduction
Agreement shall provide that the Participant agrees to forego an increase in
salary or to accept a reduction in salary from the Employer, equal to any
whole percentage or dollar amount of her/his Compensation per payroll period,
but in no event shall the maximum deferral amount under such agreement exceed
the dollar limitations described in Section 3.03 of this Agreement. While
such Agreement is in effect, the Employer will make Salary Reduction
Contributions to the Participant's Account on behalf of the Participant in an
amount equal to the total amount by which the Participant's salary is reduced
pursuant to the Salary Reduction Agreement.
3.03 Limitation of the Salary Reduction Agreement. A Salary Reduction Agreement
to which the Participant's Account relates shall be subject to the following
additional limitations:
(A) The maximum deferral amount under a Salary Reduction Agreement cannot
exceed $9500 for any given taxable year of the Participant, except that
such Participant, if eligible, may increase the maximum deferral amount
in accordance with the special election available under Section
402(g)(8) of the Code. Any Salary Reduction Contributions in excess of
$9500 shall be treated by the Custodian as permissible increases
available to the Participant under Section 402(g)(8) of the Code,
unless otherwise directed by the Participant to treat such amounts as
Excess Deferrals under Section 3.08 of this Agreement.
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(B) Any Salary Reduction Agreement between the Employer and the Participant
shall be irrevocable only as to amounts earned by the Participant after
such agreement becomes effective.
(C) The Participant may not make more than one Salary Reduction Agreement
with the Employer during any taxable year of the Participant.
(D) Any such Salary Reduction Agreement may be terminated as of the end of
any payroll period by either the Employer or Participant.
(E) Salary Reduction Contributions shall be fully vested and nonforfeitable
when made to the Participant's Account.
3.04 Annual Contribution Limit. The annual contribution limit applicable to the
sum of Employer Contributions and Salary Reduction Contributions made in any
taxable year of the Participant, may not exceed the Participant's exclusion
allowance, as defined in Section 403(b)(2) of the Code, except that such
Participant may elect to have the exclusion allowance determined under
Section 415(c) of the Code. The Participant shall be responsible for
computing his exclusion allowance under Sections 403(b)(2), or if applicable,
under Section 415(c) of the Code, and shall promptly notify the Custodian
when the sum of Employer Contributions and Salary Reduction Contributions
exceeds the applicable exclusion allowance of the Participant. In that event,
the Participant shall direct the Custodian to distribute the amounts in
excess of the exclusion allowance as Excess Contributions under Section 3.08
of this Agreement.
3.05 Transfers to and from Other Accounts. With the consent of the Custodian,
the proceeds from an existing annuity contract or custodial account described
in Section 403(b) of the Code may be transferred into the Participant's
Account. However, the balance of the Participant's Account may only be
transferred into another custodial account described in Section 403(b)(7) of
the Code unless otherwise permitted by law, regulation or administrative
pronouncement. Any transfer described in this Section shall be made only
after receipt of documents reasonably required by the Custodian to effect the
transfer.
3.06 Rollover Contributions. The Participant may make a rollover contribution to
the Participant's Account to the extent that such contribution qualifies in
all respects as a rollover contribution within the meaning of Section
403(b)(8) of the Code or any other applicable provisions of the Code in
effect at the time the contribution is made. Rollover contributions shall be
accepted by the Custodian upon receipt of documents reasonably required by
the Custodian to effect the rollover into the Participant's Account.
3.07 Receipt and Acceptance of Contributions. Contributions attributable to the
Employer and Contributions resulting from transfers and roll-overs made
pursuant to Sections 3.05 and 3.06 of this Agreement, shall be credited to
the Participant's Account upon receipt by the Custodian and shall be invested
in accordance with the provisions of Article IV.
3.08 Responsibility for Excess Deferrals and Excess Contributions. The
Participant shall be responsible for determining the maximum deferral amount
described in Section 3.03 of this Agreement, the annual contribution limit as
described in Section 3.04 of this Agreement, and for making the elections
related thereto under Sections 402(g), 403(b), and/or 415(c) of the Code. In
the event that there are amounts in excess of the permissible limits
described in Sections 3.03 and 3.04 of this Agreement, the Participant shall
direct the Custodian to treat such excess as either Excess Deferrals or
Excess Contributions.
(A) Excess Deferrals. For purposes of this Agreement, Excess Deferrals shall
mean Salary Reduction Contributions made in a given taxable year in
excess of $9500 which are not treated by the Participant as permissible
increases to the maximum deferral amount provided under Section 402(g) of
the Code. The Participant shall direct the Custodian in writing no later
than April 1st of the following tax year to which the Excess Deferrals
relate, to distribute such Excess Deferrals and earnings thereon no later
than April 15th of that year. If the Participant fails to notify the
Custodian on a timely basis and the Excess Deferrals and earnings thereon
are not distributed as of that April 15th, the Participant shall report
such amounts to the Internal Revenue Service as income both in the year
the Excess Deferrals arose and in the year they are actually distributed
from the Participant's Account. Such Excess Deferrals shall also reduce
the Participant's future exclusion allowance.
(B) Excess Contributions. For purposes of this Agreement, Excess
Contributions shall mean all Contributions attributable to the Employer
which exceed the annual contribution limit described in Section 3.04 of
this Agreement. In the case of a highly compensated Participant, Excess
Contributions shall also mean excess discretionary Employer Contributions
as determined by the Employer pursuant to Section 3.01 of this Agreement
and in accordance with Section 401(m) of the Code. The Employer shall be
responsible for notifying the Participant to withdraw such excess
discretionary Employer Contributions in the manner prescribed herein. The
Participant shall direct the Custodian in writing no later than April 1st
of the tax year following that in which the Excess Contributions were
made, to distribute such Excess Contributions and earnings thereon no
later than April 15 of that same year. If the Participant fails to notify
the Custodian on a timely basis and such Excess Contributions and
earnings thereon are not distributed as of that date, then the
Participant shall report such amounts to the Internal Revenue Service as
income for the year in which the Excess Contribution arose and shall be
subject to any excise tax imposed by Section 4973 of the Code.
ARTICLE IV
Investment of Contributions
4.01 Types of Investments. Contributions under this Agreement shall be invested
at the direction of the Participant in shares of one or more New England
Funds, which shares may be purchased through New England Funds, L.P.
4.02 Participant to Direct Investments. The Participant shall direct the
Custodian to invest the initial Contribution made to the Participant's
Account in the manner specified in the Participant Investment Application.
Thereafter, any subsequent Contributions shall be invested by the Custodian
in accordance with the written instructions of the Participant.
(A) Exchange of Shares in the New England Funds. The Participant may at any
time direct the Custodian in writing to exchange any portion of shares
in the New England Funds held in the Participant's Account for other
shares in the New England Funds having different investment objectives,
if such exchange is permitted by the current prospectus.
(B) Limitation of Liability for Investment Losses. The Custodian shall have
no duty to look beyond the written instructions received by it from the
Participant and shall in no event be responsible for any loss incurred
with respect to any investments made or retained in accordance with the
directions of the Participant.
4.03 Reinvestment of Earnings. All income, dividends, capital gains or other
earnings on the shares of New England Funds in the Participant's Account
shall be reinvested in additional full and/or fractional shares of New
England Funds which shall be credited to the Participant's Account. If such
earnings may be received in shares or in cash, the Custodian shall elect to
receive such earnings in additional shares.
4.04 Ownership of Investments. All shares in the New England Funds purchased for
a Participant's Account shall be registered in the name of the Custodian or
its nominee.
4.05 Information to Participants. The Custodian shall deliver in accordance with
the requirements of applicable law, to the Participant any notices of
Shareholders' meetings, proxies, and proxy-soliciting materials, prospectuses
and annual and other reports to shareholders relating to the shares of the
New England Funds held in the Participant's Account, which have been received
by the Custodian with respect to such investments.
4.06 Voting Powers. With respect to shares of the New England Funds, the
Participant may direct the Custodian as to the manner in which any shares
(including fractional shares) or units held by the Custodian for the
Participant's Account shall be voted with respect to any matter being voted
upon by the entity which issued such shares. All such directions by the
Participant shall be in writing, on a form approved by the Custodian, signed
by the Participant and delivered to the Custodian within the time prescribed
by it. The Custodian shal1 not vote in the absence of such directions.
ARTICLE V.
Withdrawals and Liquidation
5.01 Withdrawals after age 59 1/2. After the Participant has attained age 59
1/2, the Participant may at any time make a Withdrawal from his Account in
cash by submitting a written request to the Custodian with such proof of age
as the Custodian may require.
5.02 Hardship Withdrawals. If the Participant encounters financial hardship
within the meaning of Section 403(b)(7)(A)(ii) of the Code, whether before or
after age 59 1/2, the Participant may withdraw only the Salary Reduction
Contributions (not including earnings thereon) made to the Participant's
Account. This restriction on hardship withdrawal will not apply to the
Participant's Account balance as of December 31, 1988. The Participant must
submit a written request to the Custodian with evidence satisfactory to the
Custodian that the Withdrawal is necessary to meet an immediate and heavy
financial need of the Participant created by the hardship, and that the
amount requested is not reasonably available from other resources of the
Participant. Following any Withdrawal under this Section, the Custodian may
refuse to accept additional Contributions to the Participant's Account in the
calendar year of the Withdrawal or in the succeeding calendar year.
5.03 Liquidation of Participant's Account.
(A) Distribution Event. The Participant may elect to have the assets in the
Participant's Account fully liquidated, or may commence distribution
upon any of the following events:
(1) The Participant's attainment of age 59 1/2.
(2) The Participant's becoming disabled such that he is unable to
engage in any substantial gainful activity by reason of a medically
determinable physical or mental impairment which may be expected to
result in death or to be of long-continued and indefinite duration,
provided that the disability satisfies Section 403(b)(7)(ii) of the
Code.
(3) The Participant's separation from service.
(4) The Participant's death.
(B) Notice of the Occurrence of a Distribution Event. The Participant, the
Employer or, upon death, the Participant's Beneficiary or legal
representative, must provide the Custodian with written notice of the
occurrence of one of the foregoing events, with any other documentation
deemed necessary to effect the liquidation of a Participant's Account.
In the case of disability, such documentation shall include a
physician's certificate or opinion that the conditions of clause (2)
above are satisfied.
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5.04 Distribution of Benefits.
(A) Account Liquidation Methods. Except as otherwise provided below, upon
proper notification of a Distribution Event as described in Section
5.03 of this Agreement, the Participant or Beneficiary may elect to
liquidate the Account under one of the prescribed methods:
(1) One lump-sum payment in cash;
(2) Periodic Payments over a period certain in monthly, quarterly
semiannual, or annual cash installments, such payments to be
provided under a cash installment plan available through the
Custodian under the rules of the New England Funds whose shares are
held in the Participant's Account.
5.05 Minimum Distribution Amount. The entire interest of the individual for
whose benefit the contract is maintained (Participant) will be distributed or
commence to be distributed, no later than the first day of April following
the calendar year in which such individual attains age 70 1/2 (required
beginning date), over (a) the life of such individual, or the lives of such
individual and his or her designated beneficiary, or (b) a period certain not
extending beyond the life expectancy of such individual and his or her
designated beneficiary. Payments must be made in periodic payments at
intervals of no longer than one year. In addition, payments must be either
non-increasing or they may increase only as provided in Q&A F-3 of Section
1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of Section 401(a)(9) of the Code, including the incidental death
benefit requirements of Section 401(a)(9)(G) of the Code, and the regulations
thereunder, including the minimum distribution incidental benefit requirement
of section 4.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancy is 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 individual by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such election shall
be irrevocable by the individual and shall apply to all subsequent years. The
life expectancy of a non-spouse beneficiary may not be recalculated. Instead,
life expectancy will be calculated using the attained age of such beneficiary
during the calendar year in which the individual attains age 70 1/2, and
payments for subsequent years shall be calculated based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated.
5.06 (a) Distributions beginning before death
If the Participant dies after distribution of his or her interest has
begun the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of distribution
being used prior to the individual's death.
(b) Distributions 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 individual's death except to the extent that an
election is made to receive distributions in accordance with (1) or (2)
below:
(1) If the Participant interest is payable to a designated
beneficiary, then the entire interest of the Participant may be
distributed 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 or (B) December 31 of the calendar year
in which the Participant would have attained age 70 1/2.
(3) If the designated beneficiary is the Participant's surviving
spouse, the spouse may rollover the account into his or her
Individual Retirement Account (IRA).
(c) Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the Participant's death
unless otherwise elected by the surviving spouse by the time
distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable by the
surviving spouse and shall apply to all subsequent years. In the case
of any other designated beneficiary, life expectancies shall be
calculated using the attained age of such beneficiary during the
calendar year in which distributions are required to begin pursuant to
this section, and payments for any subsequent calendar year shall be
calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy
was first calculated.
(d) Distributions under the section are considered to have begun if
distributions are made on account of the Participant reaching his or
her required beginning date or if prior to the required beginning date
distributions irrevocably commence to an individual over a period
permitted and in an annuity form acceptable under Section 1.401(a)(9)
of the Regulations.
5.07 Designation of Beneficiary by Participant. If the plan contains employer
contributions, a married Participant must designate his Spouse as the
Beneficiary unless such Participant obtains spousal consent to name a
non-Spouse Beneficiary. Spousal consent must be given in writing by the
Participant's Spouse. Further, the Spouse's consent shall be irrevocable and
shall acknowledge the specific non-Spouse Beneficiary designated by the
Participant, including the designation of classes of Beneficiaries. If the
Participant's Spouse fails to provide written consent as to the designation
of a non-Spouse Beneficiary, then one half of the Participant's account
balance shall be paid automatically to the Surviving Spouse without regard to
the named Beneficiary who shall be entitled to receive only the remaining
half of the Participant's account balance upon the Participant's death. The
Participant may change the Beneficiary designation at any time prior to his
death by written instrument satisfactory to the Custodian. Such instrument
shall be dated and signed by the Participant and filed with the Custodian.
5.08 Benefits Payable by Custodian. The Custodian shall have full authority to
carry out the instructions of the Participant or Beneficiary for the payment
of such benefits. Upon the Participant's death, the balance in the
Participant's Account shall be distributed in accordance with the last valid
beneficiary designation form, but to the extent such designation is not
dispositive, such amounts shall be distributed to the Participant's surviving
Spouse or, if none, to the Participant's estate. All beneficiary designation
forms shall be considered to be part of this Agreement and shall be enforced
and administered according to the laws of the State in which the Custodian is
located.
5.09 Direct Rollovers and Mandatory Withholding. For distributions made on or
after January 1, 1993, a distributee may elect to have any portion of an
Eligible Rollover Distribution paid in a Direct Rollover to an Eligible
Retirement Plan specified by the Distributee. For purposes of this Section:
(a) "Direct Rollover" shall mean a payment by the Plan directly to an
Eligible Retirement Plan.
(b) "Distributee" shall mean an Employee or former Employee, and Employee's
or former Employee's Surviving Spouse and the Employee's or former
Employee's Spouse or former Spouse who is the alternate payee under a
qualified Domestic Relations Order, as defined in s414(p) of the Code.
(c) "Eligible Retirement Plan" shall mean an individual retirement account
described in s408(a) of the Code, an individual retirement annuity
described in s408(b) of the Code, or a tax-sheltered annuity, described
in s403(b) of the Code, that accepts the Distributee's Eligible Rollover
Distribution to the Surviving Spouse an "Eligible Retirement Plan"
shall mean an individual retirement account or individual retirement
annuity.
(d) "Eligible Rollover Distribution" shall mean any distribution of all or
any portion of the balance to credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that
is one of a series of substantially equal period (at least annually)
payments made for the life (or life expectancy) of the Distributee and
the Distributee's designated beneficiary, or for a specified period of
10 years or more; any distribution to the extent such distributions are
required under s401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income. Eligible Rollover
Distributions which are not rolled over to an Eligible Retirement Plan
or otherwise exempt shall be subject to mandatory Federal withholding
of tax at the rate of 20%.
ARTICLE VI
Custodian
6.01 Requirements for Appointment. The Custodian and any successor Custodian
appointed to serve under this Agreement must be a bank or a person who has
been approved by the Commissioner of Internal Revenue under Section
1.401-12(n) of the Internal Revenue Service Regulations.
6.02 Duties. The Custodian shall be an agent for the Employer and the
Participant to receive and to invest Contributions as directed by the
Participant under Article IV hereof, hold and distribute such investments,
and keep adequate records and report thereon relating to transactions
affecting the Participant's Account, all in accordance with this Agreement.
The Custodian shall file with the Internal Revenue Service returns, reports,
forms or other information which may relate to Contributions and/or
distributions from the Participant's Account.
The Custodian may perform any of its administrative duties through other
persons designated by the Custodian from time to time. When State Street Bank
and Trust Company serves as Custodian, the Custodian intends to delegate
certain administrative functions among its partially owned subsidiary, Boston
Financial Data Services, Inc., and New England Funds, L.P. No such delegation
or future change therein shall be considered an amendment of this Agreement.
Not later than sixty (60) days after the close of each calendar year, after
the Custodian's resignation or removal pursuant to Section 6.05 of this
Agreement, or termination by the Custodian of this Agreement pursuant to
Section 6.06, the Custodian shall provide the Participant or his Beneficiary
with a written statement of the transactions in the Participant's Account
during such periods, including Contributions made, dividends paid, and
distributions made. The Custodian shall be released from all liability to the
Participant or any third party as to matters contained in such statement
unless the Participant files written objections with the Custodian within
thirty (30) days after the Custodian provides such statement.
6.03 Limitations of Custodian's Liabilities and Duties. The Custodian shall be
fully protected in acting or omitting to take any action, in reliance upon
any order, notice, request, consent, certificate or other direction from the
Employer, the Participant or their legal representatives believed by the
Custodian to be genuine and properly given. If such instructions or
directions are not timely received as required under this Agreement, or if
received, are in the opinion of the Custodian unclear, the Custodian shall
not be liable for loss of income, or decrease in value of assets, and shall
not be liable for interest, pending receipt of further written instructions
or other clarification. The Custodian shall not be liable and assumes no
responsibility for: the determination of Contribution amounts and the
collection of Contributions; the deductibility of any Contribution or its
propriety under this Agreement; the purpose, propriety, amount, or timing of
any distribution under the Agreement; or the selection of investments and any
losses incurred, which matters are the sole responsibility of the Participant
or his Beneficiary under Sections 3.03, 3.04, 3.08 and 4.02 of this
Agreement.
Furthermore, the Custodian will not be required to effect any transaction by
order of the Participant or his Beneficiary unless and until the requisite
written instructions specifying the occasion for such action are rendered to
the Custodian. The Custodian must be furnished with any and all applications,
certificates, tax waivers, signature guarantees and other documents
(including proof of any legal representative's authority) deemed necessary or
advisable by the Custodian to effect such transaction. The Custodian shall
have no liability to the Participant or his Beneficiary for any tax penalty
or other damages resulting from any inadvertent failure by the Custodian to
make a distribution under this Agreement.
The Custodian shall not be liable for interest on temporary cash balances, if
any, maintained in the Account.
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 Participant or said legal
representative, and unless fully indemnified for so doing to the Custodian's
satisfaction.
6.04 Fees, Expenses and Taxes; Custodian's Right to Reserve Assets in
Participant's Account. The Custodian is entitled to charge the Participant's
Account for reasonable expenses arising in connection with this Agreement
including the fees specified on its current fee schedule, initially appearing
in the Participant Investment Application. The Custodian may change such fees
on thirty (30) days written notice to the Participant.
The following shall constitute a charge to the Participant, or, at the
Custodian's option, to the Participant's Account, and shall be paid from the
assets held in such Account by means of liquidation of shares in the New
England Funds: the Custodian's fees; and taxes incurred in connection with
the investment and reinvestment of the assets of the Account; taxes, that may
be levied or assessed against such assets; and all other administrative
expenses incurred by the Custodian in the performance of its duties including
fees for legal services rendered to the Custodian.
6.05 Resignation and Removal. The Custodian may resign by giving at least sixty
(60) days written notice to New England Funds, L.P., the Employer and the
Participant. New England Funds, L.P. may remove the Custodian by giving at
least sixty (60) days written notice to the Custodian. In each case, New
England Funds, L.P. shall designate a successor Custodian qualified under
Code Section 403(B)(7) and Regulation Section 1.401-12(n), which successor
Custodian shall accept such appointment by a writing submitted to the
Custodian. Upon request, the successor Custodian shall submit evidence
satisfactory to the Custodian of its qualification under Regulation Section
1.401-12(n).
Upon receipt by the Custodian of written acceptance of such appointment by
the successor Custodian, the Custodian shall transfer to such successor
Custodian the assets of the Participant's Account and all necessary records
or copies thereof, provided that any successor Custodian shall agree not to
dispose of any records without the Custodian's consent (which shall not be
unreasonably withheld). The Custodian is authorized, however, to retain
whatever assets it reasonably deems necessary for payment of its fees, costs
and expenses, and other liabilities which constitute a charge on or against
the assets of the Participant's Account or on or against the Custodian.
After the Custodian has transferred the assets of the Participant's Account
to the successor Custodian, the Custodian shall be relieved of all further
responsibility with respect to this Agreement, the Participant's Account and
the assets thereof. The Custodian shall not be liable for the acts or
omissions of any successor Custodian.
6.06 Termination by Custodian. The Custodian may terminate this Agreement if,
within sixty (60) days after its resignation or removal pursuant to Section
6.05 hereof, New England Funds, L.P. has not appointed a successor Custodian
which has accepted such appointment. Termination of this Agreement shall be
effected by written notice to the Employer and the Participant and by
distributing all assets in the Participant's Account in cash or in kind to
the Participant (or, at the Participant's request, to another custodial
account established under Section 403(b)(7) of the Code), or, in the event of
his death, to his Beneficiary or Beneficiaries, subject to the Custodian's
right to certain expense charges under Section 6.04 of this Agreement.
ARTICLE VII Amendment and Termination
7.01 Amendment.
(A) Amendment to Comply with Law. New England Funds, L.P. may, with the
approval of the Custodian, amend this Agreement and the documents
incorporated herein, including retroactive amendment, to conform to the
requirements of Section 403(b) of the Code or any other law or
regulation affecting this Agreement. The Employer and Participant shall
be deemed to have consented to any such amendment. New England Funds,
L.P. shall give prompt written notice to the Employer and the
Participant of any such amendment. However, New England Funds, L.P. has
no affirmative obligation to so amend the Agreement.
(B) Other Amendments. Any amendment other than an amendment described in
paragraph (A) above may be proposed by New England Funds, L.P., the
Employer or the Custodian, and shall be effective if agreed to in
writing by New England Funds, L.P., the Employer and the Custodian.
(C) Limitations. Notwithstanding the above provisions concerning
amendments, no amendment of this Agreement shall be made which would:
(1) Cause or permit any part of the assets in the Participant's Account
to be diverted to purposes other than for the exclusive benefit of
the Participant or his Beneficiary or cause or permit any portion
of such assets to revert to or become the property of the Employer;
(2) Place any greater burden on the Custodian without its written
consent;
(3) Retroactively deprive the Participant or his Beneficiary of any
benefit to which he was entitled under this Agreement by reason of
Contributions made prior to the effective date of the amendment,
unless such amendment is necessary to conform the Agreement to, or
satisfy the conditions of any law, governmental regulation or
ruling, or to permit the Participant's Account to meet the
requirements of Section 403(b)(7) of the Code.
7.02 Termination of Agreement.
(A) The Participant or the Employer may terminate this Agreement at any
time by an instrument in writing delivered to the Custodian. Such
termination shall not be effective until and unless the Custodian
receives written instructions from the Participant or the Employer
directing that the assets in the Participant's Account be transferred
to another custodial account established under Section 403(b)(7) of the
Code, and receives a formal acceptance letter from a successor
Custodian qualified under Section 1.041-12(n) of the Regulations.
(B) This Agreement shall not terminate if the Employer named in the
Affiliation Agreement is succeeded by an Employer which meets the
requirements of Section 1.06, and such successor elects in writing with
the written acceptance of the Custodian, to continue the Agreement.
(C) If it is determined by the Internal Revenue Service that this
Agreement, after initially meeting the requirements of Section
403(b)(7) of the Code, no loner meets those requirements, this
Agreement shall terminate. The assets which are derived from
Contributions made while the Agreement met the requirements of Section
403(b)(7) of the Code, and earnings thereon, shall continue to be held
by the Custodian until written instructions are received either to
transfer the assets of the Participant's Account in accordance with the
preceding Paragraph (A), or to distribute such assets to the
Participant or Beneficiary. Such transfer on distribution will occur to
the Participant within thirty (30) days following the Custodian's
receipt of notice of such failure from the Employer or the Participant,
subject to the Custodian's right to deduct fees and expenses under
Section 6.04 of this Agreement.
7.03 Termination of Distribution. This Agreement shall terminate when all assets
held in the Participant's Account have been distributed to the Participant or
Beneficiary.
ARTICLE VIII
Miscellaneous
8.01 Agreement Neither Creates Nor Modifies Contract of Employment. This
Agreement shall not be deemed to create or modify any contract of employment
between the Employer and the Participant.
8.02 Successors. This Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of any and all parties hereto whether
present or future.
8.03 Applicable Law. This Agreement is accepted by the Custodian in, and shall
be construed and administered in accordance with laws of, the State in which
the Custodian is located.
8.04 New England Funds, L.P. Not Party. Neither New England Funds, L.P. nor New
England Funds whose shares are issued in connection with this Agreement shall
be considered to be a party to this Agreement; they shall be fully protected
in acting in accordance with any written direction of the Custodian and shall
not be required to question any actions directed by the Custodian, except as
otherwise required by law. Neither New England Funds, L.P. nor any New
England Funds whose shares are issued in connection with this Agreement shall
be responsible for the propriety of Contributions distributions or investment
losses under this Agreement. Under no circumstances will New England Funds,
L.P. or any of the New England Funds be a fiduciary within the meaning of
Section 3(21) of the Employee Retirement Income Security Act of 1974 with
respect to the Participant's Account or any plan maintained by the Employer.
4
<PAGE>
8.05 Cooperation in Carrying Out Agreement. The parties to this Agreement and
all persons claiming any interest whatsoever hereunder agree to perform any
and all acts and to execute any and all documents and paper which may be
necessary or desirable for the proper administration of this Agreement or any
of its provisions.
8.06 Construction. No provision of this Agreement, including the documents
incorporated herein by reference, shall be construed to conflict with any
provision of Treasury Department or Internal Revenue Service regulations,
rulings, releases or other orders which affects its qualification under
Section 403(b)(7) of the Code. It is intended that this Agreement, including
said documents, shall be construed in a manner consistent with that purpose.
Subject to the foregoing provisions of this Paragraph, in the event of any
conflict between this Custodial Agreement and the Employer Affiliation
Agreement or the Participant Investment Application, the provisions of this
Custodial Agreement shall prevail.
8.07 Tax Treatment. Neither the Custodian, New England Funds, L.P., nor any of
the New England Funds have any responsibility with respect to such tax
treatment of any Contributions to or distributions from the Participant's
Account, nor shall any term or provision of this Agreement be construed so as
to place any such responsibility upon any one of them. Furthermore, the
Employer and/or the Participant shall have sole responsibility for filing
with the Internal Revenue Service and/or any other government agency such
returns, reports, forms, and other information as may be required of them.
8.08 Notice. Any notice from the Custodian to the Participant pursuant to this
Agreement shall be effective if sent by first class mail to the address
specified in the Participant Investment Application until the Participant
specifies a different address in a form acceptable to the Custodian. Any
notice from the Participant or Employer to the Custodian pursuant to this
Agreement shall be by first class mail addressed to its home office.
8.09 Change of Name and Address. The Participant shall notify the Custodian in
writing of any change of name or address within thirty (30) days of such
change.
8.10 Separability. If any provision of this Agreement shall be held invalid or
illegal for any reason, such determination shall not affect any remaining
provisions of this Agreement, but this Agreement shall be construed and
enforced as if such invalid or illegal provision had never been included in
this Agreement.
<PAGE>
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 03
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with initial capital
letters shall, for the purpose of this Plan, have the meanings set forth below
unless the context indicates that other meanings are intended:
1.01 Adoption Agreement
Means the document executed by the Employer through which it adopts the
Plan and Trust and thereby agrees to be bound by all terms and
conditions of the Plan and Trust.
1.02 Basic Plan Document
Means this prototype Plan and Trust document.
1.03 Break in Eligibility Service
Means a 12 consecutive month period which coincides with an Eligibility
Computation Period during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.04 Break in Vesting Service
Means a Plan Year during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.05 Code
Means the Internal Revenue Code of 1986 as amended from time-to-time.
1.06 Compensation
For Plan Years beginning on or after January 1, 1989, the following
definition of Compensation shall apply:
Compensation will mean Compensation as that term is defined in Section
3.05(E)(2) of the Plan. For any Self-Employed Individual covered under
the Plan, Compensation will mean Earned Income. Compensation shall
include only that Compensation which is actually paid to the Participant
during the applicable period. Except as provided elsewhere in this Plan,
the applicable period shall be the Plan Year unless the Employer has
selected another period in the Adoption Agreement.
Unless otherwise indicated in the Adoption Agreement, Compensation shall
include any amount which is contributed by the Employer pursuant to a
salary reduction agreement and which is not includible in the gross
income of the Employee under Sections 125, 402(a)(8), 402(h) or 403(b)
of the Code.
For years beginning after December 31, 1988, the annual Compensation of
each Participant taken into account under the Plan for any year shall
not exceed $200,000. This limitation shall be adjusted by the Secretary
at the same time and in the same manner as under Section 415(d) of the
Code, except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar year and
the first adjustment to the $200,000 limitation is effected on January
1, 1990. If a Plan determines Compensation on a period of time that
contains fewer than 12 calendar months, then the annual Compensation
limit is an amount equal to the annual Compensation limit for the
calendar year in which the compensation period begins multiplied by the
ratio obtained by dividing the number of full months in the period by
12.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the
spouse of the Participant and any lineal descendants of the Participant
who have not attained age 19 before the close of the year.
If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining the
portion of Compensation up to the integration level if this Plan
provides for permitted disparity), the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application
of this limitation.
If Compensation for any prior Plan Year is taken into account in
determining an Employee's contributions or benefits for the current
year, the Compensation for such prior year is subject to the applicable
annual Compensation limit in effect for that prior year. For this
purpose, for years beginning before January 1, 1990, the applicable
annual Compensation limit is $200,000.
