g:\funds\slep\1996\edgar\equitpea.doc
As filed with the Securities and Exchange Commission on
April 18, 1996 --------------------------------------
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Registration No. 33-2627
811-4551
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [X] Post-Effective
Amendment No. 33
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940, as amended
Amendment No. 34 [X]
SMITH BARNEY EQUITY FUNDS
(Exact name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 723-9218
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip
Code)
Christina T. Sydor
Secretary
388 Greenwich Street New York, New York
10013 (Name and Address of Agent for
Service)
copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher One Citicorp
Center 153 East 53rd Street New
York, NY 10022
To Register Additional Securities Under Reg. 270.24e-2
___________________________________CALCULATION
OF REGISTRATION FEE______________
Title of Share Proposed Proposed
Securities Amount Maximum
Maximum
Amount of
Being Being
Offering
Aggregate Registration
Registered Registered Price Per
Offering*
Fee
Share
Growth & Income Fund 1,069,453
$12.42
290,000 $100
Strategic Investors Fund 2,406,264
$18.96
290,000 $100
The fee for the shares to be registered by this filing
has been computed on the basis of the market value per
share in effect on April 15, 1996
* Calculation of the proposed maximum offering price
has been made pursuant to Rule 24e-2.
During its fiscal year ended January 31, 1996, the
Growth and Income Fund redeemed 3,550,174 shares of common
stock. During its current fiscal year, the fund used
2,504,070 shares of the Growth and Income Fund it redeemed
during its fiscal year ended January 31, 1996, for a
reduction pursuant to Rule 24f-2(c).
The fund currently is registering 1,069,453 shares for
the Growth and Income Fund, which is equal to the
remaining 1,046,104 shares redeemed during its fiscal
year ended January 31, 1996, plus 23,349 shares.
During its current fiscal year, the fund filed no other
posteffective amendments for the purpose of reduction
pursuant to Rule 24e-2(a).
During its fiscal year ended January 31, 1996, the
Strategic Investors Fund redeemed 5,237,960 shares of
common stock. During its current fiscal year, the fund
used 2,846,991 shares of the Strategic Investors Fund it
redeemed during its fiscal year ended January 31, 1996,
for a reduction pursuant to Rule 24f-2(c).
The fund currently is registering 2,406,264 shares for
the Strategic Investors Fund, which is equal to the
remaining 2,390,969 shares redeemed during its fiscal
year ended January 31, 1996, plus 15,295 shares.
During its current fiscal year, the fund filed no other
posteffective amendments for the purpose of reduction
pursuant to Rule 24e-2(a).
Rule 24f-2 (1) Declaration:
The Registrant has previously filed a declaration
of indefinite registration of its shares pursuant to Rule
24f-2 under the Investment Company Act of 1940, as
amended. Registrant's Rule 24f-2 Notice for the fiscal
year ended January 31, 1996 was filed on March 29,
1996.
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective
Amendment becomes effective.
It is proposed that this filing become effective:
_____ Immediately upon filing pursuant to Rule 485(b)
X on April 22, 1996 pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
_____ on -------------- pursuant to Rule 485(a)
SMITH BARNEY EQUITY FUNDS
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages
and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
SMITH BARNEY EQUITY FUNDS
FORM N-1A CROSS REFERENCE SHEET
Pursuant to Rule 495(a) Under the Securities Act of 1933, as
ame nded
Part A
Item No Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial
Highlights;
4. General Description of Registrant Cover
Page; Prospectus Summary;
Investment Objective and
Management
Policies; Distributor;
Additional
Information
5. Management of the Fund Prospectus
Summary; Management of
the Trust and the Fund;
Distributor;
Additional
Information
6. Capital Stock and Other Securities Investment
Objective and Management
Policies; Dividends,
Distributions
and Taxes; Additional
Information
7. Purchase of Securities Being Offered Valuation
of Shares; Purchase of
Shares; Exchange
Privilege; Redemption
of Shares;
Minimum Account Size;
Distributor;
Additional Information
8. Redemption or Repurchase of Shares Purchase
of
Shares; Redemption
of Shares; Exchange Privilege
9. Pending Legal Proceedings Not
Applicable
Part B Statement
of
Additional
Item No. Information Caption
10. Cover Page Cover page
11. Table of Contents Contents
12. General Information and
History
Distributor; Additional Information
13. Investment Objectives and Policies
Investment Objectives and Management
Policies
14. Management of the Fund Management
of
the Trust and the Funds;
Distributor
15. Control Persons and Principal Management
of
the Trust and the Funds
Holders of Securities
16. Investment Advisory and Other Services
Management of the Trust and the Funds;
Distributor
17. Brokerage Allocation
Investment
Objectives and Management
Policies; Distributor
18. Capital Stock and Other Securities
Investment Objectives and Management
Policies; Purchase
of Shares;
Redemption of
Shares; Taxes
19. Purchase, Redemption and Pricing
Purchase of Shares; Redemption of
of Securities Being Offered
Shares; Valuation of Shares; Distributor;
Exchange Privilege
20. Tax Status Taxes
21. Underwriters Distributor
22. Calculation of Performance
Data
Performance Data
23. Financial Statements
Financial
Statements
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Prospectus
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SMITH BARNEY
Growth and
Income
Fund
APRIL 22, 1996
Prospectus begins on page one
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus
April 22, 1996
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388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Growth and Income Fund (the "Fund") seeks
long-term capital
growth and income by investing in income producing equity
securities, including
dividend-paying common stocks, securities that are
convertible into common
stocks and warrants.
The Fund is one of a number of funds, each having
distinct investment
objectives and policies, making up Smith Barney Equity
Funds (the "Trust"). The
Fund is an open-end management investment company commonly
referred to as a
mutual fund.
This Prospectus sets forth concisely certain
information about the Fund and
the Trust, including sales charges, distribution and
service fees and expenses,
that prospective investors will find helpful in making an
investment decision.
Investors are encouraged to read this Prospectus carefully
and retain it for
future reference. Shares of the other funds offered by the
Trust are described
in separate prospectuses that may be obtained by calling
the Trust at the
telephone number set forth above or by contacting a Smith
Barney Financial
Consultant.
Additional information about the Fund and the Trust is
contained in a
Statement of Additional Information dated April 22, 1996,
as amended or
supplemented from time to time, that is available upon
request and without
charge by calling or writing the Trust at the telephone
number or address set
forth above or by contacting a Smith Barney Financial
Consultant. The Statement
of Additional Information has been filed with the
Securities and Exchange
Commission (the "SEC") and is incorporated by reference
into this Prospectus in
its entirety.
Smith Barney Inc.
Distributor
Smith Barney Mutual Funds Management Inc.
Investment Adviser and Administrator
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.
1
<PAGE>
Smith Barney Growth and Income Fund
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Table of Contents
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Prospectus Summary
3
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Financial Highlights
10
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Investment Objective and Management Policies
13
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Valuation of Shares
23
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Dividends, Distributions and Taxes
24
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Purchase of Shares
26
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Exchange Privilege
36
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Redemption of Shares
40
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Minimum Account Size
43
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Performance
43
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Management of the Trust and the Fund
44
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Distributor
45
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Additional Information
46
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==========================================================
======================
No person has been authorized to give any information
or to make any
representations in connection with this offering other
than those contained in
this Prospectus and, if given or made, such other
information or representations
must not be relied upon as having been authorized by the
Trust or the
distributor. This Prospectus does not constitute an offer
by the Fund or the
distributor to sell or a solicitation of an offer to buy
any of the securities
offered hereby in any jurisdiction to any person to whom
it is unlawful to make
such an offer or solicitation in such jurisdiction.
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======================
2
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus Summary
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The following summary is qualified in its entirety by
detailed information
appearing elsewhere in this Prospectus and in the
Statement of Additional
Information. Cross references in this summary are to
headings in the Prospectus.
See "Table of Contents."