Unless otherwise indicated in the Adoption Agreement, where an Employee
enters the Plan (and thus becomes a Participant) on an Entry Date other
than the first Entry Date in a Plan Year, his Compensation will include
any such earnings paid to him during the whole of such Plan Year.
Where this Plan is being adopted as an amendment and restatement to
bring a Prior Plan into compliance with the Tax Reform Act of 1986, such
Prior Plan's definition of Compensation shall apply for Plan Years
beginning before January 1, 1989.
<PAGE>
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Employee taken into account under the Plan shall
not exceed the OBRA [more than]93 annual Compensation limit. The OBRA
[more than]93 annual Compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in accordance with
Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA [more
than]93 annual Compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period,
and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall
mean the OBRA [more than]93 annual Compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the
OBRA >93 annual Compensation limit in effect for that prior
determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA [more than]93 annual Compensation limit
is $150,000.
1.07 Custodian
Means an entity specified in the Adoption Agreement as Custodian or any
duly appointed successor as provided in Section 5.09.
1.08 Disability
Means the inability to engage in any substantial, gainful activity by
reason of any medically determinable physical or mental impairment that
can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12 months. The
permanence and degree of such impairment shall be supported by medical
evidence.
1.09 Earned Income
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan to the
extent deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction allowed to
the Employer by Section 164(f) of the Code for taxable years beginning
after December 31, 1989.
1.10 Effective Date
Means the date the Plan becomes effective as indicated in the Adoption
Agreement. However, where a separate date is stated in the Plan as of
which a particular Plan provision becomes effective, such date will
control with respect to that provision.
1.11 Eligibility Computation Period
An Employee's initial Eligibility Computation Period shall be the 12
consecutive month period commencing with the date such Employee first
performs an Hour of Service (employment commencement date). His
subsequent Eligibility Computation Periods shall be the 12 consecutive
month periods commencing on the anniversaries of his employment
commencement date; provided, however, if pursuant to the Adoption
Agreement, an Employee is required to complete one or less Years of
Eligibility Service to become a Participant, then his subsequent
Eligibility Computation Periods shall be the Plan Years commencing with
the Plan Year beginning during his initial Eligibility Computation
Period.
1.12 Employee
Means any person employed by the Employer maintaining the Plan or of any
other employer required to be aggregated with such Employer under
Sections 414(b), (c), (m) or (o) of the Code.
The term Employee shall also include any Leased Employee deemed to be an
Employee of any Employer described in the previous paragraph as provided
in Sections 414(n) or (o) of the Code.
1.13 Employer
Means any corporation, partnership, sole-proprietorship or other entity
named in the Adoption Agreement and any successor who by merger,
consolidation, purchase or otherwise assumes the obligations of the
Plan. A partnership is considered to be the Employer of each of the
partners and a sole-proprietorship is considered to be the Employer of a
sole proprietor.
1.14 Employer Contribution
Means the amount contributed by the Employer each year as determined
under this Plan.
1.15 Entry Dates
Means the first day of the Plan Year and the first day of the seventh
month of the Plan Year, unless the Employer has specified more frequent
dates in the Adoption Agreement.
1.16 ERISA
Means the Employee Retirement Income Security Act of 1974 as amended
from time-to-time.
<PAGE>
1.17 Forfeiture
Means that portion of a Participant's Individual Account as derived from
Employer Contributions which he or she is not entitled to receive (i.e.,
the nonvested portion).
1.18 Fund
Means the Plan assets held by the Trustee or Custodian for the
Participants' exclusive benefit.
1.19 Highly Compensated Employee
The term Highly Compensated Employee includes highly compensated active
employees and highly compensated former employees.
A highly compensated active employee includes any Employee who performs
service for the Employer during the determination year and who, during
the look-back year: (a) received Compensation from the Employer in
excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code);
(b) received Compensation from the Employer in excess of $50,000 (as
adjusted pursuant to Section 415(d) of the Code) and was a member of the
top-paid group for such year; or (c) was an officer of the Employer and
received Compensation during such year that is greater than 50% of the
dollar limitation in effect under Section 415(b)(1)(A) of the Code. The
term Highly Compensated Employee also includes: (a) Employees who are
both described in the preceding sentence if the term "determination
year" is substituted for the term "look-back year" and the Employee is
one of the 100 Employees who received the most Compensation from the
Employer during the determination year; and (b) Employees who are 5%
owners at any time during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the 12 month period immediately preceding the
determination year.
A highly compensated former employee includes any Employee who separated
from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or after
the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5% owner who is an active or former Employee
or a Highly Compensated Employee who is one of the 10 most Highly
Compensated Employees ranked on the basis of Compensation paid by the
Employer during such year, then the family member and the 5% owner or
top 10 Highly Compensated Employee shall be aggregated. In such case,
the family member and 5% owner or top 10 Highly Compensated Employee
shall be treated as a single Employee receiving Compensation and Plan
contributions or benefits equal to the sum of such Compensation and
contributions or benefits of the family member and 5% owner or top 10
Highly Compensated Employee. For purposes of this Section, family member
includes the spouse, lineal ascendants and descendants of the Employee
or former Employee and the spouses of such lineal ascendants and
descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees treated as
officers and the Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations
thereunder.
1.20 Hours of Service -- Means
A. Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be
credited to the Employee for the computation period in which the
duties are performed; and
B. Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave of
absence. No more than 501 Hours of Service will be credited under
this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Hours under this
paragraph shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which is
incorporated herein by this reference; and
C. Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. The same Hours of
Service will not be credited both under paragraph (A) or paragraph
(B), as the case may be, and under this paragraph (C). These hours
will be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement, or payment is made.
D. Solely for purposes of determining whether a Break in Eligibility
Service or a Break in Vesting Service has occurred in a computation
period (the computation period for purposes of determining whether a
Break in Vesting Service has occurred is the Plan Year), an
individual who is absent from work for maternity or paternity reasons
shall receive credit for the Hours of Service which would otherwise
have been credited to such individual but for such absence, or in any
case in which such hours cannot be determined, 8 Hours of Service per
day of such absence. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence (1) by
reason of the pregnancy of the individual, (2) by reason of a birth
of a child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of such
child by such individual, or (4) for purposes of caring for such
child for a period beginning immediately following such birth or
placement. The Hours of Service credited under this paragraph shall
be credited (1) in the Eligibility Computation Period or Plan Year in
which the absence begins if the crediting is necessary to prevent a
Break in Eligibility Service or a Break in Vesting Service in the
applicable period, or (2) in all other cases, in the following
Eligibility Computation Period or Plan Year.
<PAGE>
E. Hours of Service will be credited for employment with other members
of an affiliated service group (under Section 414(m) of the Code), a
controlled group of corporations (under Section 414(b) of the Code),
or a group of trades or businesses under common control (under
Section 414(c) of the Code) of which the adopting Employer is a
member, and any other entity required to be aggregated with the
Employer pursuant to Section 414(o) of the Code and the regulations
thereunder.
Hours of Service will also be credited for any individual considered
an Employee for purposes of this Plan under Code Sections 414(n) or
414(o) and the regulations thereunder.
F. Where the Employer maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as service for
the Employer.
G. The above method for determining Hours of Service may be altered as
specified in the Adoption Agreement.
1.21 Individual Account
Means the account established and maintained under this Plan for each
Participant in accordance with Section 4.01.
1.22 Investment Fund
Means a subdivision of the Fund established pursuant to Section 5.05.
1.23 Key Employee
Means any person who is determined to be a Key Employee under Section
10.08.
1.24 Leased Employee
Means any person (other than an Employee of the recipient) who pursuant
to an agreement between the recipient and any other person (Aleasing
organization@) has performed services for the recipient (or for the
recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full time basis for a period
of at least one year, and such services are of a type historically
performed by Employees in the business field of the recipient Employer.
Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the
recipient Employer shall be treated as provided by the recipient
Employer.
A Leased Employee shall not be considered an Employee of the recipient
if: (1) such employee is covered by a money purchase pension plan
providing: (a) a nonintegrated employer contribution rate of at least
10% of compensation, as defined in Section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Section 125,
Section 402(a)(8), Section 402(h) or Section 403(b) of the Code, (b)
immediate participation, and (c) full and immediate vesting; and (2)
Leased Employees do not constitute more than 20% of the recipient's
nonhighly compensated work force.
1.25 Normal Retirement Age
Means the age specified in the Adoption Agreement. However, if the
Employer enforces a mandatory retirement age which is less than the
Normal Retirement Age, such mandatory age is deemed to be the Normal
Retirement Age. If no age is specified in the Adoption Agreement, the
Normal Retirement Age shall be age 59 1/2.
1.26 Owner-Employee
Means an individual who is a sole proprietor, or who is a partner owning
more than 10% of either the capital or profits interest of the
partnership.
1.27 Participant
Means any Employee or former Employee of the Employer who has met the
Plan's eligibility requirements, has entered the Plan and who is or may
become eligible to receive a benefit of any type from this Plan or whose
Beneficiary may be eligible to receive any such benefit.
1.28 Plan
Means the prototype defined contribution plan adopted by the Employer.
The Plan consists of this Basic Plan Document plus the corresponding
Adoption Agreement as completed and signed by the Employer.
1.29 Plan Administrator
Means the person or persons determined to be the Plan Administrator in
accordance with Section 8.01.
1.30 Plan Year
Means the 12 consecutive month period which coincides with the
Employer's tax year or such other 12 consecutive month period as is
designated in the Adoption Agreement.
1.31 Prior Plan
Means a plan which was amended or replaced by adoption of this Plan
document, as indicated in the Adoption Agreement.
1.32 Prototype Sponsor
Means the entity specified in the Adoption Agreement. Such entity must
meet the definition of a sponsoring organization set forth in Section
3.07 of Revenue Procedure 89-9.
<PAGE>
1.33 Self-Employed Individual
Means an individual who has Earned Income for the taxable year from the
trade or business for which the Plan is established; also, an individual
who would have had Earned Income but for the fact that the trade or
business had no net profits for the taxable year.
1.34 Separate Fund
Means a subdivision of the Fund held in the name of a particular
Participant representing certain assets held for that Participant. The
assets which comprise a Participant's Separate Fund are those assets
earmarked for him and those assets subject to the Participant's
individual direction pursuant to Section 5.14.
1.35 Taxable Wage Base
Means, with respect to any taxable year, the maximum amount of earnings
which may be considered wages for such year under Section 3121(a)(1) of
the Code.
1.36 Termination of Employment
A Termination of Employment of an Employee of an Employer shall occur
whenever his status as an Employee of such Employer ceases for any
reason other than his death. An Employee who does not return to work for
the Employer on or before the expiration of an authorized leave of
absence from such Employer shall be deemed to have incurred a
Termination of Employment when such leave ends.
1.37 Top-Heavy Plan
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to
be such pursuant to Section 10.08.
1.38 Trustee
Means an individual, individuals or corporation specified in the
Adoption Agreement as Trustee or any duly appointed successor as
provided in Section 5.09. Trustee shall mean Custodian in the event the
financial organization named as Trustee does not have full trust powers.
1.39 Valuation Date
Means the last day of the Plan Year and each other date designated by
the Plan Administrator which is selected in a uniform and
nondiscriminatory manner when the assets of the Fund are valued at their
then fair market value.
1.40 Vested
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or his
Beneficiary to that part of an immediate or deferred benefit under the
Plan which arises from a Participant's Years of Vesting Service.
1.41 Year of Eligibility Service
Means a 12-consecutive month period which coincides with an Eligibility
Computation period during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified in
the Adoption Agreement for this purpose).
1.42 Year of Vesting Service
Means a Plan Year during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified in
the Adoption Agreement for this purpose).
In the case of a Participant who has 5 or more consecutive Breaks in
Vesting Service, all Years of Vesting Service after such Breaks in
Vesting Service will be disregarded for the purpose of determining the
Vested portion of his Individual Account derived from Employer
Contributions that accrued before such breaks. Such Participant's
prebreak service will count in vesting the postbreak Individual Account
derived from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of his
Individual Account derived from Employer Contributions at the time
of his Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks in
Vesting Service is less than his number of Years of Vesting Service
before such breaks.
Separate subaccounts will be maintained for the Participant's
prebreak and postbreak portions of his Individual Account derived
from Employer Contributions. Both subaccounts will share in the
gains and losses of the Fund.
Years of Vesting Service shall not include any period of time
excluded from Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period,
Employees shall receive credit for Years of Vesting Service, in
accordance with the preceding provisions of this definition, for
each of the Plan Years (the old and new Plan Years) which overlap as
a result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 Eligibility to Participate
Each Employee of the Employer, except those Employees who belong to a
class of Employees which is excluded from participation as indicated in
the Adoption Agreement, shall be eligible to participate in this Plan
upon the satisfaction of the age and Years of Eligibility Service
requirements specified in the Adoption Agreement.
<PAGE>
2.02 Plan Entry
A. If this Plan is a replacement of a Prior Plan by amendment or
restatement, each Employee of the Employer who was a Participant in
said Prior Plan before the Effective Date shall continue to be a
Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the
Effective Date if he has met the eligibility requirements of Section
2.01 as of such date. After the Effective Date, each Employee shall
become a Participant on the first Entry Date following the date the
Employee satisfies the eligibility requirements of Section 2.01.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall furnish him
with the application form, enrollment forms or other documents which
are required of Participants. The eligible Employee shall execute
such forms or documents and make available such information as may
be required in the administration of the Plan.
2.03 Transfer to or From Ineligible Class
If an Employee who had been a Participant becomes ineligible to
participate because he is no longer a member of an eligible class of
Employees, but has not incurred a Break in Eligibility Service, such
Employee shall participate immediately upon his return to an eligible
class of Employees. If such Employee incurs a Break in Eligibility
Service, his eligibility to participate shall be determined by Section
2.04.
An Employee who is not a member of the eligible class of Employees will
become a Participant immediately upon becoming a member of the eligible
class provided such Employee has satisfied the age and Years of
Eligibility Service requirements. If such Employee has not satisfied the
age and Years of Eligibility Service requirements as of the date he
becomes a member of the eligible class, he shall become a Participant on
the first Entry Date following the date he satisfies said requirements.
2.04 Return as a Participant After Break in Eligibility Service
A. Employee Not Participant Before Break -- If an Employee incurs a
Break in Eligibility Service before satisfying the Plan's
eligibility requirements, such Employee's Years of Eligibility
Service before such Break in Eligibility Service will not be taken
into account.
B. Nonvested Participants -- In the case of a Participant who does not
have a Vested interest in his Individual Account derived from
Employer Contributions, Years of Eligibility Service before a period
of consecutive Breaks in Eligibility Service will not be taken into
account for eligibility purposes if the number of consecutive Breaks
in Eligibility Service in such period equals or exceeds the greater
of 5 or the aggregate number of Years of Eligibility Service before
such break. Such aggregate number of Years of Eligibility Service
will not include any Years of Eligibility Service disregarded under
the preceding sentence by reason of prior breaks.
If a Participant's Years of Eligibility Service are disregarded
pursuant to the preceding paragraph, such Participant will be
treated as a new Employee for eligibility purposes. If a
Participant's Years of Eligibility Service may not be disregarded
pursuant to the preceding paragraph, such Participant shall continue
to participate in the Plan, or, if terminated, shall participate
immediately upon reemployment.
C. Vested Participants -- A Participant who has sustained a Break in
Eligibility Service and who had a Vested interest in all or a
portion of his Individual Account derived from Employer
Contributions shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment.
2.05 Determinations Under This Section
The Plan Administrator shall determine the eligibility of each Employee
to be a Participant. This determination shall be conclusive and binding
upon all persons except as otherwise provided herein or by law.
2.06 Terms of Employment
Neither the fact of the establishment of the Plan nor the fact that a
common law Employee has become a Participant shall give to that common
law Employee any right to continued employment; nor shall either fact
limit the right of the Employer to discharge or to deal otherwise with a
common law Employee without regard to the effect such treatment may have
upon the Employee's rights under the Plan.
SECTION THREE CONTRIBUTIONS
3.01 Employer Contributions
A. Obligation to Contribute -- The Employer shall make contributions to
the Plan in accordance with the contribution formula specified in
the Adoption Agreement. If this Plan is a profit sharing plan, the
Employer shall, in its sole discretion, make contributions without
regard to current or accumulated earnings or profits.
B. Allocation Formula and the Right to Share in the Employer
Contribution --
1. General -- The Employer Contribution for a Plan Year will be
allocated or contributed to the Individual Accounts of
qualifying Participants in accordance with the allocation or
contribution formula specified in the Adoption Agreement. The
Employer Contribution for any Plan Year will be allocated to
each Participant's Individual Account as of the last day of that
Plan Year.
Any Employer Contribution for a Plan Year must satisfy Section
401(a)(4) and the regulations thereunder for such Plan Year.
<PAGE>
2. Qualifying Participants -- A Participant is a qualifying
Participant and is entitled to share in the Employer
Contribution for any Plan Year if (1) he was a Participant on at
least one day during the Plan Year, (2) if this Plan is a
nonstandardized plan, he completes a Year of Vesting Service
during the Plan Year and (3) where the Employer has selected the
"last day requirement" in the Adoption Agreement, he is an
Employee of the Employer on the last day of the Plan Year
(except that this last requirement (3) shall not apply if the
Participant has died during the Plan Year or incurred a
Termination of Employment during the Plan year after having
reached his Normal Retirement Age or having incurred a
Disability). Notwithstanding anything in this paragraph to the
contrary, a Participant will not be a qualifying Participant for
a Plan Year if he incurs a Termination of Employment during such
Plan Year with not more than 500 Hours of Service if he is not
an Employee on the last day of the Plan Year. The determination
of whether a Participant is entitled to share in the Employer
Contribution shall be made as of the last day of each Plan Year.
3. Special Rules for Integrated Plans -- If the Employer has
selected the integrated contribution or allocation formula in
the Adoption Agreement, then the maximum disparity rate shall be
determined in accordance with the following table.
MAXIMUM DISPARITY RATE
Integration Level Money Top-Heavy Nontop-Heavy
Purchase Profit Sharing Profit Sharing
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more than X* 5.7% 2.7% 5.7%
More than X* of TWB but not more
than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but not
more than TWB 5.4% 2.4% 5.4%
* X means the greater of $10,000 or 20% of TWB.
C. Allocation of Forfeitures -- Forfeitures for a Plan Year which arise
as a result of the application of Section 6.01(D) shall be allocated
as follows:
1. Profit Sharing Plan -- If this is a profit sharing plan,
Forfeitures shall be allocated in the manner provided in Section
3.01(B) (for Employer Contributions) to the Individual Accounts
of Participants who are entitled to share in the Employer
Contribution for such Plan Year.
2. Money Purchase Pension and Target Benefit Plan -- If this Plan
is a money purchase pension plan or a target benefit plan,
Forfeitures shall be applied towards the reduction of Employer
Contributions to the Plan. However, if the Employer has
indicated in the Adoption Agreement that Forfeitures shall be
allocated to the Individual Accounts of Participants, then
Forfeitures shall be allocated in the manner provided in Section
3.01(B) (for Employer Contributions) to the Individual Accounts
of Participants who are entitled to share in the Employer
Contributions for such Plan Year.
D. Timing of Employer Contribution -- The Employer Contribution for
each Plan Year shall be delivered to the Trustee (or Custodian, if
applicable) not later than the due date for filing the Employer's
income tax return for its fiscal year in which the Plan Year ends,
including extensions thereof.
E. Minimum Allocation for Top-Heavy Plans -- The contribution and
allocation provisions of this Section 3.01(E) shall apply for any
Plan Year with respect to which this Plan is a Top-Heavy Plan.
1. Except as otherwise provided in (3) and (4) below, the Employer
Contributions and Forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of 3% of such Participant's Compensation or (in the case
where the Employer has no defined benefit plan which designates
this Plan to satisfy Section 401 of the Code) the largest
percentage of Employer Contributions and Forfeitures, as a
percentage of the first $200,000 (increased by any cost of
living adjustment made by the Secretary of Treasury or his
delegate) of the Key Employee's Compensation, allocated on
behalf of any Key Employee for that year. The minimum allocation
is determined without regard to any Social Security
contribution. This minimum allocation shall be made even though
under other Plan provisions, the Participant would not otherwise
be entitled to receive an allocation, or would have received a
lesser allocation for the year because of (a) the Participant's
failure to complete 1,000 Hours of Service (or any equivalent
provided in the Plan), or (b) the Participant's failure to make
mandatory Employee Contributions to the Plan, or (c)
Compensation less than a stated amount.
2. For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 1.06 of the Plan.
3. The provision in (1) above shall not apply to any Participant
who was not employed by the Employer on the last day of the Plan
Year.
4. The provision in (1) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or
plans of the Employer and the Employer has provided in the
Adoption Agreement that the minimum allocation or benefit
requirement applicable to Top-Heavy Plans will be met in the
other plan or plans.
<PAGE>
5. The minimum allocation required under this Section 3.01(E) and
Section 3.01(F)(1) (to the extent required to be nonforfeitable
under Code Section 416(b)) may not be forfeited under Code
Section 411(a)(3)(B) or 411(a)(3)(D).
F. Special Requirements for Paired Plans -- The Employer maintains
paired plans if the Employer has adopted both a standardized profit
sharing plan and a standardized money purchase pension plan using
this Basic Plan Document.
1. Minimum Allocation -- The mandatory minimum allocation provision
of Section 3.01(E) shall not apply to any Participant if the
Employer maintains paired plans. Rather, for each Plan Year, the
Employer will provide a minimum contribution equal to 3% of
Compensation for each non-Key Employee who is entitled to a
minimum contribution. Such minimum contribution will only be
made to one of the Plans. If an Employee is a Participant in
only one of the Plans, the minimum contribution shall be made to
that Plan. If the Employee is a Participant in both Plans, the
minimum contribution shall be made to the money purchase plan.
2. Only One Plan can be Integrated -- If the Employer maintains
paired plans, only one of the Plans may provide for the
disparity in contributions which is permitted under Section
401(l) of the Code. In the event that both Adoption Agreements
provide for such integration, only the money purchase pension
plan shall be deemed to be integrated.
G. Return of the Employer Contribution to the Employer Under Special
Circumstances -- Any contribution made by the Employer because of a
mistake of fact must be returned to the Employer within one year of
the contribution.
In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Code, any
contributions made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the
application for qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which the
Plan is adopted, or such later date as the Secretary of the Treasury
may prescribe.
In the event that a contribution made by the Employer under this
Plan is conditioned on deductibility and is not deductible under
Code Section 404, the contribution, to the extent of the amount
disallowed, must be returned to the Employer within one year after
the deduction is disallowed.
H. Omission of Participant
1. If the Plan is a money purchase plan or a target benefit plan
and, if in any Plan Year, any Employee who should be included as
a Participant is erroneously omitted and discovery of such
omission is not made until after a contribution by the Employer
for the year has been made and allocated, the Employer shall
make a subsequent contribution with respect to the omitted
Employee in the amount which the Employer would have contributed
with respect to that Employee had he not been omitted.
2. If the Plan is a profit sharing plan, and if in any Plan Year,
any Employee who should be included as a Participant is
erroneously omitted and discovery of such omission is not made
until after the Employer Contribution has been made and
allocated, then the Plan Administrator must re-do the allocation
(if a correction can be made) and inform the Employee.
Alternatively, the Employer may choose to contribute for the
omitted Employee the amount which the Employer would have
contributed for him.
3.02 Employee Contributions
This Plan will not accept nondeductible employee contributions and
matching contributions for Plan Years beginning after the Plan Year in
which this Plan is adopted by the Employer. Employee contributions for
Plan Years beginning after December 31, 1986, together with any matching
contributions as defined in Section 401(m) of the Code, will be limited
so as to meet the nondiscrimination test of Section 401(m) of the Code.
A separate account will be maintained by the Plan Administrator for the
nondeductible employee contributions of each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator, withdraw the lesser of the portion of his Individual
Account attributable to his nondeductible employee contributions or the
amount he contributed as nondeductible employee contributions.
Employee contributions and earnings thereon will be nonforfeitable at
all times. No Forfeiture will occur solely as a result of an Employee's
withdrawal of employee contributions.
The Plan Administrator will not accept deductible employee contributions
which are made for a taxable year beginning after December 31, 1986.
Contributions made prior to that date will be maintained in a separate
account which will be nonforfeitable at all times. The account will
share in the gains and losses of the Fund in the same manner as
described in Section 4.03 of the Plan. No part of the deductible
employee contribution account will be used to purchase life insurance.
Subject to Section 6.05, joint and survivor annuity requirements (if
applicable), the Participant may withdraw any part of the deductible
employee contribution account by making a written application to the
Plan Administrator.
3.03 Rollover Contributions
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, an Employee may contribute a rollover contribution to the Plan;
provided that such Employee submits a written certification,
satisfactory to the Trustee (or Custodian), that the contribution
qualifies as a rollover contribution.
<PAGE>
A separate account shall be maintained by the Plan Administrator for
each Employee's rollover contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses of
the Fund in the manner described in Section 4.03 and shall be subject to
the Plan's provisions governing distributions.
For purposes of this Section 3.03, "rollover contribution" means a
contribution described in Sections 402(a)(5), 403(a)(4) or 408(d)(3) of
the Code or in any other provision which may be added to the Code which
may authorize rollovers to the Plan.
3.04 Transfer Contributions
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, the Trustee (or Custodian, if applicable) may receive any
amounts transferred to it from the trustee or custodian of another plan
qualified under Code Section 401(a).
A separate account shall be maintained by the Plan Administrator for
each Employee's transfer contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses of
the Fund in the manner described in Section 4.03 and shall be subject to
the Plan's provisions governing distributions.
3.05 Limitation on Allocations
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer or
a welfare benefit fund, as defined in Section 419(e) of the Code
maintained by the Employer, or an individual medical account, as
defined in Section 415(l)(2) of the Code, maintained by the
Employer, which provides an annual addition as defined in Section
3.05(E)(1), the following rules shall apply:
1. The amount of annual additions which may be credited to the
Participant's Individual Account for any limitation year will
not exceed the lesser of the maximum permissible amount or any
other limitation contained in this Plan. If the Employer
Contribution that would otherwise be contributed or allocated to
the Participant's Individual Account would cause the annual
additions for the limitation year to exceed the maximum
permissible amount, the amount contributed or allocated will be
reduced so that the annual additions for the limitation year
will equal the maximum permissible amount.
2. Prior to determining the Participant's actual compensation for
the limitation year, the Employer may determine the maximum
permissible amount for a Participant on the basis of a
reasonable estimation of the Participant's Compensation for the
limitation year, uniformly determined for all participants
similarly situated.
3. As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
4. If pursuant to Section 3.05(A)(3) or as a result of the
allocation of Forfeitures there is an excess amount, the excess
will be disposed of as follows:
a. Any nondeductible voluntary employee contributions, to the
extent they would reduce the excess amount, will be returned
to the Participant;
b. If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the limitation year, the excess amount in the
Participant's Individual Account will be used to reduce
Employer Contributions (including any allocation of
Forfeitures) for such Participant in the next limitation
year, and each succeeding limitation year if necessary;
c. If after the application of paragraph (a) an excess amount
still exists, and the Participant is not covered by the Plan
at the end of a limitation year, the excess amount will be
held unallocated in a suspense account. The suspense account
will be applied to reduce future Employer Contributions
(including allocation of any Forfeitures) for all remaining
Participants in the next limitation year, and each succeeding
limitation year if necessary;
d. If a suspense account is in existence at any time during a
limitation year pursuant to this Section, it will not
participate in the allocation of the Fund's investment gains
and losses. If a suspense account is in existence at any time
during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to
Participants' Individual Accounts before any Employer
Contributions or any Employee contributions may be made to
the Plan for that limitation year. Excess amounts may not be
distributed to Participants or former Participants.
B. If, in addition to this Plan, the Participant is covered under
another qualified master or prototype defined contribution plan
maintained by the Employer, a welfare benefit fund, as defined in
Section 419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(l)(2) of the
Code, maintained by the Employer, which provides an annual addition
as defined in Section 3.05(E)(1), during any limitation year, the
following rules apply:
1. The annual additions which may be credited to a Participant's
Individual Account under this Plan for any such limitation year
will not exceed the maximum permissible amount reduced by the
annual additions credited to a Participant's Individual Account
under the other plans and welfare benefit funds for the same
limitation year. If the annual additions with respect to the
Participant under other defined contribution plans and welfare
<PAGE>
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 such plans and funds for the
limitation year will equal the maximum permissible amount. If
the annual additions with respect to the Participant under such
other defined contribution plans and welfare benefit funds in
the aggregate are equal to or greater than the maximum
permissible amount, no amount will be contributed or allocated
to the Participant's Individual Account under this Plan for the
limitation year.
2. Prior to determining the Participant's actual compensation for
the limitation year, the Employer may determine the maximum
permissible amount for a Participant in the manner described in
Section 3.05(A)(2).
3. As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
4. If, pursuant to Section 3.05(B)(3) or as a result of the
allocation of Forfeitures, a Participant's annual additions
under this Plan and such other plans would result in an excess
amount for a limitation year, the excess amount will be deemed
to consist of the annual additions last allocated, except that
annual additions attributable to a welfare benefit fund or
individual medical account will be deemed to have been allocated
first regardless of the actual allocation date.
5. If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the excess amount attributed to this Plan
will be the product of,
a. the total excess amount allocated as of such date, times
b. the ratio of (i) the annual additions allocated to the
Participant for the limitation year as of such date under
this Plan to (ii) the total annual additions allocated to the
Participant for the limitation year as of such date under
this and all the other qualified master or prototype defined
contribution plans.
6. Any excess amount attributed to this Plan will be disposed in
the manner described in Section 3.05(A)(4).
C. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a master
or prototype plan, annual additions which may be credited to the
Participant's Individual Account under this Plan for any limitation
year will be limited in accordance with Sections 3.05(B)(1) through
3.05(B)(6) as though the other plan were a master or prototype plan
unless the Employer provides other limitations in the Section of the
Adoption Agreement titled "Limitation on Allocation -- More Than One
Plan."
D. If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum
of the Participant's defined benefit plan fraction and defined
contribution plan fraction will not exceed 1.0 in any limitation
year. The annual additions which may be credited to the
Participant's Individual Account under this Plan for any limitation
year will be limited in accordance with the Section of the Adoption
Agreement titled "Limitation on Allocation -- More Than One Plan."
E. The following terms shall have the following meanings when used in
this Section 3.05:
1. Annual additions: The sum of the following amounts credited to a
Participant's Individual Account for the limitation year:
a. Employer Contributions,
b. Employee contributions,
c. Forfeitures, and
d. Amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415(l)(2) of the Code,
which is part of a pension or annuity plan maintained by the
Employer are treated as annual additions to a defined
contribution plan. Also amounts derived from contributions
paid or accrued after December 31, 1985, in taxable years
ending after such date, which are attributable to
post-retirement medical benefits, allocated to the separate
account of a key employee, as defined in Section 419A(d)(3)
of the Code, under a welfare benefit fund, as defined in
Section 419(e) of the Code, maintained by the Employer are
treated as annual additions to a defined contribution plan.
For this purpose, any excess amount applied under Section
3.05(A)(4) or 3.05(B)(6) in the limitation year to reduce
Employer Contributions will be considered annual additions
for such limitation year.
2. Compensation: As elected by the Employer in the Adoption
Agreement (and if no election is made, Section 3401(a) wages
will be deemed to have been selected), Compensation shall mean
all of a Participant's:
a. Section 3121 wages. Wages as defined in Section 3121(a) of
the Code, for purposes of calculating Social Security taxes,
but determined without regard to the wage base limitation in
Section 3121(a)(1), the special rules in Section 3121(v), any
rules that limit covered employment based on the type or
location of an Employee's Employer, and any rules that limit
the remuneration included in wages based on familial
relationship or based on the nature or location of the
employment or the services performed (such as the exceptions
to the definition of employment in Section 3121(b)(1) through
(20)).
<PAGE>
b. Section 3401(a) wages. Wages as defined in Section 3401(a) of
the Code, for the purposes of income tax withholding at the
source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or
location of the employment or the services performed (such as
the exception for agricultural labor in Section 3401(a)(2)).
c. 415 safe-harbor compensation. Wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the Employer maintaining the Plan to the
extent that the amounts are includible in gross income
(including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, reimbursements, and expense allowances), and
excluding the following:
1. Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income
for the taxable year in which contributed, or employer
contributions under a simplified employee pension plan to
the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
2. Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture;
3. Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
4. Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity described in Section 403(b) of the Code (whether
or not the amounts are actually excludible from the gross
income of the Employee).
For any Self-Employed Individual, Compensation will mean Earned
Income. For limitation years beginning after December 31, 1991,
for purposes of applying the limitations of this Section 3.05,
compensation for a limitation year is the compensation actually
paid or includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a
Participant in a defined contribution plan who is permanently
and totally disabled (as defined in Section 22(e)(3) of the
Code) is the compensation such Participant would have received
for the limitation year if the Participant had been paid at the
rate of compensation paid immediately before becoming
permanently and totally disabled; such imputed compensation for
the disabled participant may be taken into account only if the
Participant is not a Highly Compensated Employee (as defined in
Section 414(q) of the Code) and contributions made on behalf of
such Participant are nonforfeitable when made.
3. Defined benefit fraction: A fraction, the numerator of which is
the sum of the Participant's projected annual benefits under all
the defined benefit plans (whether or not terminated) maintained
by the Employer, and the denominator of which is the lesser of
125% of the dollar limitation determined for the limitation year
under Section 415(b) and (d) of the Code or 140% of the highest
average compensation, including any adjustments under Section
415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant
as of the first day of the first limitation year beginning after
December 31, 1986, in one or more defined benefit plans
maintained by the employer which were in existence on May 6,
1986, the denominator of this fraction will not be less than
125% of the sum of the annual benefits under such plans which
the participant had accrued as of the close of the last
limitation year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the plan after May 5,
1986. The preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the
requirements of Section 415 of the Code for all limitation years
beginning before January 1, 1987.
4. Defined contribution dollar limitation: $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code as in effect for the limitation
year.
5. Defined contribution fraction: A fraction, the numerator of
which is the sum of the annual additions to the Participant's
account under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all
prior limitation years (including the annual additions
attributable to the Participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Section
419(e) of the Code, and individual medical accounts, as defined
in Section 415(l)(2) of the Code, maintained by the Employer),
and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of
service with the Employer (regardless of whether a defined
contribution plan was maintained by the Employer). The maximum
aggregate amount in any limitation year is the lesser of 125% of
the dollar limitation determined under Section 415(b) and (d) of
the Code in effect under Section 415(c)(1)(A) of the Code or 35%
of the Participant's compensation for such year.
If the Employee was a participant as of the end of the first day
of the first limitation year beginning after December 31, 1986,
in one or more defined contribution plans maintained by the
Employer which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this fraction
and the defined benefit fraction would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, an amount
equal to the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of this fraction,
will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as
they would be computed as of the end of the last limitation year
beginning before January 1, 1987, and disregarding any changes
in the terms and conditions of the Plan made after May 5, 1986,
but using the Section 415 limitation applicable to the first
limitation year beginning on or after January 1, 1987.
<PAGE>
The annual addition for any limitation year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
6. Employer: For purposes of this Section 3.05, Employer shall mean
the Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b)
of the Code as modified by Section 415(h)), all commonly
controlled trades or businesses (as defined in Section 414(c) as
modified by Section 415(h)) or affiliated service groups (as
defined in Section 414(m)) of which the adopting Employer is a
part, and any other entity required to be aggregated with the
Employer pursuant to regulations under Section 414(o) of the
Code.
7. Excess amount: The excess of the Participant's annual additions
for the limitation year over the maximum permissible amount.
8. Highest average compensation: The average compensation for the
three consecutive years of service with the Employer that
produces the highest average.
9. Limitation year: A calendar year, or the 12-consecutive month
period elected by the Employer in the Section of the Adoption
Agreement titled "Limitation on Allocation -- More Than One
Plan." All qualified plans maintained by the Employer must use
the same limitation year. If the limitation year is amended to a
different 12-consecutive month period, the new limitation year
must begin on a date within the limitation year in which the
amendment is made.
10. Master or prototype plan: A plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue
Service.
11. Maximum permissible amount: The maximum annual addition that may
be contributed or allocated to a Participant's Individual
Account under the Plan for any limitation year shall not exceed
the lesser of:
a. the defined contribution dollar limitation, or
b. 25% of the Participant's compensation for the limitation
year.
The compensation limitation referred to in (b) shall not apply
to any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is
otherwise treated as an annual addition under Section 415(l)(1)
or 419A(d)(2) of the Code.
If a short limitation year is created because of an amendment
changing the limitation year to a different 12-consecutive month
period, the maximum permissible amount will not exceed the
defined contribution dollar limitation multiplied by the
following fraction:
Number of months in the short limitation year
12
12. Projected annual benefit: The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if
such benefit is expressed in a form other than a straight life
annuity or qualified joint and survivor annuity) to which the
Participant would be entitled under the terms of the Plan
assuming:
a. the Participant will continue employment until normal
retirement age under the Plan (or current age, if later), and
b. the Participant's compensation for the current limitation
year and all other relevant factors used to determine
benefits under the Plan will remain constant for all future
limitation years.
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 Individual Accounts
A. The Plan Administrator shall establish and maintain an Individual
Account in the name of each Participant to reflect the total value
of his interest in the Fund. Each Individual Account established
hereunder shall consist of such subaccounts as may be needed for
each Participant including:
1. a subaccount to reflect Employer Contributions and Forfeitures
allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover contributions;
3. a subaccount to reflect a Participant's transfer contributions;
4. a subaccount to reflect a Participant's nondeductible employee
contributions; and
5. a subaccount to reflect a Participant's deductible employee
contributions.
Such subaccounts are primarily for accounting purposes, and do not
necessarily require a segregation of the Fund.
<PAGE>
B. The Plan Administrator may establish additional accounts as it may
deem necessary for the proper administration of the Plan, including,
but not limited to, a suspense account for Forfeitures as required
pursuant to Section 6.01(D).
4.02 Valuation of Fund
The Fund will be valued each Valuation Date at fair market value.
4.03 Valuation of Individual Accounts
A. Where all or a portion of the assets of a Participant's Individual
Account are invested in a Separate Fund for the Participant, then
the value of that portion of such Participant's Individual Account
at any relevant time equals the sum of the fair market values of the
assets in such Separate Fund, less any applicable charges or
penalties.
B. The fair market value of the remainder of each Individual Account is
determined in the following manner:
1. First, the portion of the Individual Account invested in each
Investment Fund as of the previous Valuation Date is determined.
Each such portion is reduced by any withdrawal made from the
applicable Investment Fund to or for the benefit of a
Participant or his Beneficiary, further reduced by any amounts
forfeited by the Participant pursuant to Section 6.01(D) and
further reduced by any transfer to another Investment Fund since
the previous Valuation Date and is increased by any amount
transferred from another Investment Fund since the previous
Valuation Date. The resulting amounts are the net Individual
Account portions invested in the Investment Funds.
2. Secondly, the net Individual Account portions invested in each
Investment Fund are adjusted upwards or downwards, pro rata
(i.e., ratio of each net Individual Account portion to the sum
of all net Individual Account portions) so that the sum of all
the net Individual Account portions invested in an Investment
Fund will equal the then fair market value of the Investment
Fund. Notwithstanding the previous sentence, for the first Plan
Year only, the net Individual Account portions shall be the sum
of all contributions made to each Participant's Individual
Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and Forfeitures are
allocated in accordance with the appropriate allocation
provisions of Section 3. For purposes of Section 4,
contributions made by the Employer for any Plan Year but after
that Plan Year will be considered to have been made on the last
day of that Plan Year regardless of when paid to the Trustee (or
Custodian, if applicable).
Amounts contributed between Valuation Dates will not be credited
with investment gains or losses until the next following
Valuation Date.
4. Finally, the portions of the Individual Account invested in each
Investment Fund (determined in accordance with (1), (2) and (3)
above) are added together.
4.04 Segregation of Assets
If a Participant elects a mode of distribution other than a lump sum,
the Plan Administrator may place that Participant's account balance into
a segregated Investment Fund for the purpose of maintaining the
necessary liquidity to provide benefit installments on a periodic basis.
4.05 Statement of Individual Accounts
No later than 270 days after the close of each Plan Year, the Plan
Administrator shall furnish a statement to each Participant indicating
the Individual Account balances of such Participant as of the last
Valuation Date in such Plan Year.
4.06 Modification of Method for Valuing Individual Accounts
If necessary or appropriate, the Plan Administrator may establish
different or additional procedures (which shall be uniform and
nondiscriminatory) for determining the fair market value of the
Individual Accounts.
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 Creation of Fund
By adopting this Plan, the Employer establishes the Fund which shall
consist of the assets of the Plan held by the Trustee (or Custodian, if
applicable) pursuant to this Section 5. Assets within the Fund may be
pooled on behalf of all Participants, earmarked on behalf of each
Participant or be a combination of pooled and earmarked. To the extent
that assets are earmarked for a particular Participant, they will be
held in a Separate Fund for that Participant.
No part of the corpus or income of the Fund may be used for, or diverted
to, purposes other than for the exclusive benefit of Participants or
their Beneficiaries.
5.02 Investment Authority
Except as provided in Section 5.14 (relating to individual direction of
investments by Participants), the Employer, not the Trustee (or
Custodian, if applicable), shall have exclusive management and control
over the investment of the Fund into any permitted investment.
5.03 Financial Organization Custodian or Trustee Without Full Trust Powers
This Section 5.03 applies where a financial organization has indicated
in the Adoption Agreement that it will serve, with respect to this Plan,
as Custodian or as Trustee without full trust powers (under applicable
law). Hereinafter, a financial organization Trustee without full trust
powers (under applicable law) shall be referred to as a Custodian.
<PAGE>
A. Permissible Investments -- The assets of the Plan shall be invested
only in those investments listed as permissible investments in the
Adoption Agreement.
B. Responsibilities of the Custodian -- The responsibilities of the
Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest
the Fund without distinction between principal and interest;
provided, however, that nothing in this Plan shall require the
Custodian to maintain physical custody of stock certificates (or
other indicia of ownership of any type of asset) representing
assets within the Fund;
2. To maintain accurate records of contributions, earnings,
withdrawals and other information the Custodian deems relevant
with respect to the Plan;
3. To make disbursements from the Fund to Participants or
Beneficiaries upon the proper authorization of the Plan
Administrator; and
4. To furnish to the Plan Administrator a statement which reflects
the value of the investments in the hands of the Custodian as of
the end of each Plan Year.
C. Powers of the Custodian -- Except as otherwise provided in this
Plan, the Custodian shall have the power to take any action with
respect to the Fund which it deems necessary or advisable to
discharge its responsibilities under this Plan including, but not
limited to, the following powers:
1. To invest all or a portion of the Fund (including idle cash
balances) in time deposits, savings accounts, money market
accounts or similar investments bearing a reasonable rate of
interest in the Custodian's own savings department or the
savings department of another financial organization;
2. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges or
subscription rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities or other
property;
3. To hold securities or other property of the Fund in its own
name, in the name of its nominee or in bearer form; and
4. To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers
herein granted.
5.04 [INTENTIONALLY OMITTED]
5.05 Division of Fund into investment funds
The Employer may direct the Trustee (or Custodian, if applicable) from
time-to-time to divide and redivide the Fund into one or more Investment
Funds. Such Investment Funds may include, but not be limited to,
Investment Funds representing the assets under the control of an
investment manager pursuant to Section 5.12 and Investment Funds
representing investment options available for individual direction by
Participants pursuant to Section 5.14. Upon each division or redivision,
the Employer may specify the part of the Fund to be allocated to each
such Investment Fund and the terms and conditions, if any, under which
the assets in such Investment Fund shall be invested.
5.06 Compensation and Expenses
The Trustee (or Custodian, if applicable) shall receive such reasonable
compensation as may be agreed upon by the Trustee (or Custodian) and the
Employer. The Trustee (or Custodian) shall be entitled to reimbursement
by the Employer for all proper expenses incurred in carrying out his
duties under this Plan, including reasonable legal, accounting and
actuarial expenses. If not paid by the Employer, such compensation and
expenses may be charged against the Fund.
All taxes of any kind that may be levied or assessed under existing or
future laws upon, or in respect of, the Fund or the income thereof shall
be paid from the Fund.
5.07 Not Obligated to Question Data
The Employer shall furnish the Trustee (or Custodian, if applicable) and
Plan Administrator the information which each party deems necessary for
the administration of the Plan including, but not limited to, changes in
a Participant's status, eligibility, mailing addresses and other such
data as may be required. The Trustee (or Custodian) and Plan
Administrator shall be entitled to act on such information as is
supplied them and shall have no duty or responsibility to further verify
or question such information.
5.08 Liability for Withholding on Distributions
The Plan Administrator shall be responsible for withholding federal
income taxes from distributions from the Plan, unless the Participant
(or Beneficiary, where applicable) elects not to have such taxes
withheld. However, the Trustee (or Custodian, if applicable) shall act
as agent for the Plan Administrator to withhold such taxes and to make
the appropriate distribution reports, subject to the Plan
Administrator's obligation to furnish all the necessary information to
so withhold to the Trustee (or Custodian).
<PAGE>
5.09 Resignation or Removal of Trustee (or Custodian)
The Trustee (or Custodian, if applicable) may resign at any time by
giving 30 days advance written notice to the Employer. The resignation
shall become effective 30 days after receipt of such notice unless a
shorter period is agreed upon.
The Employer may remove any Trustee (or Custodian) at any time by giving
written notice to such Trustee (or Custodian) and such removal shall be
effective 30 days after receipt of such notice unless a shorter period
is agreed upon. The Employer shall have the power to appoint a successor
Trustee (or Custodian).
Upon such resignation or removal, if the resigning or removed Trustee
(or Custodian) is the sole Trustee (or Custodian), he shall transfer all
of the assets of the Fund then held by him as expeditiously as possible
to the successor Trustee (or Custodian) after paying or reserving such
reasonable amount as he shall deem necessary to provide for the expense
in the settlement of the accounts and the amount of any compensation due
him and any sums chargeable against the Fund for which he may be liable.
If the Funds as reserved are not sufficient for such purpose, then he
shall be entitled to reimbursement from the successor Trustee (or
Custodian) out of the assets in the successor Trustee's (or Custodian's)
hands under this Plan. If the amount reserved shall be in excess of the
amount actually needed, the former Trustee (or Custodian) shall return
such excess to the successor Trustee (or Custodian).
Upon receipt of such assets, the successor Trustee (or Custodian) shall
thereupon succeed to all of the powers and responsibilities given to the
Trustee (or Custodian) by this Plan.
The resigning or removed Trustee (or Custodian) shall render an
accounting to the Employer and unless objected to by the Employer within
30 days of its receipt, the accounting shall be deemed to have been
approved and the resigning or removed Trustee (or Custodian) shall be
released and discharged as to all matters set forth in the accounting.
Where a financial organization is serving as Trustee (or Custodian) and
it is merged with or bought by another organization (or comes under the
control of any federal or state agency), that organization shall serve
as the successor Trustee (or Custodian) of this Plan, but only if it is
the type of organization that can so serve under applicable law.
Where the Trustee or Custodian is serving as a nonbank trustee or
custodian pursuant to Section 1.401-12(n) of the Income Tax Regulations,
the Employer will appoint a successor Trustee (or Custodian) upon
notification by the Commissioner of Internal Revenue that such
substitution is required because the Trustee (or Custodian) has failed
to comply with the requirements of Section 1.401-12(n) or is not keeping
such records or making such returns or rendering such statements as are
required by forms or regulations.
5.10 Degree of Care
Limitations of Liability -- The Trustee (or Custodian, if applicable)
shall not be liable for any losses incurred by the Fund by any lawful
direction to invest communicated by the Employer, Plan Administrator or
any Participant or Beneficiary. The Trustee (or Custodian) shall be
under no liability for distributions made or other action taken or not
taken at the written direction of the Plan Administrator. It is
specifically understood that the Trustee (or Custodian) shall have no
duty or responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a Participant or
remain a Participant hereunder, the amount of benefit to which a
Participant or Beneficiary shall be entitled to receive hereunder,
whether a distribution to Participant or Beneficiary is appropriate
under the terms of the Plan or the size and type of any policy to be
purchased from any insurer for any Participant hereunder or similar
matters; it being understood that all such responsibilities under the
Plan are vested in the Plan Administrator.
5.11 Indemnification of Prototype Sponsor and Trustee (or Custodian)
Notwithstanding any other provision herein, and except as may be
otherwise provided by ERISA, the Employer shall indemnify and hold
harmless the Trustee (or Custodian, if applicable) and the Prototype
Sponsor, their officers, directors, employees, agents, their heirs,
executors, successors and assigns, from and against any and all
liabilities, damages, judgments, settlements, losses, costs, charges, or
expenses (including legal expenses) at any time arising out of or
incurred in connection with any action taken by such parties in the
performance of their duties with respect to this Plan, unless there has
been a final adjudication of gross negligence or willful misconduct in
the performance of such duties.
Further, except as may be otherwise provided by ERISA, the Employer will
indemnify the Trustee (or Custodian) and Prototype Sponsor from any
liability, claim or expense (including legal expense) which the Trustee
(or Custodian) and Prototype Sponsor shall incur by reason of or which
results, in whole or in part, from the Trustee's (or Custodian's) or
Prototype Sponsor's reliance on the facts and other directions and
elections the Employer communicates or fails to communicate.
5.12 Investment Managers
A. Definition of Investment Manager -- The Employer may appoint one or
more investment managers to make investment decisions with respect
to all or a portion of the Fund. The investment manager shall be any
firm or individual registered as an investment adviser under the
Investment Advisers Act of 1940, a bank as defined in said Act or an
insurance company qualified under the laws of more than one state to
perform services consisting of the management, acquisition or
disposition of any assets of the Plan.
B. Investment Manager's Authority -- A separate Investment Fund shall
be established representing the assets of the Fund invested at the
direction of the investment manager. The investment manager so
appointed shall direct the Trustee (or Custodian, if applicable)
with respect to the investment of such Investment Fund. The
investments which may be acquired at the direction of the investment
manager are limited to those described in Section 5.03(A) (for
Custodians) or Section 5.04(A) (for Trustees).
C. Written Agreement -- The appointment of any investment manager shall
be by written agreement between the Employer and the investment
manager and a copy of such agreement (and any modification or
termination thereof) must be given to the Trustee (or Custodian).
<PAGE>
The agreement shall set forth, among other matters, the effective
date of the investment manager's appointment and an acknowledgment
by the investment manager that it is a fiduciary of the Plan under
ERISA.
D. Concerning the Trustee (or Custodian) -- Written notice of each
appointment of an investment manager shall be given to the Trustee
(or Custodian) in advance of the effective date of such appointment.
Such notice shall specify which portion of the Fund will constitute
the Investment Fund subject to the investment manager's direction.
The Trustee (or Custodian) shall comply with the investment
direction given to it by the investment manager and will not be
liable for any loss which may result by reason of any action (or
inaction) it takes at the direction of the investment manager.
5.13 [INTENTIONALLY OMITTED]
5.14 Direction of Investments by Participant
If so indicated in the Adoption Agreement, each Participant may
individually direct the Trustee (or Custodian, if applicable) regarding
the investment of part or all of his Individual Account. To the extent
so directed, the Employer, Plan Administrator, Trustee (or Custodian)
and all other fiduciaries are relieved of their fiduciary responsibility
under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be established
in the name of each Participant who directs the investment of part or
all of his Individual Account. Each Separate Fund shall be charged or
credited (as appropriate) with the earnings, gains, losses or expenses
attributable to such Separate Fund. No fiduciary shall be liable for any
loss which results from a Participant's individual direction. The assets
subject to individual direction shall not be invested in collectibles as
that term is defined in Section 408(m) of the Code.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules relating to individual direction as it deems
necessary or advisable including, but not limited to, rules describing
(1) which portions of Participant's Individual Account can be
individually directed; (2) the frequency of investment changes; (3) the
forms and procedures for making investment changes; and (4) the effect
of a Participant's failure to make a valid direction.
Subject to the approval of the Prototype Sponsor, the Plan Administrator
may, in a uniform and nondiscriminatory manner, limit the available
investments for Participants' individual direction to certain specified
investment options (including, but not limited to, certain mutual funds,
investment contracts, deposit accounts and group trusts). The Plan
Administrator may permit, in a uniform and nondiscriminatory manner, a
Beneficiary of a deceased Participant to individually direct in
accordance with this Section.
SECTION SIX VESTING AND DISTRIBUTION
6.01 Distribution to Participant
A. When Distributable
1. Entitlement to Distribution -- The Vested portion of a
Participant's Individual Account shall be distributable to the
Participant upon the occurrence of any of the following events:
a. the Participant's Termination of Employment;
b. the Participant's attainment of Normal Retirement Age;
c. the Participant's Disability; or
d. the termination of the Plan.
2. Written Request: When Distributed -- A Participant entitled to
distribution who wishes to receive a distribution must submit a
written request to the Plan Administrator. Such request shall be
made upon a form provided by the Plan Administrator. Upon a
valid request, the Plan Administrator shall direct the Trustee
(or Custodian, if applicable) to commence distribution no later
than 90 days following the later of:
a. the close of the Plan Year within which the event occurs
which entitles the Participant to distribution; or
b. the close of the Plan Year in which the request is received.
3. Special Rules For Withdrawals During Service -- If this is a
profit sharing plan and the Adoption Agreement so provides, a
Participant who is not otherwise entitled to a distribution
under Section 6.01(A)(1) may elect to receive a distribution of
all or a part of the Vested portion of his Individual Account,
subject to the requirements of Section 6.05 and further subject
to the following limits:
a. Participant for 5 or more years. An Employee who has been a
Participant in the Plan for 5 or more years may withdraw up
to his entire Vested portion of his Individual Account.
b. Participant for less than 5 years. An Employee who has been a
Participant in the Plan for less than 5 years may withdraw
only the amount which has been in his Vested Individual
Account attributable to Employer Contributions for at least 2
full Plan Years.
<PAGE>
However, if the distribution is on account of hardship, the
Participant may withdraw up to his entire Vested portion of his
Individual Account. For purposes of the preceding sentence, hardship
is defined as an immediate and heavy financial need of the
Participant where such Participant lacks other available resources.
The following are the only financial needs considered immediate and
heavy: expenses incurred or necessary for medical care, described in
Section 213(d) of the Code, of the Employee, the Employee's spouse
or dependents; the purchase (excluding mortgage payments) of a
principal residence for the Employee; payment of tuition and related
educational fees for the next 12 months of post-secondary education
for the Employee, the Employee's spouse, children or dependents; or
the need to prevent the eviction of the Employee from, or a
foreclosure on the mortgage of, the Employee's principal residence.
A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
1) The employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer;
2) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the
distribution).
4. Commencement of Benefits -- Notwithstanding any other provision,
unless the Participant elects otherwise, distribution of
benefits will begin no later than the 60th day after the latest
of the close of the Plan Year in which:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or
c. the Participant incurs a Termination of Employment.
Notwithstanding the foregoing, the failure of a Participant and
spouse to consent to a distribution while a benefit is
immediately distributable, within the meaning of Section
6.02(B), shall be deemed to be an election to defer commencement
of payment of any benefit sufficient to satisfy this Section
6.01(A)(4).
B. Determining the Vested Portion -- In determining the Vested portion
of a Participant's Individual Account, the following rules apply:
1. Employer Contributions and Forfeitures -- The Vested portion of
a Participant's Individual Account derived from Employer
Contributions and Forfeitures is determined by applying the
vesting schedule selected in the Adoption Agreement (or the
vesting schedule described in Section 6.01(C) if the Plan is a
Top-Heavy Plan).
2. Rollover and Transfer Contributions -- A Participant is fully
Vested in his rollover contributions and transfer contributions.
3. Fully Vested Under Certain Circumstances -- A Participant is
fully Vested in his Individual Account if any of the following
occurs:
a. the Participant reaches Normal Retirement Age; b. the
Participant incurs a Disability;
c. the Participant dies;
d. the Plan is terminated or partially terminated; or
e. there exists a complete discontinuance of contributions under
the Plan (if this Plan is a profit sharing plan).
4. Participants in a Prior Plan -- If a Participant was a
participant in a Prior Plan on the Effective Date, his Vested
percentage shall not be less than it would have been under such
Prior Plan as computed on the Effective Date.
C. Minimum Vesting Schedule for Top-Heavy Plans -- The following
vesting provisions apply for any Plan Year in which this Plan is a
Top-Heavy Plan.
Notwithstanding the other provisions of this Section 6.01 or the
vesting schedule selected in the Adoption Agreement (unless those
provisions or that schedule provide for more rapid vesting), a
Participant's Vested portion of his Individual Account attributable
to Employer Contributions and Forfeitures shall be determined in
accordance with the following minimum vesting schedule:
Years of Vesting Service Vested Percentage
1 0
2 20
3 40
4 60
5 80
6 100
<PAGE>
This minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code, except those attributable
to employee contributions including benefits accrued before the
effective date of Section 416 of the Code and benefits accrued
before the Plan became a Top-Heavy Plan. Further, no decrease in a
Participant's Vested percentage may occur in the event the Plan's
status as a Top-Heavy Plan changes for any Plan Year. However, this
Section 6.01(C) does not apply to the Individual Account of any
Employee who does not have an Hour of Service after the Plan has
initially become a Top-Heavy Plan and such Employee's Individual
Account attributable to Employer Contributions and Forfeitures will
be determined without regard to this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance with
the above restrictions, the vesting schedule as selected in the
Adoption Agreement will govern. If the vesting schedule under the
Plan shifts in or out of top-heavy status, such shift is an
amendment to the vesting schedule and the election in Section 9.04
applies.
D. Break in Vesting Service and Forfeitures -- If a Participant incurs
a Termination of Employment, any portion of his Individual Account
which is not Vested shall be held in a suspense account. Such
suspense account shall share in any increase or decrease in the fair
market value of the assets of the Fund in accordance with Section 4
of the Plan. The disposition of such suspense account shall be as
follows:
1. No Breaks in Vesting Service -- If a Participant neither
receives nor is deemed to receive a distribution pursuant to
Section 6.01(D)(2) or (3) and the Participant returns to the
service of the Employer before incurring 5 consecutive Breaks in
Vesting Service, there shall be no Forfeiture and the amount in
such suspense account shall be recredited to such Participant's
Individual Account.
2. Cash-out of Certain Participants -- If the value of the Vested
portion of such Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500, the
Participant shall receive a distribution of the entire Vested
portion of such Individual Account and the portion which is not
Vested shall be treated as a Forfeiture. For purposes of this
Section, if the value of the Vested portion of a Participant's
Individual Account is zero, the Participant shall be deemed to
have received a distribution of such Vested Individual Account.
A Participant's Vested Individual Account balance shall not
include accumulated deductible employee contributions within the
meaning of Section 72(o)(5)(B) of the Code for Plan Years
beginning prior to January 1, 1989.
3. Participants Who Elect to Receive Distributions -- If such
Participant elects to receive a distribution, in accordance with
Section 6.02(B), of the value of the Vested portion of his
Individual Account derived from Employee and Employer
Contributions, the portion which is not Vested shall be treated
as a Forfeiture.
4. Re-employed Participants -- If a Participant receives or is
deemed to receive a distribution pursuant to Section 6.01(D)(2)
or (3) above and the Participant resumes employment covered
under this Plan, the Participant's Employer-derived Individual
Account balance will be restored to the amount on the date of
distribution if the Participant repays to the Plan the full
amount of the distribution attributable to Employer
Contributions before the earlier of 5 years after the first date
on which the Participant is subsequently re-employed by the
Employer, or the date the Participant incurs 5 consecutive
Breaks in Vesting Service following the date of the
distribution.
Amounts forfeited under Section 6.01(D) shall be allocated in
accordance with Section 3.01(C) as of the last day of the Plan
Year during which the Forfeiture arises. Any restoration of a
Participant's Individual Account pursuant to Section 6.01(D)(4)
shall be made from other Forfeitures, income or gain to the Fund
or contributions made by the Employer.