Investment Objective The Fund is an open-end, diversified,
management investment
company that seeks long-term capital growth and income by
investing in income
producing equity securities, including dividend-paying
common stocks, securities
that are convertible into common stocks and warrants. See
"Investment Objective
and Management Policies."
Alternative Purchase Arrangements The Fund offers several
classes of shares
("Classes") designed to provide investors with the
flexibility of selecting an
investment best suited to their needs. The general public
is offered three
Classes of shares: Class A shares, Class B shares and
Class C shares which
differ principally in terms of the sales charges and rates
of expenses to which
they are subject. A fourth Class of shares, Class Y
shares, is offered only to
investors meeting an initial investment minimum of
$5,000,000. See "Purchase of
Shares" and "Redemption of Shares."
Class A Shares. Class A shares are sold at net asset
value plus an initial
sales charge of up to 5.00% and are subject to an annual
service fee of 0.25% of
the average daily net assets of the Class. The initial
sales charge may be
reduced or waived for certain purchases. Purchases of
Class A shares, which when
combined with current holdings of Class A shares offered
with a sales charge
equal or exceed $500,000 in the aggregate, will be made at
net asset value with
no initial sales charge, but will be subject to a
contingent deferred sales
charge ("CDSC") of 1.00% on redemptions made within 12
months of purchase. See
"Prospectus Summary - Reduced or No Initial Sales Charge."
Class B Shares. Class B shares are offered at net asset
value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by
1.00% each year after
the date of purchase to zero. This CDSC may be waived for
certain redemptions.
Class B shares are subject to an annual service fee of
0.25% and an annual
distribution fee of 0.50% of the average daily net assets
of the Class. The
Class B shares' distribution fee may cause that Class to
have higher expenses
and pay lower dividends than Class A shares.
Class B Shares Conversion Feature. Class B shares will
convert automatically
to Class A shares, based on relative net asset value,
eight years after the date
of the original purchase. Upon conversion, these shares
will no longer be
subject to an
3
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus Summary (continued)
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annual distribution fee. In addition, a certain portion of
Class B shares that
have been acquired through the reinvestment of dividends
and distributions
("Class B Dividend Shares") will be converted at that
time. See "Purchase of
Shares Deferred Sales Charge Alternatives."
Class C Shares. Class C shares are sold at net asset
value with no initial
sales charge. They are subject to an annual service fee of
0.25% and an annual
distribution fee of 0.50% of the average daily net assets
of the Class, and
investors pay a CDSC of 1.00% if they redeem Class C
shares within 12 months of
purchase. The CDSC may be waived for certain redemptions.
The Class C shares'
distribution fee may cause that Class to have higher
expenses and pay lower
dividends than Class A shares. Purchases of Fund shares,
which when combined
with current holdings of Class C shares of the Fund equal
or exceed $500,000 in
the aggregate, should be made in Class A shares at net
asset value with no sales
charge, and will be subject to a CDSC of 1.00% on
redemptions made within 12
months of purchase.
Class Y Shares. Class Y shares are available only to
investors meeting an
initial investment minimum of $5,000,000 (except for
purchases of Class Y shares
by Smith Barney Concert Series Inc., for which there is no
minimum purchase
amount). Class Y shares are sold at net asset value with
no initial sales charge
or CDSC. They are not subject to any service or
distribution fees.
In deciding which Class of Fund shares to purchase,
investors should consider
the following factors, as well as any other relevant facts
and circumstances:
Intended Holding Period. The decision as to which Class
of shares is more
beneficial to an investor depends on the amount and
intended length of his or
her investment. Shareholders who are planning to establish
a program of regular
investment may wish to consider Class A shares; as the
investment accumulates
shareholders may qualify for reduced sales charges and the
shares are subject to
lower ongoing expenses over the term of the investment. As
an investment
alternative, Class B and Class C shares are sold without
any initial sales
charge so the entire purchase price is immediately
invested in the Fund. Any
investment return on these additional invested amounts may
partially or wholly
offset the higher annual expenses of these Classes.
Because the Fund's future
return cannot be predicted, however, there can be no
assurance that this would
be the case.
Finally, investors should consider the effect of the
CDSC period and any
conversion rights of the Classes in the context of their
own investment time
frame. For example, while Class C shares have a shorter
CDSC period than Class B
shares, they do not have a conversion feature, and
therefore, are subject to an
ongoing
4
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus Summary (continued)
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distribution fee. Thus, Class B shares may be more
attractive than Class C
shares to investors with longer term investment outlooks.
Investors investing a minimum of $5,000,000 must
purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or
service or
distribution fee. The maximum purchase amount for Class A
shares is $4,999,999,
Class B shares is $249,999 and Class C shares is $499,999.
There is no maximum
purchase amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales
charge on Class A
shares may be waived for certain eligible purchasers, and
the entire purchase
price will be immediately invested in the Fund. In
addition, Class A share
purchases, which when combined with current holdings of
Class A shares offered
with a sales charge equal or exceed $500,000 in the
aggregate, will be made at
net asset value with no initial sales charge, but will be
subject to a CDSC of
1.00% on redemptions made within 12 months of purchase.
The $500,000 aggregate
investment will be met by adding the purchase to the net
asset value of all
Class A shares offered with a sales charge held in funds
sponsored by Smith
Barney Inc. ("Smith Barney") listed under "Exchange
Privilege." Other Class A
share purchases may also be eligible for a reduced initial
sales charge. See
"Purchase of Shares." Because the ongoing expenses of
Class A shares will be
lower than those for Class B and Class C shares,
purchasers eligible to purchase
Class A shares at net asset value or at a reduced sales
charge should consider
doing so.
Smith Barney Financial Consultants may receive
different compensation for
selling different Classes of shares. Investors should
understand that the
purpose of the CDSC on the Class B and Class C shares is
the same as that of the
initial sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Trust
and the Fund" for a
complete description of the sales charges and service and
distribution fees for
each Class of shares and "Valuation of Shares,"
"Dividends, Distributions and
Taxes" and "Exchange Privilege" for other differences
between the Classes of
shares.
Smith Barney 401(k) Program Investors may be eligible to
participate in the
Smith Barney 401(k) Program, which is generally designed
to assist plan sponsors
in the creation and operation of retirement plans under
Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), as
well as other types
of participant directed, tax-qualified employee benefit
plans (collectively,
"Participating Plans"). Class A, Class B, Class C and
Class Y shares are
available as investment alternatives for Participating
Plans. See "Purchase of
Shares--Smith Barney 401(k) Program."
5
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus Summary (continued)
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Purchase of Shares Shares may be purchased through the
Fund's distributor, Smith
Barney, or a broker that clears securities transactions
through Smith Barney on
a fully disclosed basis (an "Introducing Broker") or an
investment dealer in the
selling group. Direct purchases by certain retirement
plans may be made through
the Fund's transfer agent, First Data Investor Services
Group, Inc. ("First
Data"). See "Purchase of Shares."
Investment Minimums Investors in Class A, Class B and
Class C shares may open an
account by making an initial investment of at least $1,000
for each account, or
$250 for an individual retirement account ("IRA") or a
self-employed retirement
plan. Investors in Class Y shares may open an account for
an initial investment
of $5,000,000. Subsequent investments of at least $50 may
be made for all
Classes. For participants in retirement plans qualified
under Section 403(b)(7)
or Section 401(a) of the Code, the minimum initial
investment requirement for
Class A, Class B, and Class C shares and the subsequent
investment requirement
for all Classes is $25. The minimum initial investment
requirement for Class A,
Class B and Class C shares and the subsequent minimum
investment through the
Systematic Investment Plan described below is $50. See
"Purchase of Shares."
Systematic Investment Plan The Fund offers shareholders a
Systematic Investment
Plan under which they may authorize the automatic
placement of a purchase order
each month or quarter for Fund shares in an amount not
less than $50. See
"Purchase of Shares."
Redemption of Shares Shares may be redeemed on each day
the New York Stock
Exchange, Inc. ("NYSE") is open for business. See
"Redemption of Shares."