E. Distribution Prior to Full Vesting -- If a distribution is made to a
Participant who was not then fully Vested in his Individual Account
derived from Employer Contributions and the Participant may increase
his Vested percentage in his Individual Account, then the following
rules shall apply:
1. a separate account will be established for the Participant's
interest in the Plan as of the time of the distribution, and
2. at any relevant time the Participant's Vested portion of the
separate account will be equal to an amount (AX@) determined by
the formula: X=P (AB + (R x D)) - (R x D) where AP@ is the
Vested percentage at the relevant time, AAB@ is the separate
account balance at the relevant time; AD@ is the amount of the
distribution; and AR@ is the ratio of the separate account
balance at the relevant time to the separate account balance
after distribution.
6.02 Form of Distribution to a Participant
A. Value of Individual Account Does Not Exceed $3,500 -- If the value
of the Vested portion of a Participant's Individual Account derived
from Employee and Employer Contributions does not exceed $3,500,
distribution from the Plan shall be made to the Participant in a
single lump sum in lieu of all other forms of distribution from the
Plan.
B. Value of Individual Account Exceeds $3,500
<PAGE>
1. If the value of the Vested portion of a Participant's Individual
Account derived from Employee and Employer Contributions exceeds
(or at the time of any prior distribution exceeded) $3,500, and
the Individual Account is immediately distributable, the
Participant and the Participant's spouse (or where either the
Participant or the spouse died, the survivor) must consent to
any distribution of such Individual Account. The consent of the
Participant and the Participant's spouse shall be obtained in
writing within the 90-day period ending on the annuity starting
date. The annuity starting date is the first day of the first
period for which an amount is paid as an annuity or any other
form. The Plan Administrator shall notify the Participant and
the Participant's spouse of the right to defer any distribution
until the Participant's Individual Account is no longer
immediately distributable. Such notification shall include a
general description of the material features, and an explanation
of the relative values of, the optional forms of benefit
available under the Plan in a manner that would satisfy the
notice requirements of Section 417(a)(3) of the Code, and shall
be provided no less than 30 days and no more than 90 days prior
to the annuity starting date. If a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue Code do not
apply, such distribution may commence less than 30 days after
the notice required under Section 1.411(a)- 11(c) of the Income
Tax Regulations is given, provided that:
a. the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
b. the Participant, after receiving the notice, affirmatively
elects a distribution.
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified
joint and survivor annuity while the Individual Account is
immediately distributable. Neither the consent of the
Participant nor the Participant's spouse shall be required to
the extent that a distribution is required to satisfy Section
401(a)(9) or Section 415 of the Code. In addition, upon
termination of this Plan if the Plan does not offer an annuity
option (purchased from a commercial provider), the Participant's
Individual Account may, without the Participant's consent, be
distributed to the Participant or transferred to another defined
contribution plan (other than an employee stock ownership plan
as defined in Section 4975(e)(7) of the Code) within the same
controlled group.
An Individual Account is immediately distributable if any part
of the Individual Account could be distributed to the
Participant (or surviving spouse) before the Participant attains
or would have attained (if not deceased) the later of Normal
Retirement Age or age 62.
2. For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day
of the first Plan year beginning after December 31, 1988, the
Vested portion of a Participant's Individual Account shall not
include amounts attributable to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code.
C. Other Forms of Distribution to Participant -- If the value of the
Vested portion of a Participant's Individual Account exceeds $3,500
and the Participant has properly waived the joint and survivor
annuity, as described in Section 6.05, the Participant may request
in writing that the Vested portion of his Individual Account be paid
to him in one or more of the following forms of payment: (1) in a
lump sum; (2) in installment payments over a period not to exceed
the life expectancy of the Participant or the joint and last
survivor life expectancy of the Participant and his designated
Beneficiary; or (3) applied to the purchase of an annuity contract.
Notwithstanding anything in this Section 6.02 to the contrary, a
Participant cannot elect payments in the form of an annuity if the
safe harbor rules of Section 6.05(F) apply.
6.03 Distributions Upon the Death of a Participant
A. Designation of Beneficiary -- Spousal Consent -- Each Participant
may designate, upon a form provided by and delivered to the Plan
Administrator, one or more primary and contingent Beneficiaries to
receive all or a specified portion of his Individual Account in the
event of his death. A Participant may change or revoke such
Beneficiary designation from time to time by completing and
delivering the proper form to the Plan Administrator.
In the event that a Participant wishes to designate a primary
Beneficiary who is not his spouse, his spouse must consent in
writing to such designation, and the spouse's consent must
acknowledge the effect of such designation and be witnessed by a
notary public. Notwithstanding this consent requirement, if the
Participant establishes to the satisfaction of the Plan
Administrator that such written consent may not be obtained because
there is no spouse or the spouse cannot be located, no consent shall
be required. Any change of Beneficiary will require a new spousal
consent.
B. Payment to Beneficiary -- If a Participant dies before his entire
Individual Account has been paid to him, such deceased Participant's
Individual Account shall be payable to any surviving Beneficiary
designated by the Participant, or, if no Beneficiary survives the
Participant, to the Participant's estate.
C. Written Request: When Distributed -- A Beneficiary of a deceased
Participant entitled to a distribution who wishes to receive a
distribution must submit a written request to the Plan
Administrator. Such request shall be made upon a form provided by
the Plan Administrator. Upon a valid request, the Plan Administrator
shall direct the Trustee (or Custodian) to commence distribution no
later than 90 days following the later of:
1. the close of the Plan Year within which the Participant dies; or
2. the close of the Plan Year in which the request is received.
<PAGE>
D. Location of Participant or Beneficiary Unknown -- In the event that
all, or any portion, of the distribution payable to a Participant or
his Beneficiary hereunder shall, at the expiration of 5 years after
it becomes payable, remain unpaid solely by reason of the inability
of the Plan Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or
his Beneficiary, the amount so distributable shall be forfeited and
allocated in accordance with the terms of the Plan. In the event a
Participant or Beneficiary is located subsequent to his benefit
being forfeited, such benefit shall be restored; provided, however,
if all or a portion of such amount has been lost by reason of
escheat under state law, the Participant or Beneficiary shall cease
to be entitled to the portion so lost.
6.04 Form of Distribution to Beneficiary
A. Value of Individual Account Does Not Exceed $3,500 -- If the value
of the Participant's Individual Account derived from Employee and
Employer Contributions does not exceed $3,500, the Plan
Administrator shall direct the Trustee (or Custodian, if applicable)
to make a distribution to the Beneficiary in a single lump sum in
lieu of all other forms of distribution from the Plan.
B. Value of Individual Account Exceeds $3,500 -- If the value of a
Participant's Individual Account derived from Employee and Employer
Contributions exceeds $3,500 the preretirement survivor annuity
requirements of Section 6.05 shall apply unless waived in accordance
with that Section or unless the safe harbor rules of Section 6.05(F)
apply.
C. Other Forms of Distribution to Beneficiary -- If the value of a
Participant's Individual Account exceeds $3,500 and the Participant
has properly waived the preretirement survivor annuity, as described
in Section 6.05 (if applicable), the Beneficiary may, subject to the
requirements of Section 6.06, request in writing that the
Participant's Individual Account be paid to him as follows: (1) in a
lump sum; or (2) in installment payments over a period not to exceed
the life expectancy of such Beneficiary.
6.05 Joint and Survivor Annuity Requirements
A. The provisions of this Section shall apply to any Participant who is
credited with at least one Hour of Eligibility Service with the
Employer on or after August 23, 1984, and such other participants as
provided in Section 6.05(G).
B. Qualified Joint and Survivor Annuity -- Unless an optional form of
benefit is selected pursuant to a qualified election within the
90-day period ending on the annuity starting date, a married
Participant's Vested account balance will be paid in the form of a
qualified joint and survivor annuity and an unmarried Participant's
Vested account balance will be paid in the form of a life annuity.
The Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan.
C. Qualified Preretirement Survivor Annuity -- Unless an optional form
of benefit has been selected within the election period pursuant to
a qualified election, if a Participant dies before the annuity
starting date then the Participant's Vested account balance shall be
applied toward the purchase of an annuity for the life of the
surviving spouse. The surviving spouse may elect to have such
annuity distributed within a reasonable period after the
Participant's death.
D. Definitions
1. Election Period -- The period which begins on the first day of
the Plan Year in which the Participant attains age 35 and ends
on the date of the Participant's death. If a Participant
separates from service prior to the first day of the Plan year
in which age 35 is attained, with respect to the account balance
as of the date of separation, the election period shall begin on
the date of separation.
Pre-age 35 waiver -- A Participant who will not yet attain age
35 as of the end of any current Plan Year may make a special
qualified election to waive the qualified preretirement survivor
annuity for the period beginning on the date of such election
and ending on the first day of the Plan Year in which the
Participant will attain age 35. Such election shall not be valid
unless the Participant receives a written explanation of the
qualified preretirement survivor annuity in such terms as are
comparable to the explanation required under Section 6.05(E)(1).
Qualified preretirement survivor annuity coverage will be
automatically reinstated as of the first day of the Plan Year in
which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this
Section 6.05.
2. Earliest Retirement Age -- The earliest date on which, under the
Plan, the Participant could elect to receive retirement
benefits.
3. Qualified Election -- A waiver of a qualified joint and survivor
annuity or a qualified preretirement survivor annuity. Any
waiver of a qualified joint and survivor annuity or a qualified
preretirement survivor annuity shall not be effective unless:
(a) the Participant's spouse consents in writing to the
election, (b) the election designates a specific Beneficiary,
including any class of beneficiaries or any contingent
beneficiaries, which may not be changed without spousal consent
(or the spouse expressly permits designations by the Participant
without any further spousal consent); (c) the spouse's consent
acknowledges the effect of the election; and (d) the spouse's
consent is witnessed by a plan representative or notary public.
Additionally, a Participant's waiver of the qualified joint and
survivor annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed
without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal
consent). If it is established to the satisfaction of a plan
representative that there is no spouse or that the spouse cannot
be located, a waiver will be deemed a qualified election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to such spouse. A consent
that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge
that the spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where applicable,
and that the spouse voluntarily elects to relinquish either or
both of such rights. A revocation of a prior waiver may be made
by a Participant without the consent of the spouse at any time
before the commencement of benefits. The number of revocations
shall not be limited. No consent obtained under this provision
shall be valid unless the Participant has received notice as
provided in Section 6.05(E) below.
<PAGE>
4. Qualified Joint and Survivor Annuity -- An immediate annuity for
the life of the Participant with a survivor annuity for the life
of the spouse which is not less than 50% and not more than 100%
of the amount of the annuity which is payable during the joint
lives of the Participant and the spouse and which is the amount
of benefit which can be purchased with the Participant's vested
account balance. The percentage of the survivor annuity under
the Plan shall be 50% (unless a different percentage is elected
by the Employer in the Adoption Agreement).
5. Spouse (surviving spouse) -- The spouse or surviving spouse of
the Participant, provided that a former spouse will be treated
as the spouse or surviving spouse and a current spouse will not
be treated as the spouse or surviving spouse to the extent
provided under a qualified domestic relations order as described
in Section 414(p) of the Code.
6. Annuity Starting Date -- The first day of the first period for
which an amount is paid as an annuity or any other form.
7. Vested Account Balance -- The aggregate value of the
Participant's Vested account balances derived from Employer and
Employee contributions (including rollovers), whether Vested
before or upon death, including the proceeds of insurance
contracts, if any, on the Participant's life. The provisions of
this Section 6.05 shall apply to a Participant who is Vested in
amounts attributable to Employer Contributions, Employee
contributions (or both) at the time of death or distribution.
E. Notice Requirements
1. In the case of a qualified joint and survivor annuity, the Plan
Administrator shall no less than 30 days and not more than 90
days prior to the annuity starting date provide each Participant
a written explanation of: (a) the terms and conditions of a
qualified joint and survivor annuity; (b) the Participant's
right to make and the effect of an election to waive the
qualified joint and survivor annuity form of benefit; (c) the
rights of a Participant's spouse; and (d) the right to make, and
the effect of, a revocation of a previous election to waive the
qualified joint and survivor annuity.
2. In the case of a qualified preretirement survivor annuity as
described in Section 6.05(C), the Plan Administrator shall
provide each Participant within the applicable period for such
Participant a written explanation of the qualified preretirement
survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the
requirements of Section 6.05(E)(1) applicable to a qualified
joint and survivor annuity.
The applicable period for a Participant is whichever of the
following periods ends last: (a) the period beginning with the
first day of the Plan Year in which the Participant attains age
32 and ending with the close of the Plan Year preceding the Plan
Year in which the Participant attains age 35; (b) a reasonable
period ending after the individual becomes a Participant; (c) a
reasonable period ending after Section 6.05(E)(3) ceases to
apply to the Participant; (d) a reasonable period ending after
this Section 6.05 first applies to the Participant.
Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from service in the
case of a Participant who separates from service before
attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (b), (c)
and (d) is the end of the two-year period beginning one year
prior to the date the applicable event occurs, and ending one
year after that date. In the case of a Participant who separates
from service before the Plan Year in which age 35 is attained,
notice shall be provided within the two-year period beginning
one year prior to separation and ending one year after
separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such
Participant shall be redetermined.
3. Notwithstanding the other requirements of this Section 6.05(E),
the respective notices prescribed by this Section 6.05(E), need
not be given to a Participant if (a) the Plan "fully subsidizes"
the costs of a qualified joint and survivor annuity or qualified
preretirement survivor annuity, and (b) the Plan does not allow
the Participant to waive the qualified joint and survivor
annuity or qualified preretirement survivor annuity and does not
allow a married Participant to designate a nonspouse
beneficiary. For purposes of this Section 6.05(E)(3), a plan
fully subsidizes the costs of a benefit if no increase in cost,
or decrease in benefits to the Participant may result from the
Participant's failure to elect another benefit.
F. Safe Harbor Rules
1. If the Employer so indicates in the Adoption Agreement, this
Section 6.05(F) shall apply to a Participant in a profit sharing
plan, and shall always apply to any distribution, made on or
after the first day of the first Plan Year beginning after
December 31, 1988, from or under a separate account attributable
solely to accumulated deductible employee contributions, as
defined in Section 72(o)(5)(B) of the Code, and maintained on
behalf of a Participant in a money purchase pension plan,
(including a target benefit plan) if the following conditions
are satisfied:
a. the Participant does not or cannot elect payments in the form
of a life annuity; and
b. on the death of a participant, the Participant's Vested
account balance will be paid to the Participant's surviving
spouse, but if there is no surviving spouse, or if the
surviving spouse has consented in a manner conforming to a
qualified election, then to the Participant's designated
beneficiary. The surviving spouse may elect to have
distribution of the Vested account balance commence within
the 90-day period following the date of the Participant's
death. The account balance shall be adjusted for gains or
losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of
account balances for other types of distributions. This
Section 6.05(F) shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct
or indirect transferee of a defined benefit plan, money
purchase plan, a target benefit plan, stock bonus, or profit
sharing plan which is subject to the survivor annuity
requirements of Section 401(a)(11) and Section 417 of the
Code. If this Section 6.05(F) is operative, then the
provisions of this Section 6.05 other than Section 6.05(G)
shall be inoperative.
<PAGE>
2. The Participant may waive the spousal death benefit described in
this Section 6.05(F) at any time provided that no such waiver
shall be effective unless it satisfies the conditions of Section
6.05(D)(3) (other than the notification requirement referred to
therein) that would apply to the Participant's waiver of the
qualified preretirement survivor annuity.
3. For purposes of this Section 6.05(F), Vested account balance
shall mean, in the case of a money purchase pension plan or a
target benefit plan, the Participant's separate account balance
attributable solely to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code. In the case of a profit sharing plan, Vested account
balance shall have the same meaning as provided in Section
6.05(D)(7).
G. Transitional Rules
1. Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive the benefits prescribed by
the previous subsections of this Section 6.05 must be given the
opportunity to elect to have the prior subsections of this
Section apply if such Participant is credited with at least one
Hour of Service under this Plan or a predecessor plan in a Plan
Year beginning on or after January 1, 1976, and such Participant
had at least 10 Years of Vesting Service when he or she
separated from service.
2. Any living Participant not receiving benefits on August 23,
1984, who was credited with at least one Hour of Service under
this Plan or a predecessor plan on or after September 2, 1974,
and who is not otherwise credited with any service in a Plan
Year beginning on or after January 1, 1976, must be given the
opportunity to have his or her benefits paid in accordance with
Section 6.05(G)(4).
3. The respective opportunities to elect (as described in Section
6.05(G)(1) and (2) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984,
and ending on the date benefits would otherwise commence to said
Participants.
4. Any Participant who has elected pursuant to Section 6.05(G)(2)
and any Participant who does not elect under Section 6.05(G)(1)
or who meets the requirements of Section 6.05(G)(1) except that
such Participant does not have at least 10 Years of Vesting
Service when he or she separates from service, shall have his or
her benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of
a life annuity:
a. Automatic Joint and Survivor Annuity -- If benefits in the
form of a life annuity become payable to a married
Participant who:
1. begins to receive payments under the Plan on or after
Normal Retirement Age; or
2. dies on or after Normal Retirement Age while still working
for the Employer; or
3. begins to receive payments on or after the qualified early
retirement age; or
4. separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and
after satisfying the eligibility requirements for the
payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits;
then such benefits will be received under this Plan in the form
of a qualified joint and survivor annuity, unless the
Participant has elected otherwise during the election period.
The election period must begin at least 6 months before the
Participant attains qualified early retirement age and ends not
more than 90 days before the commencement of benefits. Any
election hereunder will be in writing and may be changed by the
Participant at any time.
b. Election of Early Survivor Annuity -- A Participant who is
employed after attaining the qualified early retirement age
will be given the opportunity to elect, during the election
period, to have a survivor annuity payable on death. If the
Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have
been made to the spouse under the qualified joint and
survivor annuity if the Participant had retired on the day
before his or her death. Any election under this provision
will be in writing and may be changed by the Participant at
any time. The election period begins on the later of (1) the
90th day before the Participant attains the qualified early
retirement age, or (2) the date on which participation
begins, and ends on the date the Participant terminates
employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest of:
a. the earliest date, under the Plan, on which the Participant
may elect to receive retirement benefits,
<PAGE>
b. the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
c. the date the Participant begins participation.
2. Qualified joint and survivor annuity is an annuity for the life
of the Participant with a survivor annuity for the life of the
spouse as described in Section 6.05 (D)(4) of this Plan.
6.06 Distribution Requirements
A. General Rules
1. Subject to Section 6.05, Joint and Survivor Annuity
Requirements, the requirements of this Section shall apply to
any distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this Section 6.06 apply
to calendar years beginning after December 31, 1984.
2. All distributions required under this Section 6.06 shall be
determined and made in accordance with the Income Tax
Regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the regulations.
B. Required Beginning Date -- The entire interest of a Participant must
be distributed or begin to be distributed no later than the
Participant's required beginning date.
C. Limits on Distribution Periods -- As of the first distribution
calendar year, distributions, if not made in a single sum, may only
be made over one of the following periods (or a combination
thereof):
1. the life of the Participant,
2. the life of the Participant and a designated Beneficiary,
3. a period certain not extending beyond the life expectancy of the
Participant, or
4. a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
D. Determination of Amount to be Distributed Each Year -- If the
Participant's interest is to be distributed in other than a single
sum, the following minimum distribution rules shall apply on or
after the required beginning date:
1. Individual Account
a. If a Participant's benefit is to be distributed over (1) a
period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy of
the Participant and the Participant's designated Beneficiary
or (2) a period not extending beyond the life expectancy of
the designated Beneficiary, the amount required to be
distributed for each calendar year, beginning with
distributions for the first distribution calendar year, must
at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy.
b. For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least 50%
of the present value of the amount available for distribution
is paid within the life expectancy of the Participant.
c. For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with
distributions for the first distribution calendar year shall
not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable
life expectancy or (2) if the Participant's spouse is not the
designated Beneficiary, the applicable divisor determined
from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the Income Tax Regulations. Distributions after the death of
the Participant shall be distributed using the applicable
life expectancy in Section 6.06(D)(1)(a) above as the
relevant divisor without regard to regulations 1.401(a)(9)-2.
d. The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Participant's required beginning date. The minimum
distribution for other calendar years, including the minimum
distribution for the distribution calendar year in which the
Employee's required beginning date occurs, must be made on or
before December 31 of that distribution calendar year.
2. Other Forms -- If the Participant's benefit is distributed in
the form of an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with the
requirements of Section 401(a)(9) of the Code and the
regulations thereunder.
<PAGE>
E. Death Distribution Provisions
1. Distribution Beginning Before Death -- If the Participant dies
after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
2. Distribution Beginning After Death -- If the Participant dies
before distribution of his or her interest begins, distribution
of the Participant's entire interest shall be completed by
December 31 of the calendar year containing the fifth
anniversary of the Participant's death except to the extent that
an election is made to receive distributions in accordance with
(a) or (b) below:
a. if any portion of the Participant's interest is payable to a
designated Beneficiary, distributions may be made over the
life or over a period certain not greater than the life
expectancy of the designated Beneficiary commencing on or
before December 31 of the calendar year immediately following
the calendar year in which the Participant died;
b. if the designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in
accordance with (a) above shall not be earlier than the later
of (1) December 31 of the calendar year immediately following
the calendar year in which the Participant dies or (2)
December 31 of the calendar year in which the Participant
would have attained age 70 1/2.
If the Participant has not made an election pursuant to this
Section 6.06(E)(2) by the time of his or her death, the
Participant's designated Beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin
under this Section 6.06(E)(2), or (2) December 31 of the
calendar year which contains the fifth anniversary of the date
of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does
not elect a method of distribution, distribution of the
Participant's entire interest must be completed by December 31
of the calendar year containing the fifth anniversary of the
Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the surviving
spouse dies after the Participant, but before payments to such
spouse begin, the provisions of Section 6.06(E)(2), with the
exception of paragraph (b) therein, shall be applied as if the
surviving spouse were the Participant.
4. For purposes of this Section 6.06(E), any amount paid to a child
of the Participant will be treated as if it had been paid to the
surviving spouse if the amount becomes payable to the surviving
spouse when the child reaches the age of majority.
5. For purposes of this Section 6.06(E), distribution of a
Participant's interest is considered to begin on the
Participant's required beginning date (or, if Section 6.06(E)(3)
above is applicable, the date distribution is required to begin
to the surviving spouse pursuant to Section 6.06(E)(2) above).
If distribution in the form of an annuity irrevocably commences
to the Participant before the required beginning date, the date
distribution is considered to begin is the date distribution
actually commences.
F. Definitions
1. Applicable Life Expectancy -- The life expectancy (or joint and
last survivor expectancy) calculated using the attained age of
the Participant (or designated Beneficiary) as of the
Participant's (or designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
2. Designated Beneficiary -- The individual who is designated as
the Beneficiary under the Plan in accordance with Section
401(a)(9) of the Code and the regulations thereunder.
3. Distribution Calendar Year -- A calendar year for which a
minimum distribution is required. For distributions beginning
before the Participant's death, the first distribution calendar
year is the calendar year immediately preceding the calendar
year which contains the Participant's required beginning date.
For distributions beginning after the Participant's death, the
first distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section 6.06(E)
above.
4. Life Expectancy -- Life expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples
in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations.
Unless otherwise elected by the Participant (or spouse, in the
case of distributions described in Section 6.06(E)(2)(b) above)
by the time distributions are required to begin, life
expectancies shall be recalculated annually. Such election shall
be irrevocable as to the Participant (or spouse) and shall apply
to all subsequent years. The life expectancy of a nonspouse
Beneficiary may not be recalculated.
<PAGE>
5. Participant's Benefit
a. The account balance as of the last valuation date in the
valuation calendar year (the calendar year immediately
preceding the distribution calendar year) increased by the
amount of any Contributions or Forfeitures allocated to the
account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made
in the valuation calendar year after the valuation date.
b. Exception for second distribution calendar year. For purposes
of paragraph (a) above, if any portion of the minimum
distribution for the first distribution calendar year is made
in the second distribution calendar year on or before the
required beginning date, the amount of the minimum
distribution made in the second distribution calendar year
shall be treated as if it had been made in the immediately
preceding distribution calendar year.
6. Required Beginning Date
a. General Rule -- The required beginning date of a Participant
is the first day of April of the calendar year following the
calendar year in which the Participant attains age 70 1/2.
b. Transitional Rules -- The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988,
shall be determined in accordance with (1) or (2) below:
1. Non 5% Owners -- The required beginning date of a Participant
who is not a 5% owner is the first day of April of the calendar
year following the calendar year in which the later of
retirement or attainment of age 70 1/2 occurs.
2. 5% Owners -- The required beginning date of a Participant who is
a 5% owner during any year beginning after December 31, 1979, is
the first day of April following the later of:
a. the calendar year in which the Participant attains age 70
1/2, or
b. the earlier of the calendar year with or within which ends
the Plan Year in which the Participant becomes a 5% owner, or
the calendar year in which the Participant retires.
The required beginning date of a Participant who is not a 5%
owner who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
c. 5% Owner -- A Participant is treated as a 5% owner for
purposes of this Section 6.06(F)(6) if such Participant is a
5% owner as defined in Section 416(i) of the Code (determined
in accordance with Section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year
ending with or within the calendar year in which such owner
attains age 66 1/2 or any subsequent Plan Year.
d. Once distributions have begun to a 5% owner under this
Section 6.06(F)(6) they must continue to be distributed, even
if the Participant ceases to be a 5% owner in a subsequent
year.
G. Transitional Rule
1. Notwithstanding the other requirements of this Section 6.06 and
subject to the requirements of Section 6.05, Joint and Survivor
Annuity Requirements, distribution on behalf of any Employee,
including a 5% owner, may be made in accordance with all of the
following requirements (regardless of when such distribution
commences):
a. The distribution by the Fund is one which would not have
disqualified such Fund under Section 401(a)(9) of the Code as
in effect prior to amendment by the Deficit Reduction Act of
1984.
b. The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the
Fund is being distributed or, if the Employee is deceased, by
a Beneficiary of such Employee.
c. Such designation was in writing, was signed by the Employee
or the Beneficiary, and was made before January 1, 1984.
d. The Employee had accrued a benefit under the Plan as of
December 31, 1983.
e. The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made,
and in the case of any distribution upon the Employee's
death, the Beneficiaries of the Employee listed in order of
priority.
2. A distribution upon death will not be covered by this
transitional rule unless the information in the designation
contains the required information described above with respect
to the distributions to be made upon the death of the Employee.
<PAGE>
3. For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the
Beneficiary, to whom such distribution is being made, will be
presumed to have designated the method of distribution under
which the distribution is being made if the method of
distribution was specified in writing and the distribution
satisfies the requirements in Sections 6.06(G)(1)(a) and (e).
4. If a designation is revoked, any subsequent distribution must
satisfy the requirements of Section 401(a)(9) of the Code and
the regulations thereunder. If a designation is revoked
subsequent to the date distributions are required to begin, the
Plan must distribute by the end of the calendar year following
the calendar year in which the revocation occurs the total
amount not yet distributed which would have been required to
have been distributed to satisfy Section 401(a)(9) of the Code
and the regulations thereunder, but for the Section 242(b)(2)
election. For calendar years beginning after December 31, 1988,
such distributions must meet the minimum distribution incidental
benefit requirements in Section 1.401(a)(9)-2 of the Income Tax
Regulations. Any changes in the designation will be considered
to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named
in the designation) under the designation will not be considered
to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or
indirectly (for example, by altering the relevant measuring
life). In the case in which an amount is transferred or rolled
over from one plan to another plan, the rules in Q&A J-2 and Q&A
J-3 shall apply.
6.07 Annuity Contracts
Any annuity contract distributed under the Plan (if permitted or
required by this Section 6) must be nontransferable. The terms of any
annuity contract purchased and distributed by the Plan to a Participant
or spouse shall comply with the requirements of the Plan.
6.08 [INTENTIONALLY OMITTED]
6.09 Distribution in Kind
The Plan Administrator may cause any distribution under this Plan to be
made either in a form actually held in the Fund, or in cash by
converting assets other than cash into cash, or in any combination of
the two foregoing ways.
6.10 Direct Rollovers of Eligible Rollover Distributions
A. Direct Rollover Option -- This Section applies to distributions made
on or after January 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a distributee's
election under this Section, a distributee may elect, at the time
and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct
rollover.
B. Definitions
1. Eligible rollover distribution - An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an
eligible rollover distribution does not include:
a. any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or
for a specified period of ten years or more;
b. any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and
c. the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities).
2. Eligible retirement plan -- An eligible retirement plan is an
individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section
408(b) of the Code, an annuity plan described in Section 403(a)
of the Code, or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual
retirement annuity.
3. Distributee -- A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of the spouse
or former spouse.
4. Direct rollover -- A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee.
SECTION SEVEN CLAIMS PROCEDURE
7.01 Filing a Claim for Plan Distributions
<PAGE>
A Participant or Beneficiary who desires to make a claim for the Vested
portion of the Participant's Individual Account shall file a written
request with the Plan Administrator on a form to be furnished to him by
the Plan Administrator for such purpose. The request shall set forth the
basis of the claim. The Plan Administrator is authorized to conduct such
examinations as may be necessary to facilitate the payment of any
benefits to which the Participant or Beneficiary may be entitled under
the terms of the Plan.
7.02 Denial of Claim
Whenever a claim for a Plan distribution by any Participant or
Beneficiary has been wholly or partially denied, the Plan Administrator
must furnish such Participant or Beneficiary written notice of the
denial within 60 days of the date the original claim was filed. This
notice shall set forth the specific reasons for the denial, specific
reference to pertinent Plan provisions on which the denial is based, a
description of any additional information or material needed to perfect
the claim, an explanation of why such additional information or material
is necessary and an explanation of the procedures for appeal.
7.03 Remedies Available
The Participant or Beneficiary shall have 60 days from receipt of the
denial notice in which to make written application for review by the
Plan Administrator. The Participant or Beneficiary may request that the
review be in the nature of a hearing. The Participant or Beneficiary
shall have the right to representation, to review pertinent documents
and to submit comments in writing. The Plan Administrator shall issue a
decision on such review within 60 days after receipt of an application
for review as provided for in Section 7.02. Upon a decision unfavorable
to the Participant or Beneficiary, such Participant or Beneficiary shall
be entitled to bring such actions in law or equity as may be necessary
or appropriate to protect or clarify his right to benefits under this
Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 Employer is Plan Administrator
A. The Employer shall be the Plan Administrator unless the managing
body of the Employer designates a person or persons other than the
Employer as the Plan Administrator and so notifies the Prototype
Sponsor and the Trustee (or Custodian, if applicable). The Employer
shall also be the Plan Administrator if the person or persons so
designated cease to be the Plan Administrator.
B. If the managing body of the Employer designates a person or persons
other than the Employer as Plan Administrator, such person or
persons shall serve at the pleasure of the Employer and shall serve
pursuant to such procedures as such managing body may provide. Each
such person shall be bonded as may be required by law.
8.02 Powers and Duties of the Plan Administrator
A. The Plan Administrator may, by appointment, allocate the duties of
the Plan Administrator among several individuals or entities. Such
appointments shall not be effective until the party designated
accepts such appointment in writing.
B. The Plan Administrator shall have the authority to control and
manage the operation and administration of the Plan. The Plan
Administrator shall administer the Plan for the exclusive benefit of
the Participants and their Beneficiaries in accordance with the
specific terms of the Plan.
C. The Plan Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to,
the following:
1. To determine all questions of interpretation or policy in a
manner consistent with the Plan's documents and the Plan
Administrator's construction or determination in good faith
shall be conclusive and binding on all persons except as
otherwise provided herein or by law. Any interpretation or
construction shall be done in a nondiscriminatory manner and
shall be consistent with the intent that the Plan shall continue
to be deemed a qualified plan under the terms of Section 401(a)
of the Code, as amended from time-to-time, and shall comply
with the terms of ERISA, as amended from time-to-time;
2. To determine all questions relating to the eligibility of
Employees to become or remain Participants hereunder;
3. To compute the amounts necessary or desirable to be contributed
to the Plan;
4. To compute the amount and kind of benefits to which a
Participant or Beneficiary shall be entitled under the Plan and
to direct the Trustee (or Custodian, if applicable) with respect
to all disbursements under the Plan, and, when requested by the
Trustee (or Custodian), to furnish the Trustee (or Custodian)
with instructions, in writing, on matters pertaining to the
Plan and the Trustee (or Custodian) may rely and act thereon;
5. To maintain all records necessary for the administration of the
Plan;
6. To be responsible for preparing and filing such disclosure and
tax forms as may be required from time-to-time by the Secretary
of Labor or the Secretary of the Treasury; and
7. To furnish each Employee, Participant or Beneficiary such
notices, information and reports under such circumstances as may
be required by law.
D. The Plan Administrator shall have all of the powers necessary or
appropriate to accomplish his duties under the Plan, including, but
not limited to, the following:
<PAGE>
1. To appoint and retain such persons as may be necessary to carry
out the functions of the Plan Administrator;
2. To appoint and retain counsel, specialists or other persons as
the Plan Administrator deems necessary or advisable in the
administration of the Plan;
3. To resolve all questions of administration of the Plan;
4. To establish such uniform and nondiscriminatory rules which it
deems necessary to carry out the terms of the Plan;
5. To make any adjustments in a uniform and nondiscriminatory
manner which it deems necessary to correct any arithmetical or
accounting errors which may have been made for any Plan Year;
and
6. To correct any defect, supply any omission or reconcile any
inconsistency in such manner and to such extent as shall be
deemed necessary or advisable to carry out the purpose of the
Plan.
8.03 Expenses and Compensation
All reasonable expenses of administration including, but not limited to,
those involved in retaining necessary professional assistance may be
paid from the assets of the Fund. Alternatively, the Employer may, in
its discretion, pay such expenses. The Employer shall furnish the Plan
Administrator with such clerical and other assistance as the Plan
Administrator may need in the performance of his duties.
8.04 Information From Employer
To enable the Plan Administrator to perform his duties, the Employer
shall supply full and timely information to the Plan Administrator (or
his designated agents) on all matters relating to the Compensation of
all Participants, their regular employment, retirement, death,
Disability or Termination of Employment, and such other pertinent facts
as the Plan Administrator (or his agents) may require. The Plan
Administrator shall advise the Trustee (or Custodian, if applicable) of
such of the foregoing facts as may be pertinent to the Trustee's (or
Custodian's) duties under the Plan. The Plan Administrator (or his
agents) is entitled to rely on such information as is supplied by the
Employer and shall have no duty or responsibility to verify such
information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 Right of Prototype Sponsor to Amend the Plan
A. The Employer, by adopting the Plan, expressly delegates to the
Prototype Sponsor the power, but not the duty, to amend the Plan
without any further action or consent of the Employer as the
Prototype Sponsor deems necessary for the purpose of adjusting the
Plan to comply with all laws and regulations governing pension or
profit sharing plans. Specifically, it is understood that the
amendments may be made unilaterally by the Prototype Sponsor.
However, it shall also be understood that the Prototype Sponsor
shall be under no obligation to amend the Plan documents and the
Employer expressly waives any rights or claims against the Prototype
Sponsor for not exercising this power to amend. For purposes of
Prototype Sponsor amendments, the mass submitter shall be recognized
as the agent of the Prototype Sponsor. If the Prototype Sponsor does
not adopt the amendments made by the mass submitter, it will no
longer be identical to or a minor modifier of the mass submitter
plan.
B. An amendment by the Prototype Sponsor shall be accomplished by
giving written notice to the Employer of the amendment to be made.
The notice shall set forth the text of such amendment and the date
such amendment is to be effective. Such amendment shall take effect
unless within the 30 day period after such notice is provided, or
within such shorter period as the notice may specify, the Employer
gives the Prototype Sponsor written notice of refusal to consent to
the amendment. Such written notice of refusal shall have the effect
of withdrawing the Plan as a prototype plan and shall cause the Plan
to be considered an individually designed plan. The right of the
Prototype Sponsor to cause the Plan to be amended shall terminate
should the Plan cease to conform as a prototype plan as provided in
this or any other section.
9.02 Right of Employer to Amend the Plan
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when
such language is necessary to satisfy Section 415 or Section 416 of the
Code because of the required aggregation of multiple plans, and (3) add
certain model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for
any other reason, including a waiver of the minimum funding requirement
under Section 412(d) of the Code, will no longer participate in this
prototype plan and will be considered to have an individually designed
plan.
An Employer who wishes to amend the Plan to change the options it has
chosen in the Adoption Agreement must complete and deliver a new
Adoption Agreement to the Prototype Sponsor and Trustee (or Custodian,
if applicable). Such amendment shall become effective upon execution by
the Employer and Trustee (or Custodian).
The Employer further reserves the right to replace the Plan in its
entirety by adopting another retirement plan which the Employer
designates as a replacement plan.
9.03 Limitation on Power to Amend
No amendment to the Plan shall be effective to the extent that it has
the effect of decreasing a Participant's accrued benefit.
<PAGE>
Notwithstanding the preceding sentence, a Participant's Individual
Account may be reduced to the extent permitted under Section 412(c)(8)
of the Code. For purposes of this paragraph, a plan amendment which has
the effect of decreasing a Participant's Individual Account or
eliminating an optional form of benefit with respect to benefits
attributable to service before the amendment shall be treated as
reducing an accrued benefit. Furthermore, if the vesting schedule of a
Plan is amended, in the case of an Employee who is a Participant as of
the later of the date such amendment is adopted or the date it becomes
effective, the Vested percentage (determined as of such date) of such
Employee's Individual Account derived from Employer Contributions will
not be less than the percentage computed under the Plan without regard
to such amendment.
9.04 Amendment of Vesting Schedule
If the Plan's vesting schedule is amended, or the Plan is amended in any
way that directly or indirectly affects the computation of the
Participant's Vested percentage, or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each
Participant with at least 3 Years of Vesting Service with the Employer
may elect, within the time set forth below, to have the Vested
percentage computed under the Plan without regard to such amendment.
For Participants who do not have at least 1 Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting A5 Years of Vesting Service@ for A3 Years of
Vesting Service@ where such language appears.
The Period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end the
later of:
A. 60 days after the amendment is adopted;
<PAGE>
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
9.05 Permanency
The Employer expects to continue this Plan and make the necessary
contributions thereto indefinitely, but such continuance and payment is
not assumed as a contractual obligation. Neither the Adoption Agreement
nor the Plan nor any amendment or modification thereof nor the making of
contributions hereunder shall be construed as giving any Participant or
any person whomsoever any legal or equitable right against the Employer,
the Trustee (or Custodian, if applicable), the Plan Administrator or the
Prototype Sponsor except as specifically provided herein, or as provided
by law.
9.06 Method and Procedure for Termination
The Plan may be terminated by the Employer at any time by appropriate
action of its managing body. Such termination shall be effective on the
date specified by the Employer. The Plan shall terminate if the Employer
shall be dissolved, terminated, or declared bankrupt. Written notice of
the termination and effective date thereof shall be given to the Trustee
(or Custodian, if applicable), Plan Administrator, Prototype Sponsor,
Participants and Beneficiaries of deceased Participants, and the
required filings (such as the Form 5500 series and others) must be made
with the Internal Revenue Service and any other regulatory body as
required by current laws and regulations. Until all of the assets have
been distributed from the Fund, the Employer must keep the Plan in
compliance with current laws and regulations by (a) making appropriate
amendments to the Plan and (b) taking such other measures as may be
required.
9.07 Continuance of Plan by Successor Employer
Notwithstanding the preceding Section 9.06, a successor of the Employer
may continue the Plan and be substituted in the place of the present
Employer. The successor and the present Employer (or, if deceased, the
executor of the estate of a deceased Self-Employed Individual who was
the Employer) must execute a written instrument authorizing such
substitution and the successor must complete and sign a new Adoption
Agreement.
9.08 Failure of Plan Qualification
If the Plan fails to attain or retain its qualified status, the Plan
will no longer be considered to be part of a prototype plan, and such
Employer can no longer participate under this prototype. In such event,
the Plan will be considered an individually designed plan.
SECTION TEN MISCELLANEOUS
10.01 State Community Property Laws
The terms and conditions of this Plan shall be applicable without regard
to the community property laws of any state.
10.02 Headings
The headings of the Plan have been inserted for convenience of reference
only and are to be ignored in any construction of the provisions hereof.
10.03 Gender and Number
Whenever any words are used herein in the masculine gender they shall be
construed as though they were also used in the feminine gender in all
cases where they would so apply, and whenever any words are used herein
in the singular form they shall be construed as though they were also
used in the plural form in all cases where they would so apply.
10.04 Plan Merger or Consolidation
In the case of any merger or consolidation of the Plan with, or transfer
of assets or liabilities of such Plan to, any other plan, each
Participant shall be entitled to receive benefits immediately after the
merger, consolidation, or transfer (if the Plan had then terminated)
which are equal to or greater than the benefits he would have been
entitled to receive immediately before the merger, consolidation, or
transfer (if the Plan had then terminated). The Trustee (or Custodian,
if applicable) has the authority to enter into merger agreements or
agreements to directly transfer the assets of this Plan but only if such
agreements are made with trustees or custodians of other retirement
plans described in Section 401(a) of the Code.
10.05 Standard of Fiduciary Conduct
The Employer, Plan Administrator, Trustee and any other fiduciary under
this Plan shall discharge their duties with respect to this Plan solely
in the interests of Participants and their Beneficiaries and with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims. No fiduciary shall cause the Plan to
engage in any transaction known as a "prohibited transaction" under
ERISA.
10.06 General Undertaking of All Parties
All parties to this Plan and all persons claiming any interest
whatsoever hereunder agree to perform any and all acts and execute any
and all documents and papers which may be necessary or desirable for the
carrying out of this Plan and any of its provisions.
10.07 Agreement Binds Heirs, etc.
This Plan shall be binding upon the heirs, executors, administrators,
successors and assigns, as those terms shall apply to any and all
parties hereto, present and future.
10.08 Determination of Top-Heavy Status
A. For any Plan Year beginning after December 31, 1983, this Plan is a
Top-Heavy Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and this Plan
is not part of any required aggregation group or permissive
aggregation group of plans;
2. If this Plan is part of a required aggregation group of plans
but not part of a permissive aggregation group and the top-heavy
ratio for the group of plans exceeds 60%;
3. If this Plan is a part of a required aggregation group and part
of a permissive aggregation group of plans and the top-heavy
ratio for the permissive aggregation group exceeds 60%.
For purposes of this Section 10.08, the following terms shall have the
meanings indicated below:
B. Key Employee -- Any Employee or former Employee (and the
beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such
individual's annual compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code, an owner (or
considered an owner under Section 318 of the Code) of one of the 10
largest interests in the Employer if such individual's compensation
exceeds 100% of the dollar limitation under Section 415(c)(1)(A) of
the Code, a 5% owner of the Employer, or a 1% owner of the Employer
who has an annual compensation of more than $150,000. Annual
compensation means compensation as defined in Section 415(c)(3) of
the Code, but including amounts contributed by the Employer pursuant
to a salary reduction agreement which are excludible from the
Employee's gross income under Section 125, Section 402(a)(8),
Section 402(h) or Section 403(b) of the Code. The determination
period is the Plan Year containing the determination date and the 4
preceding Plan Years.
The determination of who is a Key Employee will be made in
accordance with Section 416(i)(1) of the Code and the regulations
thereunder.
C. Top-heavy ratio
1. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the
Employer has not maintained any defined benefit plan which
during the 5-year period ending on the determination date(s) has
or has had accrued benefits, the top-heavy ratio for this Plan
alone or for the required or permissive aggregation group as
appropriate is a fraction, the numerator of which is the sum of
the account balances of all Key Employees as of the
determination date(s) (including any part of any account balance
distributed in the 5-year period ending on the determination
date(s)), and the denominator of which is the sum of all account
balances (including any part of any account balance distributed
in the 5-year period ending on the determination date(s)), both
computed in accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and the denominator
of the top-heavy ratio are increased to reflect any contribution
not actually made as of the determination date, but which is
required to be taken into account on that date under Section 416
of the Code and the regulations thereunder.
2. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the
Employer maintains or has maintained one or more defined benefit
plans which during the 5-year period ending on the determination
date(s) has or has had any accrued benefits, the top-heavy ratio
for any required or permissive aggregation group as appropriate
is a fraction, the numerator of which is the sum of account
balances under the aggregated defined contribution plan or plans
for all Key Employees, determined in accordance with (1) above,
and the present value of accrued benefits under the aggregated
defined benefit plan or plans for all Key Employees as of the
determination date(s), and the denominator of which is the sum
of the account balances under the aggregated defined
contribution plan or plans for all Participants, determined in
accordance with (1) above, and the present value of accrued
benefits under the defined benefit plan or plans for all
Participants as of the determination date(s), all determined in
accordance with Section 416 of the Code and the regulations
thereunder. The accrued benefits under a defined benefit plan in
both the numerator and denominator of the top-heavy ratio are
increased for any distribution of an accrued benefit made in the
5-year period ending on the determination date.
<PAGE>
3. For purposes of (1) and (2) above, the value of account balances
and the present value of accrued benefits will be determined as
of the most recent valuation date that falls within or ends with
the 12-month period ending on the determination date, except as
provided in Section 416 of the Code and the regulations
thereunder for the first and second plan years of a defined
benefit plan. The account balances and accrued benefits of a
Participant (a) who is not a Key Employee but who was a Key
Employee in a Prior Year, or (b) who has not been credited with
at least one Hour of Service with any employer maintaining the
plan at any time during the 5-year period ending on the
determination date will be disregarded. The calculation of the
top-heavy ratio, and the extent to which distributions,
rollovers, and transfers are taken into account will be made in
accordance with Section 416 of the Code and the regulations
thereunder. Deductible employee contributions will not be taken
into account for purposes of computing the top-heavy ratio. When
aggregating plans the value of account balances and accrued
benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee
shall be determined under (a) the method, if any, that uniformly
applies for accrual purposes under all defined benefit plans
maintained by the Employer, or (b) if there is no such method,
as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule of Section
411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required aggregation group of
plans plus any other plan or plans of the Employer which, when
considered as a group with the required aggregation group, would
continue to satisfy the requirements of Sections 401(a)(4) and
410 of the Code.
5. Required aggregation group: (a) Each qualified plan of the
Employer in which at least one Key Employee participates or
participated at any time during the determination period
(regardless of whether the Plan has terminated), and (b) any
other qualified plan of the Employer which enables a plan
described in (a) to meet the requirements of Sections 401(a)(4)
or 410 of the Code.
6. Determination date: For any Plan Year subsequent to the first
Plan Year, the last day of the preceding Plan Year. For the
first Plan Year of the Plan, the last day of that year.
7. Valuation date: For purposes of calculating the top-heavy ratio,
the valuation date shall be the last day of each Plan Year.
8. Present value: For purposes of establishing the "present value"
of benefits under a defined benefit plan to compute the
top-heavy ratio, any benefit shall be discounted only for
mortality and interest based on the interest rate and mortality
table specified for this purpose in the defined benefit plan.
10.09 Special Limitations for Owner-Employees
If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and
the plan established for other trades or businesses must, when looked at
as a single plan, satisfy Sections 401(a) and (d) of the Code for the
employees of those trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan
which satisfies Sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than provided for
Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
employees under the plan of the trade or business which is controlled
must be as favorable as those provided for him under the most favorable
plan of the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more Owner-Employees, together:
A. own the entire interest in a unincorporated trade or business, or
B. in the case of a partnership, own more than 50% of either the
capital interest or the profit interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or
more Owner-Employees, shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
<PAGE>
10.10 Inalienability of Benefits
No benefit or interest available hereunder will be subject to assignment
or alienation, either voluntarily or involuntarily. The preceding
sentence shall also apply to the creation, assignment, or recognition of
a right to any benefit payable with respect to a Participant pursuant to
a domestic relations order, unless such order is determined to be a
qualified domestic relations order, as defined in Section 414(p) of the
Code.
Generally, a domestic relations order cannot be a qualified domestic
relations order until January 1, 1985. However, in the case of a
domestic relations order entered before such date, the Plan
Administrator:
(1) shall treat such order as a qualified domestic relations order
if such Plan Administrator is paying benefits pursuant to such
order on such date, and
(2) may treat any other such order entered before such date as a
qualified domestic relations order even if such order does not
meet the requirements of Section 414(p) of the Code.
<PAGE>
NEW ENGLAND FUNDS SIMPLIFIED EMPLOYEE PENSION PLAN
UNIVERSAL SIMPLIFIED EMPLOYEE PENSION PLAN
Basic Plan Document
- -------------------------------------------------------------------------------
SECTION ONE ESTABLISHMENT AND PURPOSE OF PLAN
1.01 PURPOSE: The purpose of this Plan is to provide, in
accordance with its provisions, a Simplified Employee
Pension Plan providing benefits upon retirement for the
individuals who are eligible to participate hereunder.
1.02 INTENT TO QUALIFY: It is the intent of the Employer that
this Plan shall be for the exclusive benefit of its
Employees and shall qualify for approval under Section
408(k) of the Internal Revenue Code, as amended from time
to time (or corresponding provisions of any subsequent
Federal law at that time in effect). In case of any
ambiguity, it shall be interpreted to accomplish such
result. It is further intended that it comply with the
provisions of the Employee Retirement Income Security Act
of 1974 (ERISA) as amended from time to time.
1.03 WHO MAY ADOPT An employer who has ever maintained a
defined benefit plan which is now terminated may not
participate in this prototype Simplified Employee Pension
Plan. If, subsequent to adopting this Plan, any defined
benefit plan of the Employer terminates, the employer will
no longer participate in this prototype plan and will be
considered to have an individually designed plan.
1.04 USE WITH IRA This prototype Simplified Employee Pension
Plan must be used with an Internal Revenue Service model
IRA (Form 5305 or Form 5305-A) or an Internal Revenue
Service approved master or prototype IRA.
1.05 FOR MORE INFORMATION To obtain more information concerning
the rules governing this Plan, contact the Prototype
Sponsor listed in Section 5 of the Adoption Agreement.
SECTION TWO DEFINITIONS
2.01 ADOPTION AGREEMENT Means the document executed by the
Employer through which it adopts the Plan and thereby
agrees to be bound by all terms and conditions of the
Plan.
2.02 CODE Means the Internal Revenue Code of 1986 as amended.
2.03 COMPENSATION Compensation for the purposes of the $300
limit of Section 408(k)(2)(C) of the Code shall be
defined as Section 414(q)(7) Compensation.
For all other purposes, Compensation shall mean all of a
Participant's wages as defined in Section 3401(a) of the
Code for the purposes of income tax withholding at the
source (that is, W-2 wages) but determined without regard
to any rules that limit the remuneration included in wages
based on the nature or location of the employment or the
services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code).
For any Self-Employed Individual covered under the Plan,
Compensation will mean Earned Income.
Compensation shall include only that Compensation which is
actually paid to the Participant during the Plan Year.
Compensation shall include any amount which is contributed
by the Employer pursuant to a salary reduction agreement
and which is not includible in the gross income of the
Employee under Sections 125, 402(a)(8), 402(h) or 403(b)
of the Code.
The annual Compensation of each Participant taken into
account under the Plan for any year shall not exceed
$200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under
Section 415(d) of the Code, except the dollar increase in
effect on January 1 of any calendar year is effective for
years beginning in such calendar year and the first
adjustment to the $200,000
<PAGE>
limitation is effected on January 1, 1990. If a Plan
determines Compensation on a period of time that contains
fewer than 12 calendar months, then the annual
Compensation limit is an amount equal to the annual
Compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio
obtained by dividing the number of full months in the
period by 12.
In determining the Compensation of a Participant the rules
of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only
the spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the
close of the year. If, as a result of the application of
such rules the adjusted $200,000 limitation is exceeded,
then (except for purposes of determining the portion of
Compensation up to the integration level if this Plan
provides for permitted disparity), the limitation shall be
prorated among the affected individuals in proportion to
each such individual's Compensation as determined under
this section prior to the application of this limitation.
In addition to other applicable limitations set forth in
the Plan, and notwithstanding any other provision of the
Plan to the contrary, for Plan Years beginning on or after
January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the
OBRA '93 annual Compensation limit. The OBRA '93 annual
Compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Internal
Revenue Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined
(determination period) beginning in such calendar year. If
a determination period consists of fewer than 12 months,
the OBRA '93 annual Compensation limit will be multiplied
by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of
which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section
401(a)(17) of the Code shall mean the OBRA '93 annual
Compensation limit set forth in this provision.
2.04 EARNED INCOME Means the net earnings from self-employment
in the trade or business with respect to which the Plan is
established, for which personal services of the individual
are a material income-producing factor. Net earnings will
be determined without regard to items not included in
gross income and the deductions allocable to such items.
Net earnings are reduced by contributions by the Employer
to a qualified plan or to a Simplified Employee Pension
Plan to the extent deductible under Section 404 of the
Code.
Net earnings shall be determined with regard to the
deduction allowed to the Employer by Section 164(f) of the
Code for taxable years beginning after December 31, 1989.
2.05 EFFECTIVE DATE Means the date the Plan becomes effective
as indicated in the Adoption Agreement.
2.06 EMPLOYEE Means any person who is a natural person employed
by the Employer as a common law employee and if the
Employer is a sole proprietorship or partnership, any
Self-Employed Individual who performs services with
respect to the trade or business of the Employer. Further,
any employee of any other employer required to be
aggregated under Section 414(b), (c), (m), or (o) of the
Code and any leased employee required to be treated as an
employee of the Employer under Section 414(n) of the Code
shall also be considered an Employee.
2.07 EMPLOYER Means any corporation, partnership or sole
proprietorship named in the Adoption Agreement and any
successor who by merger, consolidation, purchase or
otherwise assumes the obligations of the Plan. A
partnership is considered to be the Employer of each of
the partners and a sole proprietorship is considered to be
the Employer of the sole proprietor.
2.08 EMPLOYER CONTRIBUTION Means the amount contributed by the
Employer to this Plan.
2.09 IRA Means the designated Individual Retirement Account or
Individual Retirement Annuity, which satisfies the
requirements of Section 408 of the Code, and which is
maintained by a Participant with the Prototype Sponsor
(unless the Prototype Sponsor allows Participants to
maintain their IRAs with other organizations).
2.10 PARTICIPANT Means any Employee who has met the
participation requirements of Section 3.01 and who is or
may become eligible to receive an Employer Contribution.
2.11 PLAN Means this plan document plus the corresponding
Adoption Agreement as completed and signed by the
Employer.
<PAGE>
2.12 PLAN YEAR Means the calendar year or the 12 consecutive
month period which coincides with the Employer's taxable
year.
2.13 PRIOR PLAN Means a plan which was amended or replaced by
adoption of this plan document, as indicated in the
Adoption Agreement.
2.14 PROTOTYPE SPONSOR Means the entity specified in the
Adoption Agreement which sponsors this prototype Plan.
2.15 SELF-EMPLOYED INDIVIDUAL Means an individual who has
Earned Income for a Plan Year from the trade or business
for which the Plan is established; also, an individual who
would have had Earned Income but for the fact that the
trade or business had no net profits for the Plan Year.
2.16 SERVICE Means the performance of duties by an Employee for
the Employer, for any period of time, however short, for
which the Employee is paid or entitled to payment. When
the Employer maintains the Plan of a predecessor employer,
an Employee's Service will include his or her service for
such predecessor employer.
2.17 TAXABLE WAGE BASE Means the maximum amount of earnings
which may be considered wages for a year under Section
3121(a)(1) of the Code in effect as of the beginning of
the Plan Year.
SECTION THREE ELIGIBILITY AND PARTICIPATION
3.01 ELIGIBILITY REQUIREMENTS Except for those Employees
excluded pursuant to Section 3.02, each Employee of the
Employer who fulfills the eligibility requirements
specified in the Adoption Agreement shall, as a condition
for further employment, become a Participant. Each
Participant must establish an IRA with the Prototype
Sponsor to which Employer Contributions under this Plan
will be made.
3.02 EXCLUSION OF CERTAIN EMPLOYEES If the Employer has so
indicated in the Adoption Agreement, the following
Employees shall not be eligible to become a participant in
the Plan: (a) Those Employees included in a unit of
Employees covered by the terms of a collective bargaining
agreement, provided retirement benefits were the subject
of good faith bargaining; and (b) those Employees who are
nonresident aliens, who have received no earned income
from the Employer which constitutes earned income from
sources within the United States.
3.03 ADMITTANCE AS A PARTICIPANT
A. Prior Plan - If this Plan is an amendment or
continuation of a Prior Plan, each Employee of the
Employer who immediately before the Effective Date
was a participant in said Prior Plan shall be a
Participant in this Plan as of said date.
B. Notification of Eligibility - The Employer shall
notify each Employee who becomes a Participant of his
or her status as a Participant in the Plan and of his
or her duty to establish an IRA with the Prototype
Sponsor to which Employer Contributions may be made.
C. Establishment of an IRA - If a Participant fails to
establish an IRA for whatever reason, the Employer
may execute any necessary documents to establish an
IRA on behalf of the Participant.
3.04 DETERMINATIONS UNDER THIS SECTION The Employer shall
determine the eligibility of each Employee to be a
Participant. This determination shall be conclusive and
binding upon all persons except as otherwise provided
herein or by law.
3.05 LIMITATION RESPECTING EMPLOYMENT Neither the fact of the
establishment of the Plan nor the fact that a common-law
employee has become a Participant shall give to that
common-law employee any right to continued employment; nor
shall either fact limit the right of the Employer to
discharge or to deal otherwise with a common-law employee
without regard to the effect such treatment may have upon
the Employee's rights under the Plan.
SECTION FOUR CONTRIBUTIONS AND ALLOCATIONS
4.01 EMPLOYER CONTRIBUTIONS
<PAGE>
A. Allocation Formula - Employer Contributions shall be
allocated in accordance with the allocation formula
selected in the Adoption Agreement. Each Employee who
has satisfied the eligibility requirements pursuant
to Section 3.01 (thereby becoming a Participant) will
share in such allocation.
If the Employer has selected the pro rata allocation
formula in the Adoption Agreement, then Employer
Contributions for each Plan Year shall be allocated
to the IRA of each Participant in the same proportion
as such Participant's Compensation (not in excess of
$200,000, indexed for cost of living increases in
accordance with Section 408(k)(8) of the Code) for
the Plan Year bears to the total Compensation of all
Participants for such year.
Employer Contributions made for a Plan Year on behalf
of any Participant shall not exceed the lesser of 15%
of Compensation or the limitation in effect under
Code Section 415(c)(1)(A) (indexed for cost of living
increases in accordance with Code Section 415(d)).
B. Integrated Allocation Formula - If the Employer has
selected the integrated allocation formula in the
Adoption Agreement, then Employer Contributions for
the Plan Year will be allocated to Participants' IRA
as follows:
Step 1 Employer Contributions will be allocated
to each Participant's IRA in the ratio that
each Participant's total Compensation bears
to all Participants' total Compensation, but
not in excess of 3% of each Participant's
Compensation.
Step 2 Any Employer Contributions remaining after
the allocation in Step 1 will be allocated
to each Participant's IRA in the ratio that
each Participant's Compensation for the Plan
Year in excess of the integration level
bears to the Compensation of all
Participants in excess of the integration
level, but not in excess of 3%.
Step 3 Any Employer Contributions remaining after
the allocation in Step 2 will be allocated
to each Participant's IRA in the ratio that
the sum of each Participant's total
Compensation and Compensation in excess of
the integration level bears to the sum of
all Participants' total Compensation and
Compensation in excess of the integration
level, but not in excess of the maximum
disparity rate described in the table below.
Step 4 Any Employer Contributions remaining after
the allocation in Step 3 will be allocated
to each Participant's IRA in the ratio that
each Participant's total Compensation for
the Plan Year bears to all Participants'
total Compensation for that Plan Year.
The integration level shall be equal to the Taxable
Wage Base or such lesser amount elected by the
Employer in the Adoption Agreement.
<TABLE>
<CAPTION>
Integration Level Maximum Disparity Rate
----------------- ----------------------
<S> <C>
Taxable Wage Base (TWB) 2.7%
More than $0 but not more than X* 2.7%
More than X* of TWB but not more than 80% of TWB 1.3%
More than 80% of TWB but not more than TWB 2.4%
</TABLE>
*X mean the greater of $10,000 or 20% of TWB.
C. Timing of Employer Contribution - Employer
Contributions, if any, made on behalf of Participants
for a Plan Year shall be allocated and deposited to
the IRA of each Participant no later than the due
date for filing the Employer's tax return (including
extensions).
4.02 DEDUCTIBILITY OF CONTRIBUTIONS Contributions to the Plan
are deductible by the Employer for the taxable year with
or within which the Plan Year of the Plan ends.