Management of the Trust and the Fund Smith Barney Mutual
Funds Management Inc.
("SBMFM") serves as the Fund's investment adviser. SBMFM
provides investment
advisory and management services to investment companies
affiliated with Smith
Barney. SBMFM is a wholly owned subsidiary of Smith Barney
Holdings Inc.
("Holdings"). Holdings is a wholly owned subsidiary of
Travelers Group Inc.
("Travelers"), a diversified financial services company
engaged through its
subsidiaries, principally in four business segments:
Investment Services,
Consumer Finance Services, Life Insurance Services and
Property & Casualty
Insurance Services. SBMFM also serves as the Fund's
administrator. See
"Management of the Trust and the Fund."
6
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus Summary (continued)
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Exchange Privilege Shares of a Class may be exchanged for
shares of the same
class of certain other funds of the Smith Barney Mutual
Funds at the respective
net asset values next determined, plus any applicable
sales charge differential.
See "Exchange Privilege Services."
Valuation of Shares Net asset value of the Fund for the
prior day is generally
quoted daily in the financial section of most newspapers
and is also available
from a Smith Barney Financial Consultants. See "Valuation
of Shares."
Dividends and Distributions Dividends from net investment
income are paid
quarterly. Distributions of net realized capital gains, if
any, are declared and
paid annually. See "Dividends, Distributions and Taxes."
Reinvestment of Dividends Dividends and distributions paid
on shares of a Class
will be reinvested automatically, unless otherwise
specified by an investor, in
additional shares of the same Class at current net asset
value. Shares acquired
by dividend reinvestments will not be subject to any sales
charge or CDSC. Class
B shares acquired through dividend and distribution
reinvestments will become
eligible for conversion to Class A shares on a pro rata
basis. See "Dividends,
Distributions and Taxes."
Risk Factors and Special Considerations There can be no
assurance that the
Fund's investment objective will be achieved. The market
value of fixed income
securities, which may constitute a part of the investments
of the Fund, may vary
inversely in response to changes in prevailing interest
rates. The mortgage
related securities in which the Fund may invest are
sensitive to changes in
interest rates and to prepayment of mortgages. The Fund
may make certain
investments and employ certain investment techniques that
involve other risks,
including entering into repurchase agreements, purchasing
foreign securities,
lending portfolio securities and entering into futures
contracts and related
options as hedges. These risks and those associated with
when-issued and
delayed-delivery transactions and covered option writing
are described under
"Investment Objective and Management Policies - Risk
Factors and Special
Considerations."
7
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus Summary (continued)
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The Fund's Expenses The following expense table lists the
costs and expenses an
investor will incur either directly or indirectly as a
shareholder of the Fund,
based on the maximum sales charge or maximum CDSC that may
be incurred at the
time of purchase or redemption and unless otherwise noted,
the Fund's current
operating expenses for its most recent fiscal year:
Class A
Class B Class C Class Y
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Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00%
None None None
Maximum CDSC
(as a percentage of original cost
or redemptionproceeds, whichever is lower) None*
5.00% 1.00% None
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Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees 0.65%
0.65% 0.65% 0.65%
12b-1 fees** 0.25
0.75 0.75 None
Other expenses*** 0.26
0.25 0.22 0.26
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TOTAL FUND OPERATING EXPENSES 1.16%
1.65% 1.62% 0.91%
==========================================================
======================
* Purchases of Class A shares, which when combined
with current holdings of
Class A shares offered with a sales charge equal or
exceed $500,000 in the
aggregate, will be made at net asset value with no
sales charge, but will
be subject to a CDSC of 1.00% on redemptions made
within 12 months.
** Upon conversion of Class B shares to Class A shares,
such shares will no
longer be subject to a distribution fee. Class C
shares do not have a
conversion feature and, therefore, are subject to an
ongoing distribution
fee. As a result, long-term shareholders of Class C
shares may pay more
than the economic equivalent of the maximum front-
end sales charge
permitted by the National Association of Securities
Dealers, Inc.
*** For Class Y shares "other expenses" have been
estimated based on expenses
incurred by the Class A shares because Class Y
shares were purchased
for one day during the year ended January 31, 1996.
The sales charge and CDSC set forth in the above table
are the maximum
charges imposed on purchases or redemptions of Fund shares
and investors may
actually pay lower or no charges, depending on the amount
purchased and, in the
case of Class B, Class C and certain Class A shares, the
length of time the
shares are held and whether the shares are held through
the Smith Barney 401(k)
Program. See "Purchase of Shares" and "Redemption of
Shares." Smith Barney
receives an annual 12b-1 service fee of .25% of the value
of average daily net
assets of Class A shares. Smith Barney also receives an
annual 12b-1 fee of .75%
of the value of average daily net assets of Class B and
Class C shares,
consisting of a .50% distribution fee and a .25% service
fee. "Other expenses"
in the above table include fees for shareholder services,
custodial fees, legal
and accounting fees, printing costs and registration fees.
8
<PAGE>
Smith Barney Growth and Income Fund
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Prospectus Summary (continued)
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EXAMPLE The following example is intended to assist an
investor in understanding
the various costs that an investor in the Fund will bear
directly or indirectly.
The example assumes payment by the Fund of operating
expenses at the levels set
forth in the table above. See "Purchase of Shares,"
"Redemption of Shares" and
"Management of the Trust and the Fund."
1 year 3
years 5 years 10 years*
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- ----------------------
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5.00% annual return and
(2) redemption at the end of each time period:
Class A $61 $85
$111 $184
Class B 67 82
100 182
Class C 26 51
88 192
Class Y 9 29
50 112
An investor would pay the following
expenses on the same investment,
assuming the same annual return and
no redemption:
Class A 61 85
111 184
Class B 17 52
90 182
Class C 16 51
88 192
Class Y 9 29
50 112
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- ----------------------
* Ten-year figures assume conversion of Class B shares to
Class A shares at
the end of the eighth year following the date of
purchase.
The example also provides a means for the investor to
compare expense levels
of funds with different fee structures over varying
investment periods. To
facilitate such comparison, all funds are required to
utilize a 5.00% annual
return assumption. However, the Fund's actual return will
vary and may result in
an actual return greater or less than 5.00%. This example
should not be
considered a representation of past or future expenses and
actual expenses may
be greater or less than those shown.
9
<PAGE>
Smith Barney Growth and Income Fund
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Financial Highlights
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The following information for the fiscal year ended
January 31, 1996 has been
audited by KPMG Peat Marwick LLP, independent auditors,
whose report thereon
appears in the Fund's Annual Report dated January 31,
1996. The following
information for the fiscal years ended January 31, 1993
through January 31,
1995, has been audited by Coopers & Lybrand L.L.P. The
information set forth
below should be read in conjunction with the financial
statements and related
notes that also appear in the Fund's Annual Report, which
is incorporated by
reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
For a Class A share of beneficial interest outstanding
throughout each period:
1996(1)
1995 1994(1) 1993(2)
==========================================================
================================
<S> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 9.62 $
10.36 $ 9.58 $ 9.50
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- --------------------------------
Income (Loss) From Operations:
Net investment income 0.20
0.20 0.20 0.01
Net realized and unrealized gain (loss) 2.74
(0.61) 0.81 0.07
- ----------------------------------------------------------
- --------------------------------
Total Income (Loss) From Operations 2.94
(0.41) 1.01 0.08
- ----------------------------------------------------------
- --------------------------------
Less Distributions From:
Net investment income (0.20)
(0.19) (0.23) --
Net realized gains (0.20)
(0.14) -- --
- ----------------------------------------------------------
- --------------------------------
Total Distributions (0.40)
(0.33) (0.23) --
- ----------------------------------------------------------
- --------------------------------
Net Asset Value, End of Period $ 12.16 $
9.62 $ 10.36 $ 9.58
- ----------------------------------------------------------
- --------------------------------
Total Return++ 30.97%
(3.93)% 10.70% 0.84%##
- ----------------------------------------------------------
- --------------------------------
Net Assets, End of Period(000s) $110,089 $
95,054 $ 4,468 $ 3,520
- ----------------------------------------------------------
- --------------------------------
Ratios to Average Net Assets:
Expenses 1.16%
1.41% 1.54% 1.41%+
Net investment income 1.77
1.86 2.00 0.28+
- ----------------------------------------------------------
- --------------------------------
Portfolio Turnover Rate 15%
127% 79% 1%
==========================================================
================================
Average Commissions Paid on
Equity Security Transactions(3) $ 0.06
- -- -- --
==========================================================
================================
</TABLE>
(1) Per share amounts have been calculated using the
monthly average shares
method, which more appropriately presents per share
data for this year,
since use of the undistributed net investment income
method did not accord
with results of operations.
(2) For the period from November 6, 1992 (inception
date) to January 31,
1993.
(3) New SEC disclosure guidelines require that average
commissions per share
be calculated and presented for the current year
only.
## Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
++ Total return represents the aggregate total return
for the period
indicated and does not reflect any applicable sales
charge.
10
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Financial Highlights (continued)
- ----------------------------------------------------------
- ----------------------
<TABLE>
<CAPTION>
For a Class B share of beneficial interest outstanding
throughout each period:
- ----------------------------------------------------------
- -------------------------------
1996(1)
1995 1994(1) 1993(2)
==========================================================
===============================
<S> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 9.65 $
10.38 $ 9.58 $ 9.50
- ----------------------------------------------------------
- -------------------------------
Income (Loss) From Operations
Net investment income 0.14
0.17 0.15 (0.01)
Net realized and unrealized gain (loss) 2.75
(0.62) 0.80 0.09
- ----------------------------------------------------------
- -------------------------------
Total Income (Loss) From Operations 2.89
(0.45) 0.95 0.08
- ----------------------------------------------------------
- -------------------------------
Less Distributions From:
Net investment income (0.15)
(0.14) (0.15) --
Net realized gains (0.20)
(0.14) -- --
- ----------------------------------------------------------
- -------------------------------
Total Distributions (0.35)
(0.28) (0.15) --
- ----------------------------------------------------------
- -------------------------------
Net Asset Value, End of Period $ 12.19 $
9.65 $ 10.38 $ 9.58
- ----------------------------------------------------------
- -------------------------------
Total Return++ 30.23%
(4.33)% 10.01% 0.84%##
- ----------------------------------------------------------
- -------------------------------
Net Assets, End of Period (000s) $112,891
$92,153 $68,144 $35,173
- ----------------------------------------------------------
- -------------------------------
Ratios to Average Net Assets:
Expenses 1.65%
1.90% 1.99% 1.91%+
Net investment income 1.27
1.38 1.55 (0.22)+
- ----------------------------------------------------------
- -------------------------------
Portfolio Turnover Rate 15%
127% 79% 1%
==========================================================
===============================
Average Commissions Paid on
Equity Security Transactions(3) $ 0.06
- -- -- --
==========================================================
===============================
</TABLE>
(1)Per share amounts have been calculated using the
monthly average shares
method, which more appropriately presents per share
data for this year, since
use of the undistributed net investment income method
did not accord with
results of operations.
(2)For the period from November 6, 1992 (inception date)
to January 31, 1993.
(3)New SEC disclosure guidelines require that average
commissions per share be
calculated and presented for the current year only.
## Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
++ Total return represents the aggregate total return for
the period indicated
and does not reflect any applicable sales charge.
11
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Financial Highlights (continued)
- ----------------------------------------------------------
- ----------------------
For a share of each class of beneficial interest
outstanding throughout each
period:
<TABLE>
<CAPTION>
Class C
Shares Class Y Shares
---------
- --------- --------------
1996(1)
1995(2) 1996(1)(3)
==========================================================
===========================
<S> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 9.65
$ 9.91 $ 12.08
- ----------------------------------------------------------
- ---------------------------
Income (Loss) From Operations:
Net investment income 0.13
0.07 --
Net realized and unrealized gain (loss) 2.76
(0.13) 0.08
- ----------------------------------------------------------
- ---------------------------
Total Income (Loss) From Operations 2.89
(0.06) 0.08
- ----------------------------------------------------------
- ---------------------------
Less Distributions From:
Net investment income (0.15)
(0.06) --
Net realized gains (0.20)
(0.14) --
- ----------------------------------------------------------
- ---------------------------
Total Distributions (0.35)
(0.20) --
- ----------------------------------------------------------
- ---------------------------
Net Asset Value, End of Period $ 12.19
$ 9.65 $ 12.16
- ----------------------------------------------------------
- ---------------------------
Total Return ++ 30.23%
(0.58)%## N/A*
- ----------------------------------------------------------
- ---------------------------
Net Assets, End of Period (000s) $ 961
$ 85 $ 5
- ----------------------------------------------------------
- ---------------------------
Ratios to Average Net Assets:
Expenses 1.62%
1.83%+ N/A*
Net investment income 1.11
1.44+ N/A*
- ----------------------------------------------------------
- ---------------------------
Portfolio Turnover Rate 15%
127% 15%
==========================================================
===========================
Average Commissions Paid on
Equity Security Transactions(4) $ 0.06
- -- $ 0.06
==========================================================
===========================
</TABLE>
(1)Per share amounts have been calculated using the
monthly average shares
method, which more appropriately presents per share
data for this year, since
use of the undistributed net investment income method
did not accord with
results of operations.
(2)For the period from August 15, 1994 (inception date) to
January 31, 1995.
(3)Inception date is January 31, 1996.
(4)New SEC disclosure guidelines require that average
commissions per share be
calculated and presented for the current year only.
* Information is not meaningful since the class was only
open for 1 day.
## Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
++ Total return represents the aggregate total return for
the period indicated
and does not reflect any applicable sales charge.
12
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies
- ----------------------------------------------------------
- ----------------------
Investment Objective
The investment objective of the Fund is to seek income
and long-term capital
growth. The Fund's investment objective may be changed
only with the approval of
a majority of the Fund's outstanding shares. There can be
no assurance that the
Fund's investment objective will be achieved.
The Fund seeks to achieve its investment objective by
investing in income
producing equity securities, including dividend-paying
common stocks, securities
that are convertible into common stocks and warrants.
SBMFM has developed
quantitative investment criteria against which prospective
investments will be
evaluated and will make buy and sell decisions based on
those criteria. Those
criteria establish parameters for suitable investments and
deal with such
matters as market capitalization, credit quality, dividend
growth, historic
earnings, current yield and industry concentration. The
criteria, which may be
changed by SBMFM in light of its experience in managing
the Fund or in response
to changing market or economic conditions, are designed to
identify companies
with consistent dividend paying histories, relatively high
levels of dividends,
the capacity to raise dividends in the future and the
potential for capital
appreciation. Consistent with the data used in developing
and maintaining the
quantitative investment criteria, the Fund expects to
invest primarily in
domestic companies of varying sizes, generally with
capitalizations exceeding
$250 million in a wide range of industries. The Fund may
also invest up to 20%
in the securities of foreign issuers, including American
Depositary Receipts or
European Depositary Receipts. Under normal market
conditions, the Fund will
invest substantially all - but not less than 65% - of its
assets in equity
securities. The Fund may invest the remainder of its
assets in high grade money
market instruments in order to develop income, as well as
in corporate bonds and
mortgage related securities that are rated investment
grade or are deemed by
SBMFM to be of comparable quality and in United States
government securities, in
furtherance of its objective of income and long-term
capital growth. The Fund
also may enter into repurchase agreements, lend portfolio
securities, enter into
interest rate and stock index futures and related options,
purchase or sell
securities on a when-issued or delayed-delivery basis and
write covered options.