Contributions made for a particular taxable year and
contributed by the due date of the Employer's income tax
return, including extensions, are deemed made in that
taxable year.
4.03 VESTING, WITHDRAWAL RIGHTS TO CONTRIBUTIONS All Employer
Contributions made under the Plan on behalf of Employees
shall be fully vested and nonforfeitable at all times.
Each Employee shall have an unrestricted right to withdraw
at any time all or a portion of the Employer Contributions
made on his or her behalf. However, withdrawals taken are
subject to the same taxation and penalty provisions of
<PAGE>
the Code which are applicable to IRA distributions.
4.04 SIMPLIFIED EMPLOYER REPORTS The Employer shall furnish
reports, relating to contributions made under the Plan, in
the time and manner and containing the information
prescribed by the Secretary of the Treasury, to
Participants. Such reports shall be furnished at least
annually and shall disclose the amount of the contribution
made under the Plan to the Participant's IRA.
SECTION FIVE AMENDMENT OR TERMINATION OF PLAN
5.01 AMENDMENT BY EMPLOYER The Employer reserves the right to
amend the elections made or not made on the Adoption
Agreement by executing a new Adoption Agreement and
delivering a copy of the same to the Prototype Sponsor.
The Employer shall not have the right to amend any
nonelective provision of the Adoption Agreement nor the
right to amend provisions of this plan document. If the
Employer adopts an amendment to the Adoption Agreement or
plan document in violation of the preceding sentence, the
Plan will be deemed to be an individually designed plan
and may no longer participate in this prototype Plan.
5.02 AMENDMENT BY PROTOTYPE SPONSOR By adopting this Plan, the
Employer delegates to the Prototype Sponsor the power to
amend or replace the Adoption Agreement of the Plan to
conform them to the provisions of any law, regulations or
administrative rulings pertaining to Simplified Employee
Pensions and to make such other changes to the Plan,
which, in the judgement of the Prototype Sponsor, are
necessary or appropriate. The Employer shall be deemed to
have consented to all such amendments; provided however,
that no changes may be made without the consent of the
Employer if the effect would be to substantially change
the costs or benefits under the Plan. The Prototype
Sponsor shall not have the obligation to exercise or not
to exercise the power delegated to it nor shall the
Prototype Sponsor incur liability of any nature for any
act done or failed to be done by the Prototype Sponsor in
good faith in the exercise or nonexercise of the power
delegated hereunder. The Prototype Sponsor shall notify
the Employer should it discontinue sponsorship of the
Plan.
5.03 LIMITATIONS ON POWER TO AMEND No amendment by either the
Employer or the Prototype Sponsor shall reduce or
otherwise adversely affect any benefits of a Participant
or Beneficiary acquired prior to such amendment unless it
is required to maintain compliance with any law,
regulation or administrative ruling pertaining to
Simplified Employee Pensions.
5.04 TERMINATION While the Employer expects to continue the
Plan indefinitely, the Employer shall not be under any
obligation or liability to continue contributions or to
maintain the Plan for any given length of time. The
Employer may terminate this Plan at any time by
appropriate action of its managing body. This Plan shall
terminate on the occurrence of any of the following
events:
A. Delivery to the Prototype Sponsor of a notice of
termination executed by the Employer specifying the
effective date of the Plan's termination.
B. Adjudication of the Employer as bankrupt or the
liquidation or dissolution of the Employer.
5.05 NOTICE OF AMENDMENT, TERMINATION Any amendment or
termination shall be communicated by the Employer to all
appropriate parties as required by law. Amendments made by
the Prototype Sponsor shall be furnished to the Employer
and communicated by the Employer to all appropriate
parties as required by law. Any filings required by the
Internal Revenue Service or any other regulatory body
relating to the amendment or termination of the Plan shall
be made by the Employer.
5.06 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER A successor of
the Employer may continue the Plan and be substituted in
the place of the present Employer. The successor and
present Employer (or if deceased, the executor of the
estate of a deceased Self-Employed Individual who was the
Employer) must execute a written instrument authorizing
such substitution and the successor must complete and sign
a new Adoption Agreement.
SECTION SIX SALARY DEFERRAL SEP PROVISIONS
In addition to Sections 1 through 5, the provisions of
this Section 6 shall apply if the Employer is an Eligible
Employer and has adopted a salary deferral Simplified
Employee Pension Plan by indicating in the Adoption
<PAGE>
Agreement that Retirement Savings Contributions are
permitted.
If the Employer has so indicated in the Adoption
Agreement, the Employer agrees to permit Retirement
Savings Contributions to be made which will be contributed
by the Employer to the IRA established by or on behalf of
each Contributing Participant. This arrangement is
intended to qualify as a salary reduction simplified
employee pension ("SARSEP") under Section 408(k)(6) of the
Code and the regulations thereunder.
The SARSEP portion of this Plan shall be effective upon
adoption. No Retirement Savings Contributions may be based
on Compensation an Employee could have received before
adoption of the SARSEP and execution by the Employee of a
Retirement Savings Agreement.
6.100 DEFINITIONS
6.101 COMPENSATION Means Compensation as defined in Section 2.03
of the Plan and shall include any amount which is
contributed by the Employer as a Retirement Savings
Contribution pursuant to a Retirement Savings Agreement
which is not includible in the gross income of the
Employee under Section 402(h) of the Code.
6.102 CONTRIBUTING PARTICIPANT Means a person who has met the
participation requirements and who has enrolled as a
Contributing Participant pursuant to Section 6.201 and on
whose behalf the Employer is contributing Retirement
Savings Contributions.
6.103 ELIGIBLE EMPLOYER Means an Employer which: (a) has no more
than 25 Employees who are eligible to participate in the
Plan (or would have been eligible to participate if this
Plan had been maintained) at any time during the preceding
Plan Year; (b) has no leased employees within the meaning
of Section 414(n)(2) of the Code; (c) is not a state or
local government or political subdivision thereof, or any
agency or instrumentality thereof, or an organization
exempt from tax under Subtitle A of the Code; and (d) does
not currently maintain or has not maintained a defined
benefit plan, even if now terminated.
6.104 ENROLLMENT DATE Means the first day of any Plan Year, the
first day of the seventh month of any Plan Year and any
more frequent dates as the Employer may designate in a
uniform and nondiscriminatory manner.
6.105 EXCESS CONTRIBUTION Means the amount of each Highly
Compensated Employee's Retirement Savings Contributions
that exceeds the actual deferral percentage test limits
described in Section 6.303(B) of the Plan for a Plan Year.
6.106 HIGHLY COMPENSATED EMPLOYEE Means a Participant described
in Section 414(q) of the Code who during the current or
preceding year: (a) was a 5% owner of the Employer as
defined in Section 416(i)(1)(B)(i) of the Code; (b)
received Compensation in excess of $50,000, as adjusted
pursuant to Section 415(d), and was in the top-paid group
(the top 20% of Employees, by Compensation); (c) received
Compensation in excess of $75,000, as adjusted pursuant to
section 415(d); or (d) was an officer and received
Compensation in excess of 50% of the dollar limit under
Section 415 of the Code for defined benefit plans.
6.107 KEY EMPLOYEE Means any Employee or former Employee or
beneficiaries of these Employees who at any time during
the Plan Year or the four preceding Plan Years is or was:
(a) an officer of the Employer (if the Employee's annual
Compensation exceeds 50% of the dollar limitation under
Section 415(b)(1)(A) of the Code); (b) an owner of one of
the 10 largest interests in the Employer (if the
Employee's annual Compensation exceeds 100% of the dollar
limitation under Section 415(c)(1)(A) of the Code); (c) a
5% owner of the Employer as defined in Section
416(i)(1)(B)(i) of the Code; or (d) a 1% owner of Employer
(if the Employee has annual Compensation in excess of
$150,000).
6.108 RETIREMENT SAVINGS AGREEMENT Means an agreement, on a form
provided by the Employer, pursuant to which a Contributing
Participant may elect to have his or her Compensation
reduced and paid as a Retirement Savings Contribution to
his or her IRA by the Employer.
6.109 RETIREMENT SAVINGS CONTRIBUTIONS Means contributions made
by the Employer on behalf of a Contributing Participant
pursuant to Section 6.301. Retirement Savings
Contributions shall be deemed to be Employer Contributions
for purposes of (a) the contribution limits described in
Section 4.01(A) of the Plan; (b) the vesting and
withdrawal rights described in Section 4.03 of the Plan;
and (c) determining
<PAGE>
whether this Plan is a Top-Heavy Plan.
6.110 TOP-HEAVY PLAN This Plan is a Top-Heavy Plan for any Plan
Year if, as of the last day of the previous Plan Year (or
current Plan Year if this is the first year of the Plan)
the total of the Employer Contributions made on behalf of
Key Employees for all the years this Plan has been in
existence exceeds 60% of such contributions for all
Employees. If the Employer maintains (or maintained within
the prior five years) any other SEP or defined
contribution plan in which a Key Employee participates (or
participated), the contributions or account balances,
whichever is applicable, must be aggregated with the
contributions made to the Plan. The contributions (and
account balances, if applicable) of an Employee who ceases
to be a Key Employee or of an individual who has not been
in the employ of the Employer for the previous five years
shall be disregarded. The identification of Key Employees
and the top-heavy calculation shall be determined in
accordance with Section 416 of the Code and the
regulations thereunder.
6.200 CONTRIBUTING PARTICIPANT
6.201 REQUIREMENTS TO ENROLL AS A CONTRIBUTING PARTICIPANT
A. Enrollment - Each Employee who becomes a Participant
may enroll as a Contributing Participant. A
Participant shall be eligible to enroll as a
Contributing Participant on any Enrollment Date.
B. Initial Enrollment - Notwithstanding the time set
forth in Section 6.201(A) as of which a Participant
may enroll as a Contributing Participant, the
Employer shall have the authority to designate, in a
uniform and nondiscriminatory manner, additional
Enrollment Dates during the twelve month period
beginning on the Effective Date in order that an
orderly first enrollment might be completed.
6.202 MODIFICATION OF RETIREMENT SAVINGS AGREEMENT A
Contributing Participant may modify his or her Retirement
Savings Agreement to increase or decrease (within the
limits placed on Retirement Savings Contributions in the
Adoption Agreement) the amount of his or her Compensation
deferred into his or her IRA under the Plan. Such
modification may only be prospectively made effective as
of an Enrollment Date, or as of any other more frequent
date(s) if the Employer so permits in a uniform and
nondiscriminatory manner. A Contributing Participant who
desires to make such a modification shall complete, sign
and file a new Retirement Savings Agreement with the
Employer at least 30 days (or such lesser period of days
as the Employer shall permit in a uniform and
nondiscriminatory manner) before the modification is to
become effective.
6.203 WITHDRAWAL AS A CONTRIBUTING PARTICIPANT A Participant may
withdraw as a Contributing Participant as of the last date
preceding any Enrollment Date (or as of any other date if
the Employer so permits in a uniform and nondiscriminatory
manner) by revoking his or her authorization to the
Employer to make Retirement Savings Contributions on his
or her behalf. A Participant who desires to withdraw as a
Contributing Participant shall give written notice of
withdrawal to the Employer at least 30 days (or such
lesser period of days as the Employer shall permit in a
uniform and nondiscriminatory manner) before the effective
date of withdrawal. A Participant shall cease to be a
Contributing Participant upon his or her termination of
employment, or on account of termination of the Plan.
6.204 RETURN AS CONTRIBUTING PARTICIPANT AFTER WITHDRAWAL
A Participant who has withdrawn as a Contributing
Participant under Section 6.203 may not again become a
Contributing Participant until the first day of the first
Plan Year following the effective date of his or her
withdrawal as Contributing Participant.
6.300 RETIREMENT SAVINGS CONTRIBUTIONS
6.301 SALARY DEFERRAL ARRANGEMENT The Employer shall contribute
Retirement Savings Contributions on behalf of all
Contributing Participants for each Plan Year that the
following requirements are satisfied:
A. The Employer is an Eligible Employer; and
B. Not less than 50% of the Employees eligible to
participate elect to have Retirement Savings
Contributions contributed to the Plan on their
behalf.
Subject to the limits described in Section 6.303, the
amount of Retirement Savings Contributions so contributed
shall be the amount required by the Retirement Savings
Agreements of Contributing Participants.
<PAGE>
No Retirement Savings Contribution may be based on
Compensation a Participant received, or had a right to
receive, before execution of a Retirement Savings
Agreement by the Participant.
6.302 FAILURE TO SATISFY 50% PARTICIPATION REQUIREMENT If the
50% participation requirement described in Section
6.301(B)is not satisfied as of the end of any Plan Year,
all the Retirement Savings Contributions made by Employees
for the Plan Year shall be considered "Disallowed
Deferrals", i.e., IRA contributions that are not SEP-IRA
contributions. The Employer shall notify each affected
Employee, within 2 1/2 months after the end of the Plan
Year to which the Disallowed Deferrals relate, that the
deferrals are no longer considered SEP-IRA contributions.
Such notification shall specify the amount of the
Disallowed Deferrals and the calendar year of the Employee
in which they are includible in income and must provide an
explanation of applicable penalties if the Disallowed
Deferrals are not withdrawn in a timely fashion.
The notice to each affected Employee must state
specifically: (a) the amount of the Disallowed Deferrals;
(b) that the Disallowed Deferrals are includible in the
Employee's gross income for the calendar year or years in
which the amounts deferred would have been received by the
Employee in cash had he or she not made an election to
defer and that the income allocable to such Disallowed
Deferrals is includible in the year withdrawn from the
IRA; and (c) that the Employee must withdraw the
Disallowed Deferrals (and allocable income) from the
SEP-IRA by April 15 following the calendar year of
notification by the Employer. Those Disallowed Deferrals
not withdrawn by April 15 following the year of
notification will be subject to the IRA contribution
limitations of Sections 219 and 408 of the Code and thus
may be considered an excess contribution to the Employee's
IRA. Disallowed Deferrals may be subject to the 6% tax on
excess contributions under Section 4973 of the Code. If
income allocable to a Disallowed Deferral is not withdrawn
by April 15 following the year of notification by the
Employer, the income may be subject to the 10% tax on
early distributions under Section 72(t) of the Code when
withdrawn.
Disallowed Deferrals are reported in the same manner as
are Excess Contributions.
6.303 LIMITS ON RETIREMENT SAVINGS CONTRIBUTIONS
A. Maximum Amount - No Contributing Participant shall be
permitted to have Retirement Savings Contributions
made under this Plan during any calendar year in
excess of $7,000 (as indexed pursuant to Code Section
402(g)(5)). The $7,000 (indexed) limit applies to the
total elective deferrals the Contributing Participant
makes for the calendar year under this Plan and under
any cash or deferred arrangement described in Section
401(k) of the Code and any salary reduction
arrangement described in Section 403(b) of the Code.
The limit may be increased to $9,500 if the
Contributing Participant makes elective deferrals to
a salary reduction arrangement under Section 403(b)
of the Code.
Under no circumstances may an Employee?s Retirement
Savings Contributions in any calendar year exceed the
lesser of: (1) the limitation under Section 402(g) of
the Code based on all of the plans of the Employer;
or (2) 15% of his or her Compensation (less any
amount contributed by the Employer as a Retirement
Savings Contribution). Compute the amount of this 15%
limit by using the following formula:
Compensation (before subtracting Retirement
Savings Contributions) x 13.0435%.
If an Employer maintains any other SEP plan to which
non-elective SEP Employer Contributions are made for
a Plan Year, or any qualified plan to which
contributions are made for such Plan Year, then an
Employee's Retirement Savings Contribution may be
limited to the extent necessary to satisfy the
maximum contribution limitation under Section
415(c)(1)(A) of the Code.
In addition to the dollar limitation of Section
415(c)(1)(A), which is $30,000 in 1991, Employer
Contributions to this Plan, when aggregated with
contributions to all other SEP plans and qualified
plans of the Employer, generally may not exceed 15%
of Compensation (less any amount contributed by the
Employer as a Retirement Savings Contribution) for
any Employee. If these limits are exceeded on behalf
of any Employee for a particular Plan Year, that
Employee's Retirement Savings Contributions for that
year must be reduced to the extent of the excess.
B. Actual Deferral Percentage (ADP) Test Limits -
Retirement Savings Contributions by a Highly
Compensated Employee must satisfy the actual deferral
percentage (hereinafter "ADP") limitation under
Section 408(k)(6) of the Code. Amounts in excess of
the ADP limitation will be deemed Excess
<PAGE>
Contributions on behalf of the affected Highly
Compensated Employee or Employees. The ADP of any
Highly Compensated Employee who is eligible to be a
Contributing Participant shall not be more than the
product obtained by multiplying the average of the
ADPs of all non-Highly Compensated Employees who are
eligible to be Contributing Participants by 1.25. For
purposes of this Section 6.303, an Employee's ADP is
the ratio (expressed as a percentage) of his or her
Retirement Savings Contributions for the Plan Year to
his or her Compensation for the Plan Year. The ADP of
an Employee who is eligible to be a Contributing
Participant, but who does not make Retirement Savings
Contributions during the Plan Year is zero. The
determination of the ADP for any Employee is to be
made in accordance with Section 408(k)(6) of the Code
and should satisfy such other requirements as may be
provided by the Secretary of the Treasury.
C. Special Rule for Family Members - For purposes of
determining the ADP of a Highly Compensated Employee,
the Retirement Savings Contributions and Compensation
of the Employee will also include the Retirement
Savings Contributions and Compensation of any family
member. This special rule applies only if the Highly
Compensated Employee is in one of the following
groups: (a) a more than 5% owner of the Employer; or
(b) one of a group of the 10 most Highly Compensated
Employees.
The Retirement Savings Contributions and Compensation
of family members used in this special rule do not
count in computing the average of the ADPs of
non-Highly Compensated Employees.
For purposes of this special rule, a family member is
an individual who is related to a Highly Compensated
Employee as a spouse, or as a lineal ascendant or
descendant or the spouses of such lineal ascendants
or descendants in accordance with Section 414(q) of
the Code and the regulations thereunder.
6.304 DISTRIBUTION OF EXCESS RETIREMENT SAVINGS CONTRIBUTIONS To
the extent that a Contributing Participant's Retirement
Savings Contributions for a calendar year exceed the limit
described in Section 6.303(A) (i.e., the $7,000 (indexed)
limit), the Contributing Participant must withdraw the
excess Retirement Savings Contributions (and any income
allocable to such amount) by April 15 following the year
of the deferral.
6.305 DISTRIBUTION OF EXCESS CONTRIBUTIONS The Employer shall
notify each Employee, no later than 2 1/2 months following
the close of the Plan Year of the amount, if any, of any
Excess Contribution to that Employee's IRA for such Plan
Year. If the Employer does not so notify Employees by such
date, the Employer must pay a tax equal to 10% of the
Excess Contributions for the Plan Year pursuant to Section
4979 of the Code. If the Employer fails to notify
Employees by the end of the Plan Year following the Plan
Year of the Excess Contributions, the SEP no longer will
be considered to meet the requirements of Section
408(k)(6) of the Code. This means that the earnings on the
SEP are subject to tax immediately, that no more
Retirement Savings Contributions may be made under the
SEP, and that Retirement Savings Contributions of all
Employees with uncorrected Excess Contributions must be
included in their income in that year. If the SEP no
longer meets the requirements of Section 408(k)(6), then
any contribution to an Employee's IRA will be subject to
the IRA contribution limitations of Section 219 and 408 of
the Code and thus may be considered an excess contribution
to the Employee's IRA.
The Employer's notification to each affected Employee of
the Excess Contributions must specifically state in a
manner calculated to be understood by the average Plan
Participant: (a) the amount of the Excess Contributions
attributable to that Employee's Retirement Savings
Contributions; (b) the Plan Year for which the Excess
Contributions were made; (c) that the Excess Contributions
are includible in the affected Employee's gross income for
the calendar year in which such Excess Contributions were
made; and (d) that the Employee must withdraw the Excess
Contributions (and allocable income) from the IRA by April
15 following the year of notification by the Employer.
Those Excess Contributions not withdrawn by April 15
following the year of notification will be subject to the
IRA contribution limitations of Sections 219 and 408 of
the Code for the preceding calendar year and thus may be
considered an excess contribution to the Employee's IRA.
Such excess contributions may be subject to the 6% tax on
excess contributions under Section 4973 of the Code. If
income allocable to an Excess Contribution is not
withdrawn by April 15 following the year of notification
by the Employer, the income may be subject to the 10% tax
on early distributions under Section 72(t) of the Code
when withdrawn. However, if the Excess Contributions (not
including allocable income) total less than $100, then the
Excess Contributions are includible in the Employee's
gross income in the year of notification. Income allocable
to the Excess Contributions is includible in the year of
withdrawal from the IRA.
<PAGE>
6.306 DETERMINATION OF INCOME For purposes of Sections 6.302,
6.304 and 6.305, the income allocable to Disallowed
Deferrals, excess Retirement Savings Contributions or
Excess Contributions for a year shall be determined by
multiplying the income earned on the IRA for the period
which begins on the first day of such year and ends on the
date of distribution from the IRA by a fraction, the
numerator of which is the Disallowed Deferral, excess
Retirement Savings Contribution or Excess Contribution for
such year and the denominator of which is the sum of the
account balance of the IRA as of the beginning of such
year and the total contributions made to the IRA for such
year.
6.307 RESTRICTION ON TRANSFERS AND WITHDRAWALS The Employer
shall notify each Contributing Participant that, until the
earlier of 2 1/2 months after the end of a particular Plan
Year or the date the Employer notifies its employees that
the actual deferral percentage limitations have been
calculated, any transfer or distribution from the
Contributing Participant's IRA of Retirement Savings
Contributions (or income on these contributions)
attributable to Retirement Savings Contributions made
during that Plan Year will be includible in income for
purposes of Sections 72(t) and 408(d)(1) of the Code.
6.308 ALLOCATION OF RETIREMENT SAVINGS CONTRIBUTIONS Retirement
Savings Contributions made on behalf of Contributing
Participants for a Plan Year shall be allocated and
deposited to the IRA of each Contributing Participant by
the Employer as soon as is administratively feasible.
6.400 SPECIAL RULES FOR TOP-HEAVY PLANS
6.401 MINIMUM ALLOCATION The following mandatory minimum
allocation applies when this Plan is a Top-Heavy Plan:
Unless another plan of the Employer is designated in the
space below to satisfy the top-heavy requirements of
Section 416 of the Code, each year this Plan is a
Top-Heavy Plan, the Employer will make a minimum
contribution to the IRA of each Participant who is not a
Key Employee, which, in combination with other
non-elective contributions, if any, is equal to the lesser
of 3% of such Participant's Compensation or a percentage
of Compensation equal to the percentage of Compensation at
which elective and non-elective contributions are made
under the Plan for the Plan Year for the Key Employee for
whom such percentage is the largest.
The top-heavy minimum will be met in the following plan:
--------------------------------------------------------
--------------------------------------------------------
(If applicable, name the plan other than this Plan in
which the minimum top-heavy contribution will be made.)
6.402 RETIREMENT SAVINGS CONTRIBUTIONS CANNOT BE USED FOR
MINIMUM ALLOCATION For purposes of satisfying the minimum
allocation requirement of Section 416 of the Code,
Retirement Savings Contributions contributed for the
benefit of Employees who are not Key Employees may not be
used to satisfy the minimum allocation requirement.
#409 (1/94)A92 1995 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
[Logo]
NEW ENGLAND FUNDS
Where The Best Minds Meet(TM)
INDIVIDUAL
- -------------------
RETIREMENT
- -------------------
ACCOUNT
- -------------------
PLAN AND DISCLOSURE
STATEMENT
- ----------------------------------------------------------------------------
WHAT'S INSIDE . . . .
* SUMMARY QUESTIONS & ANSWERS ....................................... P. 1
* CUSTODIAL ACCOUNT AGREEMENT ....................................... P. 2
* INFORMATION ON YOUR INDIVIDUAL RETIREMENT ACCOUNT ................. P. 8
* INTERNAL REVENUE SERVICE LETTER ................................... P.13
- ----------------------------------------------------------------------------
<PAGE>
Q. HOW MUCH CAN I CONTRIBUTE TO MY IRA?
A. The Tax Reform Act of 1986 ("TRA-86") did not change the IRA contribution
limits. For each year prior to the year in which you attain age seventy and
one-half (70 1/2), you can still contribute up to the lesser of $2,000 or
100% of your compensation (earned income, if you are self-employed).
However, as a result of the new limits on deductibility, all or a portion
of your contribution may not be deductible.
Q. WHEN CAN I MAKE A CONTRIBUTION TO AN IRA?
A. You may make a contribution to your existing IRA or establish a new IRA for
a taxable year up to April 15th of the following year.
Q. CAN I MAKE A CONTRIBUTION TO A SEPARATE IRA FOR MY SPOUSE?
A. TRA-86 liberalized the requirements for making contributions to a separate
spousal IRA. For each year prior to the year in which your spouse attains
age seventy and one-half (70 1/2), you can now make a contribution to a
separate IRA for your spouse, regardless of whether your spouse had any
compensation or earned income in that year. To make an IRA contribution for
your spouse you must file a joint tax return and your spouse must elect on
the return to be treated as having no compensation or earned income for
that year. The limits of the amount you can contribute have not changed.
The aggregate amount of your contribution to both IRA's cannot exceed the
lesser of $2,250, or 100% of your compensation (earned income, if you are
self-employed). You must set up a separate IRA for your spouse and no more
than the lesser of $2,000, or 100% of joint earned income may be deposited
in any one account.
Q. HOW DO I KNOW IF MY CONTRIBUTION IS TAX DEDUCTIBLE?
A. The deductibility of your contribution depends upon whether you, or, if
applicable, your spouse, is an active participant in an employer-sponsored
retirement plan. If neither you nor your spouse are an active participant,
the entire contribution to your IRA and, if applicable, your spouse's IRA
is deductible.
Q. WHAT PORTION OF MY CONTRIBUTION IS DEDUCTIBLE IF EITHER MY SPOUSE OR I AM
AN ACTIVE PARTICIPANT IN AN EMPLOYER-SPONSORED RETIREMENT PLAN?
A. The portion of your contribution that is deductible depends upon your
filing status and the amount of your Adjusted Gross Income ("AGI"). If you
are single and your AGI does not exceed $25,000; or if you are married,
filing jointly and your AGI does not exceed $40,000; the entire
contribution to your IRA and, if applicable, your spouse's IRA will be
deductible. If you are single and your AGI exceeds $35,000; or if you are
married, filing jointly and your AGI exceeds $50,000, the entire
contribution to your IRA and, if applicable, your spouse's IRA will be
nondeductible. If you are married but live apart from your spouse, filing
separately and your spouse is an active participant but you are not, the
entire contribution to your IRA will be deductible. If you are an active
participant with an AGI of $10,000 or more and you are married, filing
separately, the entire contribution to your IRA will be nondeductible.
Q. WHAT HAPPENS IF I CONTRIBUTE MORE THAN I'M ALLOWED TO MY IRA?
A. The maximum allowable contribution you can make to an IRA is $2,000 or 100%
of earned income, whichever is less. Any amounts contributed to the IRA in
excess of the maximum allowable contribution will be considered an "excess
contribution." An excess contribution is subject to a nondeductible excise
tax of 6% for each year it remains in the IRA. This is true whether the
excess contribution is deductible or nondeductible.
Q. HOW CAN I CORRECT AN EXCESS CONTRIBUTION?
A. Excess contributions may be corrected without paying a 6% penalty, provided
you withdraw the excess and any earnings on the excess before the due date
(including extensions) for filing your tax return for the year for which
you made the excess contribution. A deduction should not be taken for any
excess contributions. Earnings on any excess contribution withdrawn by this
method must be withdrawn along with the amount of the contribution. These
earnings must be included in your income for the tax year in which the
contribution was made.
Q. HOW ARE AMOUNTS DISTRIBUTED FROM MY IRA GOING TO BE TAXED?
A. Amounts distributed to you are includible in your gross income in the
taxable year that you receive them unless considered a return of
nondeductible contributions, and are then taxable as ordinary income. Since
the purpose of the IRA is to accumulate funds for retirement, your receipt
or use of any portion of this IRA before you attain age 59 1/2 generally
will be considered as an early withdrawal and subject to a 10% penalty tax
unless the distribution was a result of death or disability.
TRA-86 has added an additional exception to the early withdrawal rule. The
10% penalty tax for early withdrawal will not apply if the distribution is
part of a scheduled series of substantially equal periodic payments for
your life (or the joint lives of you and your beneficiary) or your life
expectancy (or the joint life expectancy of you and your beneficiary). If
there is an adjustment to the scheduled series of payments, the 10% penalty
tax may apply. For example, if you begin receiving payments at age 50 under
a distribution method which provides for substantially equal payments over
your life expectancy, and at age 58 you elect to receive the remaining
amount in a lump sum, the 10% penalty tax will apply to the lump sum and to
the amounts previously distributed to you prior to age 59 1/2.
Q. HOW ARE MY DISTRIBUTIONS FROM MY IRA REPORTED?
A. The custodian will report all distributions to the IRS on a form 1099R.
This report will include a description of the type of distribution (e.g.
premature, regular, rollover, etc.) For reporting purposes, a direct
transfer of assets to a successor custodian or trustee shall not be
considered a distribution.
Q. CAN I ROLL OVER A DISTRIBUTION I RECEIVE FROM MY EMPLOYER'S RETIREMENT PLAN
INTO AN IRA?
A. If you receive an eligible distribution from a tax-qualified retirement
plan as a result of termination of employment, plan discontinuance or
retirement, it may be deposited into your IRA. Distributions from qualified
plans (other than the return of Non-deductible Employee Contributions) must
be "rolled over" into an IRA within 60 days of receipt from the other
qualifed plan in order to continue their tax-deferred status.
Q. WHAT ARE THE WITHHOLDING REQUIREMENTS WHICH APPLY TO DISTRIBUTIONS MADE
AFTER JANUARY 1, 1993?
A. Generally, a plan making a distribution after January 1, 1993 may be
required to withhold 20% of the "eligible rollover amount." For most kinds
of distributions, that means that unless the distribution is made directly
from the distributing plan to the new plan or IRA, or is paid to you in a
check made payable to the new plan or IRA, the distributing plan will be
required to withhold 20% of the total amount of the distribution.