Additional Investments
Money Market Instruments. The Fund may, as a cash
management tool, hold up to
20% of the value of its assets in cash and invest in short-
term instruments and,
when SBMFM believes that market conditions warrant, the
Fund may adopt a
temporary defensive posture and may hold cash and invest
in short-term
instruments without limitation. Short-term instruments in
which the Fund may
13
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ---------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
invest include securities issued or guaranteed by the
United States government,
its agencies or instrumentalities ("U.S. government
securities"); obligations of
banks having at least $1 billion in assets (including
certificates of deposit,
time deposits and bankers' acceptances of domestic or
foreign banks, domestic
savings and loan associations and similar institutions);
commercial paper rated
no lower than A-2 by Standard & Poor's Corporation ("S&P")
or Prime-2 by Moody's
Investors Service, Inc. ("Moody's") or the equivalent from
another nationally
recognized statistical rating organization ("NRSRO") or,
if unrated, of an
issuer having an outstanding, unsecured debt issue then
rated within the two
highest rating categories; and repurchase agreements with
respect to any of the
foregoing entered into with banks and non-bank dealers
approved by the Trust's
Board of Trustees. The NRSROs currently designated as such
by the SEC are S&P,
Moody's, Fitch Investors Service, Inc., Duff & Phelps,
Inc., IBCA Limited and
its affiliate, IBCA, Inc. and Thomson BankWatch. A more
detailed discussion of
the ratings of NRSROs is contained in the Statement of
Additional Information.
U.S. Government Securities. The U.S. government
securities in which the Fund
may invest include: direct obligations of the United
States Treasury (such as
Treasury Bills, Treasury Notes and Treasury Bonds), and
obligations issued by
U.S. government agencies and instrumentalities, including
securities that are
supported by the full faith and credit of the United
States (such as
certificates issued by the Government National Mortgage
Association); securities
that are supported by the right of the issuer to borrow
from the United States
Treasury (such as securities of Federal Home Loan Banks);
and securities that
are supported only by the credit of the instrumentality
(such as bonds issued by
Federal National Mortgage Association and the Federal Home
Loan Mortgage
Corporation). Treasury Bills have maturities of less than
one year, Treasury
Notes have maturities of one to ten years and Treasury
Bonds generally have
maturities of greater than ten years at the date of
issuance.
Convertible Securities. Convertible securities are
fixed-income securities
that may be converted at either a stated price or stated
rate into underlying
shares of common stock and therefore are deemed to be
equity securities for
purposes of the Fund's investment objective and
techniques. Convertible
securities have general characteristics similar to both
fixed-income and equity
securities Although to a lesser extent than with fixed-
income securities
generally, the market value of convertible securities
tends to decline as
interest rates increase and, conversely, tends to increase
as interest rates
decline. In addition, because of the conversion feature,
the market value of
convertible securities tends to vary with fluctuations in
the market value of
the underlying common stocks and, therefore, also will
react to
14
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
variations in the general market for equity securities. A
unique feature of
convertible securities is that as the market price of the
underlying common
stock declines, convertible securities tend to trade
increasingly on a yield
basis and so may not experience market value declines to
the same extent as the
underlying common stock. When the market price of the
underlying common stock
increases, the prices of the convertible securities tend
to rise as a reflection
of the value of the underlying common stock. While no
securities investments are
without risk, investments in convertible securities
generally entail less risk
than investments in common stocks of the same issuer.
As fixed-income securities, convertible securities
provide for a stable
stream of income with generally higher yields than common
stocks. Of course,
like all fixed-income securities, convertible securities
offer no assurance of
current income because the issuers of the securities may
default on their
obligations. Convertible securities, however, generally
offer lower interest or
dividend yields than non-convertible securities of similar
quality because of
the potential for capital appreciation. A convertible
security, in addition to
providing fixed income, offers the potential for capital
appreciation through
the conversion feature, which enables the holder to
benefit from increases in
the market price of the underlying common stock. There can
be no assurance of
capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to
other similar but
non-convertible securities of the same issuer, although
convertible bonds, as
corporate debt obligations, enjoy seniority in right of
payment to all equity
securities, and convertible preferred stock is senior to
common stock of the
same issuer. Because of the subordination feature,
however, convertible
securities typically have lower ratings than similar non-
convertible securities.
Investment Strategies and Techniques
In attempting to achieve its investment objective, the
Fund may employ, among
others, one or more of the strategies and techniques set
forth below. The Fund
is under no obligation to use any of the strategies or
techniques at any given
time or under any particular economic condition. More
detailed information
concerning these strategies and techniques and their
related risks is contained
in the Statement of Additional Information.
Repurchase Agreements. The Fund may enter into
repurchase agreements with
banks which are the issuers of instruments acceptable for
purchase by the Fund
and with certain dealers on the Federal Reserve Bank of
New York's list of
reporting
15
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
dealers. Under the terms of a typical repurchase
agreement, the Fund
would acquire an underlying debt obligation for a
relatively short period
(usually not more than seven days), subject to an
obligation of the seller to
repurchase, and the Fund to resell, the obligation at an
agreed-upon price and
time, thereby determining the yield during the Fund's
holding period. This
arrangement results in a fixed rate of return that is not
subject to market
fluctuations during the Fund's holding period. The value
of the underlying
securities will be monitored on an ongoing basis by SBMFM
to ensure that the
value is at least equal at all times to the total amount
of the repurchase
obligation, including interest. The Fund bears a risk of
loss in the event that
the other party to a repurchase agreement defaults on its
obligations and the
Fund is delayed or prevented from exercising its rights to
dispose of the
collateral securities, including the risk of a possible
decline in the value of
the underlying securities during the period in which the
Fund seeks to assert
these rights. SBMFM, acting under the supervision of the
Trust's Board of
Trustees, reviews on an ongoing basis the value of the
collateral and the
creditworthiness of those banks and dealers with which the
Fund enters into
repurchase agreements to evaluate potential risks.
Lending of Securities. The Fund has the ability to lend
portfolio securities
to brokers, dealers and other financial organizations. By
lending its
securities, the Fund can increase its income by continuing
to receive interest
on the loaned securities as well as by either investing
the cash collateral in
short-term instruments or obtaining yield in the form of
interest paid by the
borrower when U.S. government securities are used as
collateral. Loans of
portfolio securities, if and when made, by the Fund may
not exceed 331 1/43% of
the Fund's total assets, taken at value. Loans of
portfolio securities will be
collateralized by cash, letters of credit or U.S.
government securities, which
are maintained at all times in an amount equal to the
current market value of
the loaned securities. Any gain or loss in the market
price of the securities
loaned that might occur during the term of the loan would
be for the account of
the Fund. The risks in lending portfolio securities, as
with other extensions of
secured credit, consist of possible delay in receiving
additional collateral or
in the recovery of the securities or possible loss of
rights in the collateral
should the borrower fail financially. Loans will be made
to firms deemed by
SBMFM to be of good standing and will not be made unless,
in the judgment of
SBMFM the consideration to be earned from such loans would
justify the risk.
Futures and Options on Futures. When deemed advisable
by SBMFM, the Fund may
enter into interest rate futures contracts, stock index
futures contracts and
related options that are traded on a domestic exchange or
board of trade. These
transactions will be made solely for the purpose of
hedging against the effects
of
16
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
changes in the value of portfolio securities due to
anticipated changes in
interest rates, market conditions and currency values, as
the case may be. All
futures and options contracts will be entered into only
when the transactions
are economically appropriate to the reduction of risks
inherent in the
management of the Fund.
An interest rate futures contract provides for the
future sale by one party
and the purchase by the other party of a specified amount
of a particular
financial instrument (debt security) at a specified price,
date, time and place.
Similarly, a foreign currency futures contract provides
for the future sale by
one party and the purchase by another party of a certain
amount of a particular
currency at a specified price, date, time and place Stock
index futures
contracts are based on indexes that reflect the market
value of common stock of
the firms included in the indexes. An index futures
contract is an agreement
pursuant to which two parties agree to take or make
delivery of an amount of
cash equal to the difference between the value of the
index at the close of the
last trading day of the contract and the price at which
the index contract was
originally entered into. An option on an interest rate,
stock index or currency
futures contract gives the purchaser the right, in return
for the premium paid,
to assume a position in a futures contract (a long
position if the option is a
call and a short position if the option is a put) at a
specified exercise price
at any time prior to the expiration date of the option.
The use of futures contracts and options on futures
contracts as a hedging
device involves several risks. There can be no assurance
that there will be a
correlation between price movements in the underlying
securities, index or
currency, on the one hand, and price movements in the
securities that are the
subject of the hedge, on the other hand. Positions in
futures contracts and
options on futures contracts may be closed out only on the
exchange or board of
trade on which they were entered into, and there can be no
assurance that an
active market will exist for a particular contract or
option at any particular
time.
With respect to long positions in futures or options on
futures, the Fund
will set aside cash, short-term U.S. debt obligations or
other U.S. dollar
denominated high quality short-term money market
instruments in an amount equal
to the underlying commodity value of those positions.
When-Issued Securities and Delayed-Delivery
Transactions. The Fund may
purchase and sell securities on a when-issued basis, which
calls for the
purchase (or sale) of securities at an agreed-upon price
on a specified future
date The Fund will enter into a when-issued transaction
for the purpose of
acquiring portfolio securities and not for the purpose of
leverage. In such
transactions, delivery of the securities occurs beyond the
normal settlement
periods, but no payment or delivery is made
17
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
by, and no interest accrues to, the Fund prior to the
actual delivery or payment
by the other party to the transaction. Due to fluctuations
in the value of
securities purchased or sold on a when-issued or delayed-
delivery basis, the
returns obtained on such securities may be higher or lower
than the returns
available in the market on the dates when the investments
are actually delivered
to the buyers. The Fund will establish a segregated
account consisting of cash,
U.S. government securities or other high-grade debt
obligations in an amount
equal to the amount of its when-issued and delayed-
delivery commitments. Placing
securities rather than cash in the segregated account may
have a leveraging
effect on the Fund's net assets. The Fund will not accrue
income with respect to
a when-issued security prior to its stated delivery date.
Covered Option Writing. The Fund may write put and call
options on
securities. The Fund realizes fees (referred to as
"premiums") for granting the
rights evidenced by the options. A put option embodies the
right of its
purchaser to compel the writer of the option to purchase
from the option holder
an underlying security at a specified price at any time
during the option
period. In contrast, a call option embodies the right of
its purchaser to compel
the writer of the option to sell to the option holder an
underlying security at
a specified price at any time during the option period.
Thus, the purchaser of a
put option written by the Fund has the right to compel the
Fund to purchase from
it the underlying security at the agreed-upon price for a
specified time period,
while the purchaser of a call option written by the Fund
has the right to
purchase from the Fund the underlying security owned by
the Fund at the
agreed-upon price for a specified time period.
Upon the exercise of a put option written by the Fund,
the Fund may suffer a
loss equal to the difference between the price at which
the Fund is required to
purchase the underlying security plus the premium received
for writing the
option and its market value at the time of the option
exercise. Upon the
exercise of a call option written by the Fund, the Fund
may suffer a loss equal
to the difference between the security's market value at
the time of the option
exercise less the premium received for writing the option
and the Fund's
acquisition cost of the security.
The Fund will write only covered options. Accordingly,
whenever the Fund
writes a call option, it will continue to own or have the
present right to
acquire the underlying security for as long as it remains
obligated as the
writer of the option. To support its obligation to
purchase the underlying
security if a put option is exercised, the Fund will
either (a) deposit with PNC
Bank, National Association ("PNC"), the Trust's custodian,
in a segregated
account cash, U.S. government securities or other high
grade debt obligations
having a value at least equal to the
18
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
exercise price of the underlying securities or (b)
continue to own an equivalent
number of puts of the same "series" (that is, puts on the
same underlying
security having the same exercise prices and expiration
dates as those written
by the Fund) or an equivalent number of puts of the same
"class" (that is, puts
on the same underlying security) with exercise prices
greater than those that it
has written (or, if the exercise prices of the puts that
it holds are less than
the exercise prices of those that it has written, it will
deposit the difference
with PNC in a segregated account).
The Fund may engage in a closing purchase transaction
to realize a profit, to
prevent an underlying security from being called or put
or, in the case of a
call option, to unfreeze an underlying security (thereby
permitting its sale or
the writing of a new option on the security prior to the
outstanding option's
expiration). To effect a closing purchase transaction, the
Fund would purchase,
prior to the holder's exercise of an option that the Fund
has written, an option
of the same series as that on which the Fund desires to
terminate its
obligation. The obligation of the Fund under an option
that it has written would
be terminated by a closing purchase transaction, but the
Fund would not be
deemed to own an option as the result of the transaction.
There can be no
assurance that the Fund will be able to effect closing
purchase transactions at
a time when it wishes to do so. To facilitate closing
purchase transactions,
however, the Fund ordinarily will write options only if a
secondary market for
the options exists on a domestic securities exchange or in
the over-the-counter
market.
The staff of the SEC considers most over-the-counter
options to be illiquid
The ability to terminate option positions established in
the over-the-counter
market may be more limited than in the case of exchange-
traded options and may
also involve the risk that securities dealers
participating in such transactions
would fail to meet their obligations to the Fund.
Reverse Repurchase Agreements. In order to generate
additional income, the
Fund may engage in reverse repurchase agreement
transactions with banks,
broker-dealers and other financial intermediaries. Reverse
repurchase agreements
are the same as repurchase agreements except that, in this
instance, the Fund
would assume the role of seller/borrower in the
transaction. The Fund will
maintain segregated accounts with PNC consisting of U.S.
government securities,
cash or money market instruments that at all time are in
an amount equal to
their obligations under reverse repurchase agreements. The
Fund will invest the
proceeds in other money market instruments or repurchase
agreements maturing not
later than the expiration of the reverse repurchase
agreement. Reverse
repurchase agreements involve the risk that the market
value of the securities
sold by the Fund may decline below the repurchase price of
the securities.
19
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
Risk Factors and Special Considerations
Investing in the Fund involves special considerations,
such as those
described below:
Foreign Securities. There are certain risks involved in
investing in
securities of companies and governments of foreign nations
which are in addition
to the usual risks inherent in domestic investments. These
risks include those
resulting from revaluation of currencies, future adverse
political and
economical developments and the possible imposition of
currency exchange
blockages or other foreign governmental laws or
restrictions, reduced
availability of public information concerning issuers and
the lack of uniform
accounting, auditing and financial reporting standards or
of other regulatory
practices and requirements comparable to those applicable
to domestic companies.
The yield of the Fund may be adversely affected by
fluctuations in value of one
or more foreign currencies relative to the U.S. dollar.
Moreover, securities of
many foreign companies and their markets may be less
liquid and their prices
more volatile than those of securities of comparable
domestic companies. In
addition, with respect to certain foreign countries, there
is the possibility of
expropriation, nationalization, confiscatory taxation and
limitations on the use
or removal of funds or other assets of the Fund, including
the withholding of
dividends. Foreign securities may be subject to foreign
government taxes that
could reduce the yield on such securities. Because the
Fund may invest in
securities denominated or quoted in currencies other than
the U.S. dollar,
changes in foreign currency exchange rates may adversely
affect the value of
portfolio securities and the appreciation or depreciation
of investments.
Investment in foreign securities also may result in higher
expenses due to the
cost of converting foreign currency to U.S. dollars, the
payment of fixed
brokerage commissions on foreign exchanges, which
generally are higher than
commissions on domestic exchanges, and the expense of
maintaining securities
with foreign custodians, and the imposition of transfer
taxes or transaction
charges associated with foreign exchanges.