Q. CAN I ROLL OVER A PART OF A DISTRIBUTION I RECEIVE FROM MY EMPLOYER'S PLAN?
A. Yes it is possible to roll over, tax free, any portion of a distribution
from an employer plan without rolling over the entire amount distributed.
Amounts you receive which are not paid directly from an employer plan to a
new plan or IRA may be subject to tax and withholding, as noted above.
Q. ONCE I HAVE ROLLED OVER THIS DISTRIBUTION INTO AN IRA, CAN I SUBSEQUENTLY
ROLL OVER THESE AMOUNTS INTO ANOTHER QUALIFIED RETIREMENT PLAN?
A. Yes. Part or all of a qualifed total distribution received from a qualified
plan may be transferred to another qualifed plan through the medium of an
IRA. However, the IRA must have no assets other than those which were
previously distributed to you from the qualified plan. Specifically, the
IRA cannot contain any regular annual IRA contributions. Also, the new
qualified plan must provide for the acceptance of these amounts.
Q. HOW FREQUENTLY CAN I ROLL OVER ASSETS FROM MY IRA TO ANOTHER IRA?
A. You may "roll over" distributions from an IRA only once in any 365-day
period. This rule applies to each individual IRA. Further, if you roll over
assets from a qualified plan to an IRA you may subsequently roll over to
another IRA.
PLEASE REFER TO IRS PUBLICATION 590 FOR MORE INFORMATION ABOUT YOUR IRA
NEW ENGLAND FUNDS, L.P.
INDIVIDUAL RETIREMENT ACCOUNT
PROTOTYPE
The Custodial Account Agreement ("Agreement") including the Adoption Agreement
executed by the Custodian and the Depositor constitutes a Custodial Account
for the purpose of qualifying as an Individual Retirement Account under
section 408(a) of the Internal Revenue Code of 1986.
ARTICLE I
GENERAL
1.01 INTERPRETATION AND ADMINISTRATION. The Agreement is intended to meet the
requirements of the Internal Revenue Code ("IRC") relating to individual
retirement accounts and shall be interpreted and administered in a manner
consistent with such requirements.
1.02 AGREEMENT FOR EXCLUSIVE BENEFIT OF DEPOSITOR. In no circumstances shall any
part of the corpus or income of the Agreement be used for or diverted to
purposes other than for the exclusive benefit of the Depositor or his
Beneficiary.
1.03 DEPOSITOR'S RIGHTS TO CONTRIBUTIONS NONFORFEITABLE. The right of the
Depositor to or derived from contributions made shall be nonforfeitable at
the time such contribution is paid to the Agreement.
1.04 GOVERNING STATE. The Agreement established hereunder shall be governed by
the law of the State in which the Custodian is located.
1.05 SPONSOR. New England Funds, L.P. is the sponsoring organization of this
Individual Retirement Account. New England Funds, L.P. shall mean the
broker-dealer subsidiary of New England Investment Companies, L.P.
ARTICLE II
CONTRIBUTIONS AND ROLLOVERS
2.01 CONTRIBUTION REQUIREMENTS.
A. If an individual retirement account is established, whether alone or as
part of a Simplified Employee Pension ("SEP"), the total contribution to
such account by the Depositor for his taxable year must be in cash and
shall not exceed the lesser of $2,000 or 100% of the Depositor's
compensation for such year.
B. If individual retirement accounts are established for the benefit of an
individual who receives compensation and his non-employed spouse, the
total contribution by the Depositors to both accounts for their taxable
year must be in cash and shall not exceed the lesser of $2,250 or 100%
of the compensation of the employed Depositor for such year. Provided,
however, that no contribution made to the separate account of either
spouse may exceed $2,000 for the taxable year.
C. If an individual retirement account is established for the investment of
contributions to a Simplified Employee Pension (SEP) described in
section 408(k) of the Internal Revenue Code, the total contribution by
the Depositor's employer to such account for the Depositor's taxable
year shall not exceed the lesser of $22,500 or 15% of the Depositor's
compensation (not in excess of the first $150,000), or such larger
amount as may be prescribed by law for such year.
D. If an individual retirement account is established for the investment of
contributions to a Salary Reduction Simplified Employee Pension (SARSEP)
described in section 408(k) of the IRC, the total contribution to the
Depositor's account for the taxable year shall not exceed the employer
contribution described in subsection C. increased by an employee
elective deferral amount not to exceed $9,240 (as adjusted annually per
IRC section 415(d)).
"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, commissions on insurance
premiums, tips, and bonuses) and includes earned income, as defined in
section 401(c)(2) (reduced by the deduction the self employed individual
takes for contributions made to a Keogh plan). 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. The
term "compensation" shall include any amount includible in the individual's
gross income under section 71 with respect to a divorce or separation
instrument described in subparagraph (A) of section 71(b)(2).
2.02 ROLLOVERS. The provisions of Section 2.01 notwithstanding, a Depositor may
make a contribution which exceeds such limits provided that the Depositor
warrants that the amount contributed is a rollover contribution described
in Internal Revenue Code section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)
(8), or 408(d)(3) relating to qualified plans, individual retirement
accounts and individual retirement annuities and is contributed hereto
within sixty (60) days of receipt by the Depositor.
In the event that the Depositor elects to make a rollover contribution
attributable to a distribution from an employer plan qualified under Code
section 401(a), the Depositor shall have full discretion as to (a) whether
such a contribution shall be made to an IRA containing regular annual
contributions made pursuant to Section 2.01, (b) whether to make subsequent
regular annual contributions to an IRA originally funded solely with
rollover contributions attributable to distributions from a plan qualified
under Code section 401(a), or (c) whether to maintain an IRA established
with a rollover contribution attributable to a distribution from a plan
qualified under section 401(a) as a separate IRA, not commingled with
regular annual contributions pursuant to Section 2.01. The Custodian shall
be under no duty to question any direction of the Depositor regarding any
order to commingle rollover and regular annual contributions, nor shall the
Custodian be liable for any loss or damage which may arise from any
subsequent loss of portability of such an employer plan rollover
contribution to another employer plan qualified under Code section 401(a).
ARTICLE III
DEPOSITOR'S ACCOUNT AND INVESTMENTS
3.01 As used in this Agreement, the following terms shall have the following
meanings:
"Securities Account" shall mean an account consisting of shares of New
England Funds which are distributed by New England Funds, L.P.
"Insurer" shall mean the New England Mutual Life Insurance Company of
Boston, Massachusetts.
"Policy" shall mean an annuity contract issued by the Insurer. Such
policies shall not provide for fixed premiums. No portion of a Depositor's
Account shall be invested in life insurance contracts.
"Savings Account" shall mean an interest bearing deposit in the Custodian's
banking department of a type made available by the Custodian from time to
time for investment hereunder, and which is intended by the Depositor as
either (i) a relatively permanent investment, or (ii) an interim investment
pending use of the deposit to invest in Policies or a Securities Account.
3.02 DEPOSITOR'S ACCOUNT. For each type of account designated in the Adoption
Agreement, the Custodian shall establish an account to which shall be
credited all contributions made for the Depositor according to the
direction of the Depositor under Section 3.03. When the term "Depositor's
Account" is used in the Agreement, it shall refer to all the accounts
maintained for the Depositor under the Agreement.
The Depositor's Account shall include all assets held by the Custodian or
by the Insurer on behalf of the Depositor, including Securities Accounts,
Policies, Savings Accounts, and uninvested funds.
When the Adoption Agreement is checked for spousal accounts, a separate
Depositor Account will be opened and maintained in each spouse's name.
Contributions made on behalf of each spouse will be credited to that
spouse's separate account. A spouse for whom the Agreement is established
shall be the sole owner of all amounts in his Depositor's Account and shall
have the right to direct the investments in his Depositor's Account in
accordance with Sections 3.03 and 3.05. When any provision of the Agreement
gives the Depositor a right, option or privilege, such provision shall
extend to the spouse when the Agreement is established for a spouse.
3.03 INVESTMENT OF FUNDS. The Custodian shall receive and invest contributions
made by or on behalf of the Depositor and shall invest and reinvest thereto
without distinction between principal and income. No portion of the
Agreement assets shall be invested in life insurance contracts or
collectibles within the meaning of Code section 408(m), nor may the assets
of the Agreement be commingled with other property except in a common trust
fund or a common investment fund. The Custodian shall invest only in
Securities Accounts, Policies, and Savings Accounts and may hold amounts
uninvested without liability for interest thereon pursuant to Section
5.02(D).
A. All investments acquired by the Custodian under any Securities Account
or Savings Account shall be registered in the name of Custodian (with or
without identifying Depositor) or of its nominee (and the same nominee
may be used with respect to assets of other investors whether or not
held under agreements similar to this one or in any fiduciary capacity
whatsoever); provided, however, that the Custodian may hold any security
in bearer form or by or through a central clearing corporation
maintained by institutions active in the national securities markets;
provided further, however, that (i) the books and records of the
Custodian shall show that all such investments are part of the Custodial
Account; (ii) each Custodial Account shall be separate and distinct;
(iii) a separate account thereof shall be maintained by the party having
actual custody of such assets; and (iv) the assets thereof shall be held
in individual or bulk segregation in such party's vaults or in
depositories approved by the Securities and Exchange Commission under
the Securities Exchange Act of 1934.
B. Policy Ownership. Each Policy shall be a contract between the Custodian
and the Insurer. The Policy shall name the Custodian as owner, reserving
to it all rights, options and benefits provided by the Policy or
permitted by the Insurer except the right to change the Beneficiary
shall be exercisable by the Depositor.
C. Supplemental Agreement. A Disability Benefit Agreement (waiver of
premium in the event of disability), if available from the Insurer, may
be added to a Policy, provided that the additional cost of such
Agreement together with the annual contribution for the Depositor shall
not exceed the amounts specified in Section 2.01. The payment of
benefits from such agreement shall in no sense or manner or for any
purpose be considered or deemed a distribution by or through the
Agreement.
3.04 DIVIDENDS AND GAINS. Dividends which may become payable under a Policy
shall be held in the Depositor's Account to provide additional benefits.
Dividends and capital gains or other distributions received under any
Securities Account held for a Depositor's Account shall be reinvested in
the Securities Account in accordance with the written direction by the
Depositor. The shares so received upon such reinvestment shall be credited
to such Depositor's Account. All interest earned on a Savings Account shall
be credited as a deposit thereto. Notwithstanding the foregoing, a
Depositor who has attained age 59 1/2 may request distribution of dividends
and gains in accordance with the provisions of Article IV.
3.05 DEPOSITOR TO DIRECT INVESTMENTS. The Depositor shall direct the Custodian
with respect to the investment of the Depositor's Account, except that such
investments shall be limited to Securities Accounts, Policies, and Savings
Accounts. The Custodian shall have no duty to look beyond instructions
received by it from the Depositor and shall in no event be responsible for
any loss incurred with respect to any investments made or retained in
accordance with the directions of the Depositor.
3.06 CHANGES IN INVESTMENT. The Depositor may direct the Custodian in writing to
change investments held by the Custodian, both with respect to investments
already made and with respect to investments to be made with contributions
currently due. The Custodian shall make such changes in investment as soon
as reasonably possible after receiving written direction from the
Depositor. The Custodian shall not be responsible for any investment gains
or losses in the interim.
3.07 INFORMATION TO DEPOSITOR. When any portion of the Depositor's Account is
invested in Securities Accounts or variable annuity Policies, the Custodian
shall in accordance with requirements of applicable law, deliver or cause
to be delivered to the Depositor copies of any notices of shareholders'
meetings, proxies and proxy-soliciting materials, prospectuses, and annual
and other reports to shareholders, which have been received by the
Custodian with respect to such investments.
3.08 VOTING POWERS. With respect to Securities Accounts and variable annuity
Policies each Depositor may direct the Custodian as to the manner in which
any shares (including fractional shares) or units held by the Custodian for
his Depositor's Account shall be voted with respect to any matters being
voted upon by the entity which issued such shares or units. All such
directions by the Depositor shall be in writing on a form approved by the
Custodian, signed by the Depositor and delivered to the Custodian within
the time prescribed by it. The Custodian shall not vote in the absence of
such directions.
ARTICLE IV
DISTRIBUTIONS
4.01 DISTRIBUTIONS AFTER AGE 59 1/2. A Depositor who has attained the age of 59
1/2 may receive a distribution of dividends and gains as they accrue or of
other amounts in the account by directing the Custodian in writing to make
such distributions and furnishing such proof of age as the Custodian may
require.
4.02 COMMENCEMENT OF REQUIRED DISTRIBUTIONS. The entire interest (value of the
account) of the Depositor will be distributed or commence to be
distributed, no later than the first day of April following the calendar
year in which such individual attains age 70 1/2 (required beginning date),
in equal or substantially equal amounts, over (a) the life of the
Depositor, or the lives of the Depositor and his or her designated
beneficiary, or (b) a period certain not extending beyond the life
expectancy of the Depositor, or the joint and last survivor expectancy of
the Depositor and his or her designated beneficiary.
4.03 MINIMUM AMOUNTS TO BE DISTRIBUTED. If the Depositor's entire interest is to
be distributed in other than a lump sum, then the amount to be distributed
each year (commencing with the required beginning date and each year
thereafter) must be at least equal to the quotient obtained by dividing the
Depositor's benefit by the applicable life expectancy.
For calendar years beginning before January 1, 1989, if the Depositor's
spouse is not the designated beneficiary, the method of distribution
selected must assure that at least 50% of the present value of the amount
available for distribution is paid within the life expectancy of the
Depositor.
For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with the first year for which
distributions are required and then for each succeeding calendar year,
shall not be less than the quotient obtained by dividing the Depositor's
benefit by the lesser of (1) the applicable life expectancy or (2) if the
Depositor'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 Income Tax Regulations. Distributions after the death
of the Depositor shall be calculated using the applicable life expectancy
as the relevant divisor without regard to proposed regulations section
1.401(a)(9)-2.
Life expectancy is 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 by the time distributions are required
to begin, life expectancies shall be recalculated annually. Such election
shall be irrevocable as to the participant and shall apply to all
subsequent years. The life expectancy of a non-spouse beneficiary may not
be recalculated; instead, life expectancy will be calculated using the
attained age of such beneficiary during the calendar year in which
distributions are required to begin pursuant to this section, and payments
for subsequent years shall be calculated based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year life expectancy was first calculated.
If the individual retirement arrangement is an annuity, distributions shall
be made in accordance with the requirements of section 401(a)(9) of the
Code and the regulations thereunder.
4.04 DISTRIBUTION PROCEDURE. Shortly before the time benefits are to commence
under Section 4.02, the Depositor shall advise the Custodian or the Insurer
of the arrangements to be made effective for the payment of benefits. Such
benefits may be paid entirely by the Custodian or by the Insurer, or in
part by each of them, and the Custodian shall have full authority to carry
out the instructions of the Depositor for the payment of such benefits in a
fixed or variable amount. In order to perform the foregoing, the Custodian
shall have full authority to surrender a Policy or to transfer amounts held
by it to the Insurer for settlement under a Policy. Any interest in a
Securities Account shall be transferred to the Depositor or converted into
cash and the value distributed to the Depositor. Any credit balance in
Savings Account shall be distributable in a lump sum.
Before making any distribution upon the death of a Depositor, the Custodian
shall be furnished with any and all certificates, tax waivers and other
documents requested in its discretion by the Custodian.
4.05 DISTRIBUTIONS UPON DEATH OF DEPOSITOR.
A. Distributions beginning before death. If the Depositor dies after
distribution of his or her interest has begun, the remaining portion of
such interest will continue to be distributed at least as rapidly as
under the method of distribution being used prior to the Depositor's
death.
B. Distributions beginning after death. If the Depositor dies before
distribution of his or her interest begins, the Depositor's entire
interest will be distributed in accordance with one of the following
four provisions:
(1) The Depositor's entire interest will be paid by December 31 of the
calendar year containing the fifth anniversary of the Depositor's
death.
(2) If the Depositor's interest is payable to a beneficiary designated
by the Depositor and the Depositor has not elected (1) above, then
the entire interest will be distributed 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
Depositor died. The designated beneficiary may elect at any time to
receive greater payments.
(3) If the designated beneficiary of the Depositor is the Depositor's
surviving spouse, the spouse may elect to receive equal or
substantially equal payments over the life or life expectancy of
the surviving spouse commencing at any date prior to the later of
(1) December 31 of the calendar year immediately following the
calendar year in which the Depositor died and (2) December 31 of
the calendar year in which the Depositor would have attained age 70
1/2. Such election must be made no later than the earlier of
December 31 of the calendar year containing the fifth anniversary
of the Depositor's death or the date distributions are required to
begin pursuant to the preceding sentence. The surviving spouse may
accelerate these payments at any time, i.e., increase the frequency
or amount of such payments.
(4) If the designated beneficiary is the Depositor's surviving spouse,
the spouse may treat the account as his or her own individual
retirement arrangement (IRA). 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 such account, or fails
to elect any of the above three provisions.
C. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the Depositor's death, unless
otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually.
Such election shall be irrevocable as to the surviving spouse and shall
apply to all subsequent years. In the case of any other designated
beneficiary, life expectancies shall be calculated using the attained
age of such beneficiary during the calendar year in which distributions
are required to begin pursuant to this section, and payments for any
subsequent calendar year shall be calculated based on such life
expectancy reduced by one for each calendar year which has based on such
life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
D. For purposes of this requirement, any amount paid to a child of the
Depositor will be treated as if it had been paid to the surviving spouse
if the remainder of the interest becomes payable to the surviving spouse
when the child reaches the age of majority.
4.06 BENEFICIARY DESIGNATION. The term "Beneficiary" means one or more
recipients designated to receive a payment upon the death of the Depositor.
With respect to any Policy on the life of a Depositor, the proceeds shall
be paid to the Beneficiary designated in the Policy. With respect to
Securities Accounts and Savings Accounts, the amount remaining in the
Depositor's Account shall be distributed to the Beneficiary last designated
by the Depositor in writing on a form acceptable to the Custodian. Such
designation shall not take effect until it is received by the Custodian.
However, in the event no such designation is made or, if made, to the
extent such designation does not effectively dispose of the Depositor's
Account, the term "Beneficiary" shall mean the Depositor's estate.
4.07 DISTRIBUTION UPON DISABILITY OF DEPOSITOR. If the Depositor shall become
disabled to the extent that 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 as documented by a physician's statement,
the Depositor may direct the Custodian to transfer the Depositor's Account
to the disabled Depositor in such manner as directed by the Depositor
provided, however, such manner does not conflict with Section 4.02 and
4.03.
4.08 DISTRIBUTION IN PERIODIC PAYMENTS FOR LIFE. The Depositor may elect to
receive distributions at least annually as part of a series of
substantially equal periodic payments (if not less than $100) over the life
or life expectancy of the Depositor or the joint lives (or joint life
expectancies) of the Depositor and his or her Beneficiary.
4.09 DISTRIBUTION TO DEPOSITOR. Except in the case of the Depositor's death,
disability or attainment of age 59 1/2, the Custodian shall be notified by
the Depositor as to the disposition of the amount distributed. The
Depositor must direct the Custodian to commence distribution in accordance
with Section 4.02.
4.10 DISTRIBUTION OF EXCESS CONTRIBUTIONS. If the Depositor shall contribute, in
any calendar year, an amount greater than that which may be claimed as an
allowable deduction under the Code, the Depositor shall be entitled to
withdraw the excess, plus earnings thereon, before the date for filing of
the Depositor's federal income tax return, plus extensions.
ARTICLE V
CUSTODIAN
5.01 CUSTODIAN. "Custodian" shall mean the State Street Bank and Trust Company
or the Custodian named on the Adoption Agreement, and any successor
Custodian.
5.02 PROVISIONS REGARDING CUSTODIAN.
A. The Agreement shall take effect only when accepted and signed by the
Custodian and Depositor. As directed, the Custodian shall then open and
maintain a separate custodial account for the Depositor for each type of
individual retirement account designated in the Adoption Agreement and
invest the initial contribution hereunder as directed by the Depositor.
The Custodian shall not accept annual contributions in excess of the
amounts specified in Section 2.01 (or such other amounts as may be
permitted under the Internal Revenue Code of 1986 as amended), unless
the same is designated by the Depositor as a rollover contribution as
provided in Section 2.02.
B. The Depositor may direct the Custodian to establish another account for
him under the Agreement or may redesignate the account he had originally
designated in this adoption Agreement.
C. When there is more than one account under the Agreement the Depositor
shall direct the Custodian to which account each contribution shall be
credited.
D. 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, the 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 of written instructions or
clarification. The Custodian does not undertake to render any investment
advice whatsoever to the Depositor.
E. The Custodian assumes (and shall have) no responsibility to make any
distribution unless and until such instructions specify the occasion for
such distribution, the elected manner of distribution, and any
declaration required by Section 4.08. Also, before making any such
distribution or before honoring any assignment of a Depositor's Account,
the Custodian shall be furnished with any and all applications,
certificates, tax waivers, signature guarantees, and other documents
(including proof of any legal representative's authority) deemed
necessary or advisable by the Custodian.
5.03 RECORDS OF TRANSACTIONS. The 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 Section 5.07(A), the Custodian shall
render to the Depositor a written report or reports reflecting the
transactions effected by it during such period and the assets of the
Agreement (other than Policies) at the close of the period, using such
information as is reasonably available to it. Sixty (60) days after
rendering such report(s), the Custodian shall be forever released and
discharged (to the extent permitted by law) 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
the recipient of such report(s) shall have filed written objections with
the Custodian within the latter such sixty (60) day period.
5.04 DUTIES OF CUSTODIAN. Except as provided in Section 3.03, the Custodian
shall be an agent for the Depositor to receive and invest contributions
directed by the Depositor, hold and distribute such investments, and keep
adequate records and report thereon, all in accordance with this Agreement.
Custodian may perform any of its administrative duties through other
persons designated by the Custodian from time to time, except that the
ownership of the assets shall be as prescribed in Section 3.03 and 3.07 and
Custodian intends initially to delegate all such duties to its
partially-owned subsidiary Boston Financial Data Service, Inc., but no such
delegation or future change therein shall be considered as an amendment of
this Agreement. 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, the purpose or
propriety of any distribution or the tax treatment of any distribution
ordered by the Depositor or the Depositor's failure to commence
distribution in accordance with Article IV, which matters are the
responsibility of the Depositor.
5.05 INDEMNIFICATION. To the extent permitted by law, the Depositor 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 or willful misconduct. Custodian shall not be obligated or
expected to commence or defend any legal action or proceeding in connection
with Agreement or such matters unless agreed upon by Custodian and
Depositor and unless fully indemnified for so doing to Custodian's
satisfaction.
5.06 RELIANCE ON INSTRUCTIONS. Custodian may conclusively rely upon and shall
not be responsible for acting upon any written order from the Depositor 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, and shall have no further duty or inquiry.
5.07 RESIGNATION OR REMOVAL OF CUSTODIAN.
A. The Custodian may resign at any time upon at least thirty (30) days
prior notice in writing to the Depositor, and may be removed by the
Depositor at any time upon at least thirty (30) days prior notice in
writing to the Custodian. Upon such resignation or removal, the
Depositor shall appoint a successor Custodian to serve under this
Agreement. Upon receipt by the Custodian of written acceptance of such
appointment by the successor Custodian, the Custodian shall transfer to
such successor the assets of the Agreement and all necessary records (or
copies thereof) pertaining thereto, provided that (if so requested by
Custodian) any successor Custodian agrees not to dispose of any such
records without the Custodian's consent. The 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 expense,
or for payment of any other liabilities constituting a charge on or
against the assets of the Agreement or on or against the Custodian, with
any balance of such reserve remaining after the payment of all such
items to be paid over to the successor Custodian.
B. If within thirty (30) days after Custodian's resignation or removal or
such longer time as Custodian may agree to, the Depositor has not
appointed a successor Custodian which has accepted such appointment, the
Custodian shall terminate the Agreement.
C. The Custodian shall not be liable for the acts or omissions of such
successor.
D. The Custodian, and every successor Custodian appointed to serve under
this Agreement, must be a bank as defined in Code section 408(n).
E. After the Custodian has transferred the Agreement assets (including any
reserve balance as contemplated above) to the successor Custodian, the
Custodian shall be relieved of all further liability with respect to
this Custodial Agreement, and the assets thereof.
5.08 FEES, EXPENSES, AND TAXES. The Depositor shall pay the fees and reasonable
expenses of the Custodian in connection with the operation of the
Agreement.
Upon thirty (30) days' prior notice, the Custodian may change such schedule
of fees. 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
Agreement, that may be levied or assessed in respect to such assets, and
all other administrative expenses incurred by the Custodian, may be charged
to a Depositor's Account, by sale or liquidation of the assets in such
Account, or (at the Custodian's election) may be charged to the Depositor.
ARTICLE VI
AMENDMENT AND TERMINATION OF AGREEMENT
6.01 AMENDMENT OF AGREEMENT. New England Funds, L.P. is the sponsoring
organization for the Agreement. New England Funds, L.P. reserves to itself,
and the Depositor by execution of an Adoption Agreement delegates to it,
powers to amend the plan as it deems necessary or advisable including
amendments in order to implement requirements of applicable law, provided
that notice of such amendment shall be given to the Custodian and to the
Depositor.
6.02 AMENDMENT OF AGREEMENT. A Depositor may amend his Adoption Agreement at any
time by an instrument in writing which shall take effect 60 days after
delivery to the Custodian (a copy of which amendment shall be sent to the
Insurer) provided that
A. no amendment shall deprive the Insurer of any of its exemptions and
immunities with respect to Policies which were issued by it prior to
receipt at its Home Office of notice of such amendment; and
B. no amendment shall expand or increase the duties or liabilities of the
Custodian without its consent.
6.03 TERMINATION OF AGREEMENT.
A. The Custodian shall terminate the Agreement if, within the time
specified in Section 5.07B, after the Custodian's resignation or
removal, the Depositor has not appointed a successor Custodian which has
accepted such appointment. Termination of this Agreement shall be
effected by distributing all assets thereof in a lump sum in cash or in
kind to the Depositor, subject to Custodian's right to reserve funds as
provided in Section 5.07A.
B. Upon termination of the Agreement, the Custodian shall be relieved from
all further liability with respect to this Agreement, and all assets
thereof so distributed.
6.04 WITHDRAWAL OF DEPOSITOR. The Depositor may terminate his Agreement at any
time by an instrument in writing delivered to the Custodian, and upon such
termination the Depositor shall be entitled to receive all values being
held for his benefit in a manner consistent with Section 4.04.
6.05 FAILURE OF QUALIFICATION OF AGREEMENT. In the event that an Agreement shall
fail to qualify initially under the applicable provisions of the Internal
Revenue Code, the Custodian shall upon direction of the Depositor return to
the Depositor the value of all assets of the Agreement and the Agreement
thereupon shall be of no effect.
ARTICLE VII
REPORTS; MISCELLANEOUS
7.01 ANNUAL INFORMATION. The Insurer and the Custodian shall supply annually
such information concerning Agreement transactions affecting the Depositor
as the Secretary of the Treasury or his delegate shall prescribe, and shall
otherwise conform to such reporting requirements as may be prescribed by
Federal or State regulatory authority.
7.02 INTERNAL REVENUE CODE. "Internal Revenue Code" or "Code" or "IRC" as used
herein shall mean the Internal Revenue Code of 1986, as amended from time
to time.
7.03 PROTECTION OF INSURER, SPONSOR. Neither the Custodian, the Sponsor nor the
Insurer shall be responsible for the validity of a Depositor's Agreement or
for the validity or tax compliance of any SEP or SARSEP whose contributions
may be held under this Agreement. To the extent permitted by law, neither
the Sponsor nor the Insurer shall owe the Depositor any responsibility for
action taken or not taken by the Custodian, for determining the propriety
of accepting premium payments or other contributions, for making payments
in accordance with directions of the Custodian, or for the application of
such payments. The Sponsor and the Insurer shall be fully protected in
dealing with any officer, partner or principal of the Custodian.
7.04 NO ALIENATION OR ASSIGNMENT BY DEPOSITOR. Neither the Depositor nor a
designated Beneficiary shall have the right to alienate or assign his
interests provided by this Agreement. No such interest shall be subject to
attachment, execution, garnishment, or any other legal or equitable
process.
7.05 DEPOSITOR'S BENEFITS LIMITED TO ASSETS. The Depositor by his participation
in the Agreement shall be conclusively deemed to have agreed to look solely
to the assets held in the Agreement for the payment of any benefit to which
he may be entitled by reason of his participation.
7.06 DEPOSITOR TO ENFORCE AGREEMENT. To the extent permitted by law, the
Depositor shall have the sole authority to enforce the Agreement, and no
person other than the Depositor shall institute or maintain any action or
proceeding against the Custodian or the Insurer.
7.07 WITHHOLDING. Income tax may be withheld from payments provided under the
Agreement unless the Depositor or the Depositor's Beneficiary effectively
elects in writing not to have income tax withholding apply.
<PAGE>
NEW ENGLAND FUNDS, L.P.
INFORMATION ON YOUR INDIVIDUAL RETIREMENT ACCOUNT
This summary highlights the general provisions of federal tax law concerning
your Individual Retirement Account Plan (IRA Plan) including certain provisions
of the Tax Reform Act of 1986 (Act). As discussed below, this Act made a number
of major changes to the law governing the deductibility of contributions to IRA
plans. Hopefully, this summary will answer many of your questions about how the
law now operates. Further information can be obtained from any district office
of the Internal Revenue Service, from IRS Publication 590, from your investment
dealer or New England Funds, L.P.
IRA PLAN MAY BE REVOKED
You have the right to revoke this IRA Plan for any reason within 7 days after it
is established by delivering or mailing written notification to New England
Funds, L.P. or your investment dealer. If mailed, the notification will be
deemed mailed on the date of the postmark if it is deposited in the U.S. mail
first class postage prepaid and properly addressed. The notification to New
England Funds, L.P. should be mailed or delivered to:
New England Funds, L.P.
P.O. Box 8551
Boston, Massachusetts 02266-8551
If you wish to mail your notification to your investment dealer, call your
investment dealer for further information.
Upon revocation, all amounts paid will be refunded to you without adjustment
due to sales commissions, administrative expenses, or change in market value.
INDIVIDUALS ELIGIBLE FOR IRA PLANS
If you had compensation or earned income during your taxable year, you are
eligible to establish and contribute to an IRA Plan for yourself during the
year. The term "compensation" includes alimony or separate maintenance
payments which are includable in an individual's gross income with respect to
a divorce or separation instrument. Under the Act, if you are eligible to
establish an IRA Plan for yourself you may contribute to a Spousal IRA even if
your spouse has earned some compensation during the year. Provided your spouse
does not make a contribution to an IRA, you may set up a Spousal IRA
consisting of an account for your spouse as well as an account for yourself.
Note that an IRA Plan for the benefit of your spouse may be established only
if you file a joint return.
If both you and your spouse have compensation or earned income during the
taxable year, you may each establish and maintain separate IRA Plans.
DEDUCTIBLE CONTRIBUTIONS TO IRA PLANS
Under the Act, if neither you, nor your spouse, is an active participant (see
A. below) you may make a contribution of up to the lesser of $2,000 (or $2,250
in the case of a Spousal IRA) or 100% of compensation and take a deduction for
the entire amount contributed. If you are an active participant but have an
adjusted gross income (AGI) below a certain level (see B. below), you may make
a deductible contribution as under old law. If, however, you or your spouse
is an active participant and your combined AGI is above the specified level,
the amount of the deductible contribution you may make to an IRA Plan is
phased down and eventually eliminated.
A. Active Participant
You are an "active participant" for a year if you are covered by a
retirement plan. You are covered by a "retirement plan" for a year if your
employer or union has a retirement plan under which money is added to your
account or you are eligible to earn retirement credits. For example, if you
are 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 (SEP) or a plan which
promises you a retirement benefit which is based upon the number of years
of service you have with the employer, you are likely to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or
voluntary employee contributions to a retirement plan, you are an active
participant. In certain plans you may be an active participant even if you
were only with the employer for part of the year.
You are not considered an active participant if you are covered in a plan
only because of your service as 1) an Armed Forces Reservist, for 90 days
or less of active service, or 2) a volunteer firefighter covered for
firefighting service by a government plan if your accrued benefit is below
a threshold amount. Of course, if you are covered in any other plan, these
exceptions do not apply.
If you are married, living apart from your spouse, and file a separate tax
return, your spouse's active participation does not affect your ability to
make deductible contributions.
B. Adjusted Gross Income (AGI)
If you are an active participant, you must look at your AGI for the year
(if you and your spouse file a joint tax return you use your combined AGI)
to determine whether you can make a deductible IRA Plan contribution. Your
tax return will show you how to calculate your AGI for this purpose. If you
are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active
participant.
If you are single, your threshold AGI level is $25,000. The threshold level
if you are married and file a joint tax return is $40,000, and if you are
married but file a separate tax return, the threshold level is $0.
If your AGI is less than $10,000 above your threshold level, you will still
be able to make a deductible contribution but it will be limited in amount.
The amount by which your AGI exceeds your Threshold Level (AGI-Threshold
Level) is called your Excess AGI. The Maximum Allowable Deduction is $2,000
(or $2,250 for a Spousal IRA). You can estimate your deduction limit as
follows:
10,000 - Excess AGI
------------------- X Maximum Allowable Deduction = Deduction Limit
10,000
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed
100% of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an AGI
of $31,619. She calculates her deductible IRA Plan contributions as follows:
Her AGI is $31,619
Her Threshold Level is $25,000
Her Excess AGI is (AGI - Threshold Level) or ($31,619 - $25,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA Plan deduction limit is:
$10,000 - $6,619
---------------- X $2,000 = $676 (rounded to $680).
$10,000
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 Plan and calculate their
deductible contributions to each IRA Plan as follows:
Their AGI is $44,255
Their Threshold Level is $40,000
Their Excess AGI is (AGI - Threshold Level) or ($44,255 - $40,000) = $4,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA Plan deduction limit as follows:
$10,000 - $4,255
---------------- X $2,000 = $1,149 (rounded to $1,150).
$10,000
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 a
Spousal IRA. The amount of deductible contributions which could be made to the
two IRA Plans is calculated using a Maximum Allowable Deduction of $2,250
rather than $2,000.
$10,000 - $4,255
---------------- X $2,250 = $1,293 (rounded to $1,300).
$10,000
The $1,300 can be divided between the two accounts, but neither IRA Plan may
receive a deductible contribution of more than $1,150 (the limit 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 is (AGI - Threshold Level) or ($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 Plan 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.
NONDEDUCTIBLE CONTRIBUTIONS TO IRA PLANS
Even if you are above the threshold level and thus may not make a deductible
contribution of $2,000 ($2,250 for Spousal IRA), you may still contribute up
to the lesser of 100% of compensation or $2,000 to an IRA Plan ($2,250 for a
Spousal IRA). The amount of your contribution which is not deductible will be
a nondeductible contribution to the IRA Plan. You may also choose to make a
contribution nondeductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA Plan contribution,
whether from deductible or nondeductible contribution, will not be taxed until
taken out of your IRA Plan and distributed to you.
If you make a nondeductible contribution to an IRA Plan you must report the
amount of the nondeductible contribution to the IRS as a part of your tax
return for the year.
You may make a $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000, without having to know how
much will be deductible. When you fill out your tax return you may then figure
out how much is deductible.
According to the IRS, you may withdraw an IRA Plan contribution made for a
year any time before April 15 of the following year. If you do so, you must
also withdraw the earnings attributable to that portion and report the
earnings as income for the year for which the contribution was made. In
addition, if you are not 59 1/2 at the time of the withdrawal, you also may be
required to pay the premature distribution tax on these earnings. If some
portion of your contribution is not deductible, you may decide either to
withdraw the nondeductible amount, or to leave it in the IRA and designate
that portion as a nondeductible contribution on your tax return.
IRA PLAN DISTRIBUTIONS
Because nondeductible IRA Plan contributions are made using income which has
already been taxed (that is, they are not deductible contributions), the
portion of the IRA Plan distributions consisting of nondeductible
contributions will not be taxed again when received by you. If you make any
nondeductible IRA Plan contributions, each distribution from your IRA Plan
will consist of a nontaxable portion (return of nondeductible contributions)
and a taxable portion (return of deductible contributions, if any, and account
earnings).
Thus, you may not take a distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year:
<TABLE>
<S> <C> <C>
Remaining Nondeductible contributions Total Nontaxable
-------------------------------------------------- X Distributions = distributions
Year-end total IRA Plan account balance (for the year) (for the year)
(plus distributions taken during the year).
</TABLE>
To Figure the year-end total IRA Plan account balance you treat all of your
IRA Plans as a single IRA. This includes all regular IRAs, as well as
Simplified Employer Pension (SEP) IRAs, and Rollover IRAs. You also add back
the distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRA
Plans:
YEAR DEDUCTIBLE NONDEDUCTIBLE
1983 $2,000
1984 1,800 $1,000
1987 1,000 1,400
1989 600
----- -----
$5,400 $2,400
Deductible Contributions ......................................... $5,400
Nondeductible Contributions ...................................... 2,400
Earnings on IRA Plans ............................................ 1,200
-----
Total Account Balance of IRA Plans as of 12/31/91 ................ $9,000
(including distributions in 1991)
In 1991 the individual takes a distribution of $3,000. The total account
balance in the IRA Plans on 12/31/91 plus 1991 distributions is $9,000. The
nontaxable portion of the distributions for 1991 is figured as follows:
Total nondeductible contributions ........ $2,400 X $3,000
Total account balance in the IRA Plans --------------- = $800
plus distributions ..................... $9,000
Thus, $800 of the $3,000 distribution in 1991 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1991.
SIMPLIFIED EMPLOYEE PENSION (SEP) IRA PLANS
Your employer also may establish a SEP IRA Plan for you. If a SEP IRA Plan is
established by your employer, you are allowed an exclusion for federal income
tax purposes equal to the employer contributions made to your IRA Plan for the
least of the following amounts:
1. The actual amount of employer contributions made to your IRA Plan;
2. $22,500; or
3. 15% of your compensation (not in excess of the first $150,000) from such
employer.
If you are a participant in a SEP IRA Plan you also may make your own IRA Plan
contributions in accordance with the limitations described above.
A SARSEP is a Salary Reduction Simplified Employee Pension Plan. A salary
reduction contribution of no more than $9,500 annually (as adjusted by law) is
allowed. This salary reduction contribution is treated as an employer
contribution in applying the exclusion for federal income tax purposes
described above.
A SEP Plan may be established by completing IRS Form 5305-SEP. A SARSEP Plan
may be established by completing IRS Form 5305A-SEP. A nonmodel SEP/SARSEP
document may be required in some cases.
OTHER LIMITATIONS
The terms "compensation" and "earned income" do not include earnings from
property such as interest, rents and dividends. IRA contributions must be made
no later than the due date of your tax return (without regard to extensions)
to be deductible for that year. No contributions may be made to your IRA Plan
beginning with the taxable year in which you attain age 70 1/2. However, if
you contribute to a Spousal IRA, contributions may be made on behalf of your
spouse (who has not attained age 70 1/2) even if you are age 70 1/2 or older.
Your employer may continue to make excludible contributions for you under a
SEP IRA Plan after you have attained age 70 1/2. However, distribution must
commence not later than April 1 of the calendar year following the year in
which you attain age 70 1/2. The IRA Plan deduction is available whether or
not you itemize deductions.
REQUIREMENTS OF AN IRA PLAN
An IRA Plan is a trust or custodial agreement with a bank or other
organization approved by the Secretary of the Treasury which is for the
exclusive benefit of an individual or his beneficiaries and which meets the
following requirements:
1. The interest of an individual in the IRA Plan must be non-forfeitable;
2. The contributions for any year must be in cash and cannot exceed $2,000,
except in the case of contributions to a SEP IRA Plan and a rollover
contribution (described later);
3. The assets of the IRA Plan cannot be commingled with other property
except in a common trust fund or common investment fund; and
4. Distribution of the assets of the IRA Plan must be made in the manner
described in the LATEST TIME FOR DISTRIBUTION Section.
EXCESS CONTRIBUTIONS
Contributions which exceed the limits in either the DEDUCTIBLE CONTRIBUTIONS
TO IRA PLANS or NONDEDUCTIBLE CONTRIBUTIONS TO IRA PLANS Sections are excess
contributions. No deduction is allowed for excess contributions to your IRA
Plan. If in any year you make an excess contribution to your IRA Plan, you may
correct your contribution by withdrawing the excess amount (and any income
earned by it) by the due date for filing your tax return (including
extensions) for that year. The earned income withdrawn is taxable and may be
subject to a 10% penalty as described in the PREMATURE DISTRIBUTION Section.
Excess contributions which are not corrected are subject to a 6% nondeductible
excise tax.
If you do not withdraw your excess contribution (and any income earned by it),
you may withdraw the contribution in a later year or you may treat it as a
deductible or nondeductible contribution for that year to the extent
allowable. If you do not correct your contribution, the 6% nondeductible
excise tax will be applied for each year that the excess contribution is
allowed to remain in your IRA Plan. If an excess contribution is not withdrawn
before the due date of your tax return (including extensions), the return of
the excess contribution in a later year may be treated as a premature
distribution which could result in an additional penalty tax being imposed.
This tax is explained in the PREMATURE DISTRIBUTION Section. If, however, your
total IRA contribution was not more than $2,250 for a taxable year and you
have not been allowed a deduction for the excess contribution, you may
withdraw the excess after the due date for your return. The excess withdrawn
is not included in income or subject to a premature distribution tax, and you
need not withdraw the related earnings.
PREMATURE DISTRIBUTION
If you receive a payment from your IRA Plan before you attain the age of 59 1/
2 or become disabled, the payment will be considered a premature distribution.
If you receive a premature distribution, some or all of the amount received
may be included in your gross income in the taxable year of receipt. In
addition, your income tax for that tax year is increased by an amount equal to
10% of the premature distribution includable in your gross income. However,
the 10% penalty will not be imposed on amounts distributed on account of your
death prior to age 59 1/2, on amounts rolled over, or on amounts distributed
as part of a series of substantially equal periodic payments (made at least
annually) over your life or life expectancy or the joint lives (or life
expectancies) of you and your designated beneficiary.
LATEST TIME FOR DISTRIBUTION
Amounts contributed to an IRA Plan are intended to be paid out for retirement
purposes. Distribution must be made or commenced not later than April 1 of the
calendar year following the year in which you attain age 70 1/2, and the
distribution generally must not extend beyond the lives of you and your
designated beneficiary (or a period based on the life expectancies of you and
your designated beneficiary). If your designated beneficiary is your spouse,
the life expectancies of you and your spouse may be recomputed annually. If
your designated beneficiary is other than your spouse, the life expectancy of
such nonspouse beneficiary may be calculated only at the time distribution
commences. If sufficient payments are not made from your IRA Plan, you may be
liable for an excise tax of 50% of the amount of underdistribution. For
example, if the payout that you should receive is $1,000 for the taxable year
and you only receive $600, an excise tax of $200 (50% of the $400
underdistribution) must be paid by you unless the IRS grants you a waiver of
this tax (see Form 5329 for an explanation of the procedures for applying for
such a waiver). Detailed information about amounts required to be distributed
can be found in your IRA Plan document.
ROLLOVERS
Rollover contributions permit you to withdraw all or a portion of your
interest in your IRA Plan and reinvest it in another IRA Plan or other
qualified vehicle without incurring any federal tax liability or penalty as a
premature distribution. There is no tax deduction for the amount transferred.
Rollovers between IRA Plans may be made once every year and the money and any
other property received from one IRA Plan must be reinvested within 60 days of
the date it was received into another IRA Plan. Some or all of the amount
retained by you may be included in your gross income in the year of receipt
and may be considered a premature distribution subject to an additional 10%
tax if the distribution occurs prior to age 59 1/2.
If you take a partial or total distribution from a qualified retirement plan
which is not transferred directly into an IRA or other qualified vehicle, you
may be subject to a mandatory 20% withholding requirement.
PROHIBITED TRANSACTIONS
If you or your beneficiary engages in a prohibited transaction with respect to
your IRA Plan, the IRA Plan will lose its exemption from tax, and the fair
market value of the IRA Plan may be includible in your gross income for that
year. In addition, if you have not attained age 59 1/2, there may be an
additional 10% penalty tax as a premature distribution. The term "prohibited
transaction" means any direct or indirect sale or exchange, or leasing, of any
property, lending of money or other extension of credit, or furnishing of
goods, services, or facilities between you or your beneficiary and the IRA
Plan; transfer to, or use by or for the benefit of you or your beneficiary of
the assets of the IRA Plan for your own interest; and receipt of any
consideration by you or your beneficiary from any party dealing with the IRA
Plan in connection with a transaction involving the income or assets of the
IRA Plan.
SECURITY FOR LOAN
If you are participating in an IRA Plan and use any portion of the value as
security for a loan, the portion so used will be treated as a distribution and
may be includible in your gross income for that tax year. The transaction also
may be treated as a premature distribution subject to an additional 10% tax if
it occurs before age 59 1/2.
TAXABILITY OF IRA PLANS-FEDERAL INCOME TAX
Amounts which accumulate under your IRA Plan are exempt from federal income
taxation while they remain in the IRA Plan. When you or your beneficiary
receive distributions from your IRA Plan, the distributions may be taxed as
ordinary income for the year received. Distributions from any IRA Plan are not
eligible for the special averaging rules that apply to lump sum distributions
from qualified employer plans. As noted above, distributions which qualify as
rollovers will not incur tax liability, and there are penalties for premature
distributions, insufficient distributions, borrowing under the IRA Plan or
using the values as security for a loan.
TAXABILITY OF IRA PLANS -- FEDERAL ESTATE AND GIFT TAX
In the event of your death, distributions to the beneficiary of your IRA Plan
will be included for purposes of determining your federal estate tax liability
(if any). The designation by you of a beneficiary to receive payment under
this IRA Plan is not considered to be a transfer subject to federal gift tax
treatment.
TAXABILITY OF IRA PLANS -- STATE LAW
The treatment of IRA Plans varies under state income, estate or gift tax laws
(if any). Consult your state office of taxation or your tax advisor for
questions you may have concerning the effect of state law on your IRA Plan.
IRS FORM 5329 REQUIRED FOR SPECIAL SITUATIONS
IRS Form 5329, Additional Taxes Attributable to Qualified Retirement Plans
(Including IRAs), Annuities, and Modified Endowment Contracts is used to
report penalty taxes on your IRA Plan. The penalty taxes which must generally
be reported on Form 5329 include excess contribution taxes, premature
distribution taxes, and taxes imposed because an IRA Plan has not distributed
a sufficient amount to you under the distribution rules.
Form 5329 and Instructions for Form 5329 are available at your local IRS
office. Failure to file Form 5329 when required may be subject to penalty by
the Internal Revenue Service.
APPROVAL BY IRS
The Internal Revenue Service approved the overall form of this account as an
IRA plan. This does not represent a determination on the specific use of the
account by you.
FINANCIAL DISCLOSURE
Your contributions to this IRA Plan will be subject to custodial fees which
are described in the Individual Retirement Account booklet.
If the investment(s) you choose to fund this IRA Plan is (are) sold by
prospectus, consult the applicable prospectus(es) you have been furnished for
information concerning (i) the types and amounts of charges which are made
against your contributions, (ii) the method for computing and allocating
annual earnings, and (iii) the types of other charges which may be applied to
your interest in the investment(s) in determining the net amount of money
available to you and the method of computing each such charge. Growth in value
of this IRA Plan is neither guaranteed nor projected.
<PAGE>
INTERNAL REVENUE SERVICE
Plan Name: IRA Custodial Account
FFN: 50143000000-007 Case: 9070037 EIN: 04-1662730
Letter Serial No: D111853b
NEW ENGLAND MUTUAL LIFE INSURANCE CO.
501 BOYLSTON STREET
BOSTON, MA 02117
DEPARTMENT OF THE TREASURY
Washington, DC 20224
Person to Contact: Mr. Westry
Telephone Number: (202) 535-4972
Refer Reply to: E:EP:Q:4
Date: 04/30/90
Dear Applicant:
In our opinion, the amendment to the form of the prototype trust, custodial
account or annuity contract identified above does not adversely affect its
acceptability under section 408 of the Internal Revenue Code, as amended by
the Tax Reform Act of 1986.
Each individual who adopts this approved plan will be considered to have a
retirement savings program that satisfies the requirements of Code 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. Furthermore, this letter does not express any opinion as to
the applicability of Code section 4975, regarding prohibited transactions.
Code section 408(i) and related regulations require that the trustee,
custodian or issuer of a contract provide a disclosure statement to each
participant in this program as specified in the regulations. Publication 590,
Tax Information on Individual Retirement Arrangements, gives information about
the items to be disclosed.
The trustee, custodian or issuer of a contract is also required to provide
each adopting individual with 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>
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TO LEARN MORE, AND FOR A FREE PROSPECTUS, CONTACT YOUR FINANCIAL REPRESENTATIVE.
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This material is authorized for distribution to prospective investors when it is
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IR12
EXHIBIT 99.B16
SCHEDULE FOR CALCULATION OF PERFORMANCE DATA
<PAGE>
TNE TAX EXEMPT MONEY MARKET TRUST
* COMMENCED OPERATIONS 4-22-83
EARNINGS CALCULATION
DIVIDENDS REINVESTED
====================
<TABLE>
<CAPTION>
1. PLUS VALUE OF 1. PLUS VALUE OF
MONTHLY DIV. PRINCIPAL + MONTHLY DIV. PRINCIPAL +
FACTOR REINV. DIVS. FACTOR REINV. DIVS.
<S> <C> <C> <C> <C> <C> <C> <C>
1992 JANUARY 29 1.0023444148 $15,304.13 1989 JANUARY 26 1.0037672320 $13,183.03
FEBRUARY 26 1.0021043688 15,336.34 FEBRUARY 23 1.0041348508 13,237.54
MARCH 25 1.0020996874 15,368.54 MARCH 30 1.0056334306 13,312.11
APRIL 29 1.0028100161 15,411.73 APRIL 27 1.0046553136 13,374.08
MAY 27 1.0023505187 15,447.95 MAY 25 1.0047354205 13,437.41
JUNE 24 1.0020492913 15,479.61 JUNE 29 1.0056717939 13,513.63
JULY 29 1.0021783489 15,513.33 JULY 27 1.0042977829 13,571.71
AUGUST 26 1.0017074828 15,539.82 AUGUST 31 1.0053045889 13,643.70
SEPTEMBER 30 1.0023864860 15,576.90 SEPTEMBER 28 1.0042338382 13,701.47
OCTOBER 28 1.0017188426 15,603.68 OCTOBER 26 1.0042641370 13,759.89
NOVEMBER 25 1.0017664149 15,631.24 NOVEMBER 30 1.0052961214 13,832.76
DECEMBER 31 1.0023068260 15,667.30 DECEMBER 31 1.0047753543 13,898.82
1993 JANUARY 27 1.0014763101 15,690.43 1990 JANUARY 25 1.0036265699 13,949.23
FEBRUARY 24 1.0015091715 15,714.11 FEBRUARY 22 1.0038907405 14,003.50
MARCH 31 1.0018261568 15,742.80 MARCH 29 1.0049867964 14,073.33
APRIL 28 1.0014914038 15,766.28 APRIL 26 1.0041458748 14,131.68
MAY 26 1.0016047120 15,791.58 MAY 31 1.0052875773 14,206.40
JUNE 1.0018271577 15,820.44 JUNE 28 1.0041185918 14,264.91
JULY 1.0013668179 15,842.06 JULY 26 1.0039915719 14,321.85
AUGUST 1.0015951467 15,867.33 AUGUST 30 1.0049897412 14,393.31
SEPTEMBER 1.0019746525 15,898.66 SEPTEMBER 27 1.0041333096 14,452.80
OCTOBER 1.0016216999 15,924.45 OCTOBER 25 1.0041862636 14,513.31
NOVEMBER 1.0015056165 15,948.42 NOVEMBER 29 1.0050600184 14,586.74
DECEMBER 1.0019116015 15,978.91 DECEMBER 31 1.0050202205 14,659.97
1994 JANUARY 1.0016190435 16,004.78 1991 JANUARY 31 1.004023871 14,718.96
FEBRUARY 1.0016075134 16,030.51 FEBRUARY 28 1.003210382 14,766.22
MARCH 1.0017321956 16,058.28 MARCH 28 1.003419855 14,816.71
APRIL 1.0018211173 16,087.52 APRIL 25 1.00324548 14,864.80
MAY 1.0021479975 16,122.08 MAY 30 1.00397462 14,923.88
JUNE 1.0019355680 16,153.28 JUNE 27 1.002987502 14,968.47
JULY 1.0018967680 16,183.92 JULY 25 1.002798612 15,010.36
AUGUST 1.0021276790 16,218.35 AUGUST 29 1.003837704 15,067.97
SEPTEMBER 1.0022622510 16,255.04 SEPTEMBER 26 1.00325182 15,116.96
OCTOBER 1.0023717340 16,293.60 OCTOBER 31 1.003733307 15,173.40
NOVEMBER 1.0024169050 16,332.98 NOVEMBER 27 1.002813317 15,216.09
DECEMBER 1.0023461391 16,371.30 DECEMBER 31 1.003433853 15,268.34
1995 JANUARY 1.0032321387 16,424.21
FEBRUARY 1.0026834573 16,468.28
MARCH 1.0030006845 16,517.70
APRIL 1.0030310358 16,567.77
MAY 1.0032154276 16,621.04
JUNE 1.0027803393 16,667.25
JULY 1.0027542137 16,713.16
AUGUST 1.0027215887 16,758.64
SEPTEMBER 1.0027454063 16,804.65
OCTOBER 1.0027134170 16,850.25
NOVEMBER 1.0027511220 16,896.61
DECEMBER 1.0026576990 16,941.51
1996 JANUARY 1.0026939500 16,987.15
FEBRUARY 1.0024080240 17,028.06
MARCH 1.0025380520 17,071.28
APRIL 1.0026278390 17,116.14
MAY 1.0028876500 17,165.56
JUNE 1.0025174840 17,208.78
JULY 1.0000000000 17,208.78
AUGUST 1.0000000000 17,208.78
SEPTEMBER 1.0000000000 17,208.78
OCTOBER 1.0000000000 17,208.78
NOVEMBER 1.0000000000 17,208.78
DECEMBER 1.0000000000 17,208.78
</TABLE>
TNE TAX EXEMPT MONEY MARKET TRUST
* COMMENCED OPERATIONS 4-22-83
<TABLE>
<CAPTION>
1. PLUS VALUE OF 1. PLUS VALUE OF
MONTHLY DIV. PRINCIPAL + MONTHLY DIV. PRINCIPAL +
FACTOR REINV. DIVS. FACTOR REINV. DIVS.
<S> <C> <C> <C> <C> <C> <C> <C>
1986 JANUARY 1.0049206561 $11,600.05 1983 JANUARY
FEBRUARY 1.0038226522 11,644.39 FEBRUARY
MARCH 1.0037119786 11,687.61 MARCH $10,000.00
APRIL 1.0037101297 11,730.97 APRIL * 1.0014019043 10,014.02
MAY 1.0037750024 11,775.26 MAY 1.0043344566 10,057.42
JUNE 1.0032167658 11,813.14 JUNE 1.0041233516 10,098.89
JULY 1.0032976825 11,852.09 JULY 1.0042895823 10,142.21
AUGUST 1.0036553538 11,895.42 AUGUST 1.0043318246 10,186.15
SEPTEMBER 1.0031122331 11,932.44 SEPTEMBER 1.0043259553 10,230.21
OCTOBER 1.0032512585 11,971.23 OCTOBER 1.0045386354 10,276.65
NOVEMBER 1.0027204412 12,003.80 NOVEMBER 1.0045063698 10,322.96
DECEMBER 1.0033025320 12,043.44 DECEMBER 1.0046505381 10,370.96
1987 JANUARY 1.0031399252 12,081.26 1984 JANUARY 1.0047116449 10,419.83
FEBRUARY 1.0026880078 12,113.73 FEBRUARY 1.0043088608 10,464.72
MARCH 1.0028797735 12,148.62 MARCH 1.0045474795 10,512.31
APRIL 1.0032622141 12,188.25 APRIL 1.0045333521 10,559.97
MAY 1.0036713210 12,233.00 MAY 1.0047961171 10,610.62
JUNE 1.0032054420 12,272.21 JUNE 1.0047079355 10,660.57
JULY 1.0033753557 12,313.63 JULY 1.0048708112 10,712.50
AUGUST 1.0029925710 12,350.48 AUGUST 1.0048134430 10,764.06
SEPTEMBER 1.0031850513 12,389.82 SEPTEMBER 1.0054756550 10,823.00
OCTOBER 1.0037161784 12,435.86 OCTOBER 1.0051676369 10,878.93
NOVEMBER 1.0036699579 12,481.50 NOVEMBER 1.0047418992 10,930.52
DECEMBER 1.0039618847 12,530.95 DECEMBER 1.0048969036 10,984.04
1988 JANUARY 1.0038513771 12,579.21 1985 JANUARY 1.0047792756 11,036.54
FEBRUARY 1.0034105292 12,622.11 FEBRUARY 1.0040976515 11,081.76
MARCH 1.0036265642 12,667.89 MARCH 1.0042832160 11,129.23
APRIL 28 1.0032468394 12,709.02 APRIL 1.0041335308 11,175.23
MAY 26 1.0033239631 12,751.26 MAY 1.0043143161 11,223.44
JUNE 30 1.0042460900 12,805.41 JUNE 1.0039434689 11,267.70
JULY 28 1.0035476264 12,850.84 JULY 1.0037896023 11,310.40
AUGUST 25 1.0037501390 12,899.03 AUGUST 1.0039316840 11,354.87
SEPTEMBER 29 1.0048234975 12,961.25 SEPTEMBER 1.0039114532 11,399.29
OCTOBER 27 1.0039411296 13,012.33 OCTOBER 1.0038902753 11,443.63
NOVEMBER 23 1.0038803258 13,062.82 NOVEMBER 1.0039101711 11,488.38
DECEMBER 30 1.0054146444 13,133.55 DECEMBER 1.0047758788 11,543.25
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000714528
<NAME> TAX EXEMPT MM TRUST
<SERIES>
<NUMBER> 01
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 66,885,256
<INVESTMENTS-AT-VALUE> 66,885,256
<RECEIVABLES> 1,199,415
<ASSETS-OTHER> 94,039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,178,710
<PAYABLE-FOR-SECURITIES> 3,208,685
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,742
<TOTAL-LIABILITIES> 3,281,427
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,675,292
<SHARES-COMMON-STOCK> 64,675,292
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<ACCUMULATED-NET-GAINS> 0
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<NET-INVESTMENT-INCOME> 2,186,497
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<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96,882,833
<NUMBER-OF-SHARES-REDEEMED> 2,152,160
<SHARES-REINVESTED> 101,935,023
<NET-CHANGE-IN-ASSETS> (2,900,030)
<ACCUMULATED-NII-PRIOR> 1,136,631
<ACCUMULATED-GAINS-PRIOR> 61
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 267,906
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 595,369
<AVERAGE-NET-ASSETS> 65,028,208
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .033
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .033
<RETURNS-OF-CAPITAL> 3.32
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.56
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000714528
<NAME> TAX EXEMPT MM TRUST
<SERIES>
<NUMBER> 02
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 66,885,256
<INVESTMENTS-AT-VALUE> 66,885,256
<RECEIVABLES> 1,199,415
<ASSETS-OTHER> 94,039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,178,710
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,742
<TOTAL-LIABILITIES> 3,281,427
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,991
<SHARES-COMMON-STOCK> 221,991
<SHARES-COMMON-PRIOR> 446,611
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 64,897,283
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,563,249
<OTHER-INCOME> 0
<EXPENSES-NET> 376,752
<NET-INVESTMENT-INCOME> 2,186,497
<REALIZED-GAINS-CURRENT> (44)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,186,453
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,218,146
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96,882,833
<NUMBER-OF-SHARES-REDEEMED> 2,152,160
<SHARES-REINVESTED> 101,935,023
<NET-CHANGE-IN-ASSETS> (2,900,030)
<ACCUMULATED-NII-PRIOR> 1,136,631
<ACCUMULATED-GAINS-PRIOR> 61
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 267,906
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 595,369
<AVERAGE-NET-ASSETS> 65,028,208
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .033
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .033
<RETURNS-OF-CAPITAL> 3.32
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