Fixed-Income Securities. The market value of the Fund's
fixed-income
obligations can be expected to vary inversely in relation
to changes in
prevailing interest rates and also may be affected by
other market and credit
factors. Investors also should recognize that in periods
of declining interest
rates the yield of an income-oriented fund such as the
Fund may be somewhat
higher than prevailing market rates, and in periods of
rising interest rates the
Fund's yield may be somewhat lower. In addition, when
interest rates are
falling, the inflow of net new money to the Fund from the
continuous sale of its
shares probably will be invested in instruments producing
lower yields than the
balance of its holdings, thereby
20
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
reducing the Fund's current yield. In periods of rising
interest rates the
opposite can be expected to occur. In addition, fixed-
income securities in which
the Fund may invest may not yield as high a level of
current income as might be
achieved by investing in securities with less liquidity
and safety and longer
maturities.
To the extent the Fund purchases mortgage related
securities at a premium,
mortgage foreclosures and prepayments of principal by
mortgagors (which may be
made at any time without penalty) may result in some loss
of the Fund's
principal investment to the extent of the premium paid.
The yield of a fund that
invests in mortgage related securities may be affected by
reinvestment of
prepayments at higher or lower rates than the original
investment. In addition,
like those of other debt securities, the values of
mortgage related securities,
including government and government-related mortgage
pools, generally will
fluctuate in relation to interest rates.
Certain Investment Guidelines
Up to 15% of the assets of the Fund may be invested in
securities and other
instruments that are illiquid ("illiquid securities"),
although the Fund has no
present intention to invest more than 10% of its assets in
the aggregate in
illiquid securities, including (a) repurchase agreements
with maturities greater
than seven days, (b) futures contracts and options thereon
for which a liquid
secondary market does not exist, (c) time deposits
maturing in more than seven
calendar days and (d) securities of new and early stage
companies whose
securities are not publicly traded. In addition, the Fund
may invest up to 5% of
its assets in the securities of issuers that have been in
continuous operation
for less than three years.
Investment Restrictions
The Trust has adopted certain fundamental investment
restrictions with
respect to the Fund that may not be changed without
approval of a majority of
the Fund's outstanding voting securities, as defined in
the Investment Company
Act of 1940, as amended ("1940 Act"). Included among those
fundamental
restrictions are the following that prohibit the Fund
from:
1. With respect to 75% of the value of its total
assets, investing more than
5% of its total assets in securities of any one
issuer, except securities
issued or guaranteed by the U.S. government, or
purchase more than 10% of
the outstanding voting securities of such issuer.
2. Borrowing money, except that (a) the Fund may borrow
from banks for
temporary or emergency (not leveraging) purposes,
including the meeting of
21
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
redemption requests that might otherwise require the
untimely disposition
of securities, in an amount not exceeding 10% of the
value of the Fund's
total assets (including the amount borrowed) valued
at market less
liabilities (not including the amount borrowed) at
the time the borrowing
is made and (b) the Fund may enter into reverse
repurchase agreements.
Whenever borrowings, including reverse repurchase
agreements, exceed 5% of
the value of the total assets of the Fund, the Fund
will not make any
additional investments.
3. Making loans of its funds or securities. This
restriction does not apply
to: (a) the purchase of debt obligations in which
the Fund may invest
consistent with its investment objective, (b) the
entering into repurchase
agreements, and (c) the making of loans of its
portfolio securities.
4. Investing more than 25% of its total assets in
securities, the issuers of
which are in the same industry. For purposes of this
limitation, U.S.
government securities and securities of state or
municipal governments and
their political subdivisions are not considered
members of any industry.
A complete list of investment restrictions that the
Trust has adopted with
respect to the Fund identifying additional restrictions
that cannot be changed
without the approval of the majority of the Fund's
outstanding shares is
contained in the Statement of Additional Information.
Portfolio Transactions and Turnover
Securities held by the Fund ordinarily are purchased
from and sold to parties
acting as either principal or agent. Newly-issued
securities ordinarily are
purchased directly from the issuer or from an underwriter;
other purchases and
sales usually are placed with those dealers from which it
appears that the best
price or execution will be obtained. Usually no brokerage
commissions, as such,
are paid by the Fund for purchases and sales undertaken
through principal
transactions, although the price paid usually includes an
undisclosed
compensation to the dealer acting as principal. The prices
paid to underwriters
of newly-issued securities usually include a concession
paid by the issuer to
the underwriter, and purchases of after-market securities
from dealers
ordinarily are executed at a price between the bid and
asked price.
Transactions on behalf of the Fund are allocated to
various brokers and
dealers by SBMFM in its best judgment. The primary
consideration is prompt and
effective execution of orders at the most favorable price.
Subject to that
primary consideration, brokers and dealers, including
Smith Barney, may be
selected for
22
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
research, statistical or other services to enable SBMFM to
supplement its own
research and analysis with the views and information of
other securities firms.
The Fund may, from time to time, in accordance with an
exemptive order granted
by the SEC, enter into principal transactions involving
certain money market
instruments with Smith Barney and certain Smith Barney
affiliated dealers.
The Fund cannot accurately predict its portfolio
turnover rate, but
anticipates that its annual turnover will not exceed 50%.
An annual turnover
rate of 50% would occur if half of the securities held by
the Fund are replaced
once during a period of one year. SBMFM will not consider
turnover rate a
limiting factor in making investment decisions consistent
with the Fund's
investment objective and policies.
- ----------------------------------------------------------
- ----------------------
Valuation of Shares
- ----------------------------------------------------------
- ----------------------
The Fund's net asset value per share is determined as
of the close of regular
trading on the NYSE on each day that the NYSE is open, by
dividing the value of
the Fund's net assets attributable to each Class by the
total number of shares
of the Class outstanding.
Generally, the Fund's investments are valued at market
value or, in the
absence of a market value, at fair value as determined by
or under the direction
of the Trust's Board of Trustees. Portfolio securities
that are primarily traded
on foreign exchanges are generally valued at the preceding
closing values of
such securities on their respective exchanges, except that
when an occurrence
subsequent to the time a value was so established is
likely to have changed such
value, then the fair market value of those securities will
be determined by
consideration of other factors by or under the direction
of the Trustees or its
delegates. A security that is traded primarily on a
domestic or foreign stock
exchange is valued at the last sale price on that exchange
or, if there were no
sales during the day, at the current quoted bid price.
Debt securities (other
than U.S. government securities and short-term
obligations) are valued by SBMFM
after consultation with independent pricing services
approved by the Trustees.
Investments in U.S. government securities (other than
short-term securities) are
valued at the average of the quoted bid and asked prices
in the over-the-counter
market. Short-term investments that mature in 60 days or
less are valued at
amortized cost (which involves valuing an investment
instrument at its cost and,
thereafter, assuming a constant amortization to maturity
of any discount or
premium, regardless of the effect of fluctuating interest
rates on the market
value of the instrument) whenever the Trustees determine
that amortized cost
reflects
23
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Valuation of Shares (continued)
- ----------------------------------------------------------
- ----------------------
fair value of those investments. An option written by the
Fund is generally
valued at the last sale price or, in the absence of the
last sale price, the
last offer price. An option purchased by the Fund is
generally valued at the
last sale price or, in the absence of the last sale price,
the last bid price.
Short sales of securities, which are not traded on a
national securities
exchange, are valued at the last asked price.
Alternatively, long positions are
valued at the last bid price. The value of a futures
contract equals the
unrealized gain or loss on the contract that is determined
by marking the
contract to the current settlement price for a like
contract on the valuation
date of the futures contract. A settlement price may not
be used if the market
makes a limit move with respect to a particular futures
contract or if the
securities underlying the futures contract experience
significant price
fluctuations after the determination of the settlement
price. In such event, the
futures contract will be valued at a fair market price as
determined by or under
the direction of the Board of Trustees. Further
information regarding the Fund's
valuation policies is contained in the Statement of
Additional Information.
- ----------------------------------------------------------
- ----------------------
Dividends, Distributions and Taxes
- ----------------------------------------------------------
- ----------------------
Dividends and Distributions
The Fund's policy is to distribute its net investment
income (that is, its
income other than its net realized capital gains)
quarterly, and to declare and
pay its net realized capital gains, if any, once a year,
normally at the end of
the year in which earned or at the beginning of the next
year.
If a shareholder does not otherwise instruct, dividends
and capital gains
distributions will be reinvested automatically in
additional shares of the same
Class at net asset value, subject to no sales charge or
CDSC. In order to avoid
the application of a 4% nondeductible excise tax on
certain undistributed
amounts of ordinary income and capital gains, the Fund may
make an additional
distribution shortly before December 31 in each year of
any undistributed
ordinary income or capital gains and expects to pay any
other dividends and
distributions necessary to avoid the application of this
tax.
The per share dividends on Class B and Class C shares
of the Fund may be
lower than the per share dividends on Class A and Class Y
shares principally as
a result of the distribution fee applicable with respect
to Class B and Class C
shares. The per share dividends on Class A shares of the
Fund may be lower than
the per share dividends on Class Y shares principally as a
result of the service
fee
24
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Dividends and Distributions (continued)
- ----------------------------------------------------------
- ----------------------
applicable to Class A shares. Distributions of capital
gains, if any, will
be in the same amount for Class A, Class B, Class C and
Class Y shares.
Taxes
The Fund will be treated as a separate taxpayer with
the result that, for
Federal income tax purposes, the amount of its net
investment income and capital
gains earned will be determined without regard to the
earnings on distributions
of the other funds of the Trust. The Trust intends for the
Fund to qualify each
year as a regulated investment company under the Code.
Dividends paid from the
Fund's net investment income and distributions of the
Fund's net realized
short-term capital gains are taxable to shareholders
(other than IRAs,
self-employed retirement plans and other tax-exempt
investors) as ordinary
income, regardless of how long shareholders have held
their Fund shares and
whether the dividends or distributions are received in
cash or reinvested in
additional Fund shares. Distributions of the Fund's net
realized long-term
capital gains will be taxable to shareholders as long-term
capital gains,
regardless of how long shareholders have held Fund shares
and whether the
distributions are received in cash or reinvested in
additional Fund shares. In
addition, as a general rule, a shareholder's gain or loss
on a sale or
redemption of shares of the Fund will be a long-term
capital gain or loss if the
shareholder has held the shares for more than one year and
will be a short-term
capital gain or loss if the shareholder has held the
shares for one year or
less. Some of the Fund's dividends declared from net
investment income may
qualify for the Federal dividends-received deduction for
corporations.
Income received by the Fund from sources within foreign
countries may be
subject to withholding and other foreign taxes. The
payment of such taxes will
reduce the amount of dividends and distributions paid to
the Fund's
shareholders. If (a) the Fund qualifies as a regulated
investment company, (b)
certain distribution requirements are satisfied and (c)
more than 50% of the
value of the Fund's assets at the close of the taxable
year consist of
securities of foreign corporations, the Trust may elect,
for Federal income tax
purposes, to treat foreign income taxes paid by the Fund
that can be treated as
income taxes under Federal income tax principles as paid
by the Fund's
shareholders. The Fund may qualify for, and the Trust may
make, this election in
some, but not necessarily all, of the Fund's taxable
years. If the Trust were to
make an election, an amount equal to the foreign income
taxes paid by the Fund
would be included in the income of its shareholders and
the shareholders would
be entitled to credit their portions of this amount
against their Federal tax
liabilities, if any, or to deduct such portions from their
Federal taxable
income, if any. Shortly after any year for which the Trust
makes such an
election,
25
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Dividends and Distributions (continued)
- ----------------------------------------------------------
- ----------------------
the Trust will report to the Fund's shareholders, in
writing, the amount per
share of such foreign tax that must be included in each
shareholder's gross
income and the amount that will be available for deduction
or credit. No
deduction for foreign taxes may be claimed by a
shareholder who does not itemize
deductions. Certain limitations will be imposed on the
extent to which the
credit (but not the deduction) for foreign taxes may be
claimed.
Statements as to the tax status of each shareholder's
dividends and
distributions are mailed annually. Each shareholder also
will receive, if
appropriate, various written notices after the close of
the Fund's prior taxable
year as to the Federal income tax status of his or her
dividends and
distributions which were received from the Fund during the
Fund's prior taxable
year. Shareholders should consult their tax advisors about
the status of the
Fund's dividends and distributions for Federal, state and
local tax liabilities.
- ----------------------------------------------------------
- ----------------------
Purchase of Shares
- ----------------------------------------------------------
- ----------------------
General
The Fund offers four Classes of shares. Class A shares
are sold to investors
with an initial sales charge and Class B and Class C
shares are sold without an
initial sales charge but with higher ongoing expenses and
a CDSC payable upon
certain redemptions. Class Y shares are sold without an
initial sales charge or
a CDSC, and are available only to investors investing a
minimum of $5,000,000
(except for purchases of Class Y shares by Smith Barney
Concert Series Inc., for
which there is no minimum purchase amount). See
"Prospectus Summary Alternative
Purchase Arrangements" for a discussion of factors to
consider in selecting
which Class of shares to purchase.
Purchases of shares must be made through a brokerage
account maintained with
Smith Barney, an Introducing Broker or an investment
dealer in the selling
group, except for investors purchasing shares of the Fund
through a qualified
retirement plan who may do so directly through First Data.
When purchasing
shares of the Fund, investors must specify whether the
purchase is for Class A,
Class B, Class C or Class Y shares. No maintenance fee
will be charged in
connection with a brokerage account through which an
investor purchases or holds
shares.
Investors in Class A, Class B and Class C shares may
open an account by
making an initial investment of at least $1,000 for each
account, or $250 for an
IRA
26
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
or a self-employed retirement plan, in the Fund. Investors
in Class Y shares
may open an account by making an initial investment of
$5,000,000. Subsequent
investments of at least $50 may be made for all Classes.
For participants in
retirement plans qualified under Section 403(b)(7) or
Section 401(a) of the
Code, the minimum initial investment requirement for Class
A, Class B and Class
C shares and the subsequent investment requirement for all
Classes in the Fund
is $25. For the Fund's Systematic Investment Plan, the
minimum initial
investment requirement for Class A, Class B and Class C
shares and the
subsequent investment requirement for all Classes is $50.
There are no minimum
investment requirements for Class A shares, for employees
of Travelers and its
subsidiaries, including Smith Barney or Trustees of the
Trust and their spouses
and children. The Fund reserves the right to waive or
change minimums, to
decline any order to purchase its shares and to suspend
the offering of shares
from time to time. Shares purchased will be held in the
shareholder's account by
the Trust's transfer agent, First Data. Share certificates
are issued only upon
a shareholder's written request to First Data.
Purchase orders received by the Fund or Smith Barney
prior to the close of
regular trading on the NYSE, on any day on which the Fund
calculates its net
asset value, are priced according to the net asset value
determined on that day.
Orders received by dealers or Introducing Brokers, prior
to the close of regular
trading on the NYSE on any day the Fund calculates its net
asset value, are
priced according to the net asset value determined on that
day, provided the
order is received by the Fund or Smith Barney prior to
Smith Barney's close of
business (the "trade date"). Payment for Fund shares is
due on the third
business day after the trade date.
Systematic Investment Plan
Shareholders may make additions to their accounts at
any time by purchasing
shares through a service known as the Systematic
Investment Plan. Under the
Systematic Investment Plan, Smith Barney or First Data is
authorized through
preauthorized transfers of $150 or more to charge the
regular bank account or
other financial institution indicated by the shareholder
on a monthly or
quarterly basis to provide systematic additions to the
shareholder's Fund
account. A shareholder who has insufficient funds to
complete the transfer will
be charged a fee of up to $25 by Smith Barney or First
Data. The Systematic
Investment Plan also authorizes Smith Barney to apply cash
held in the
shareholder's Smith Barney brokerage account or redeem the
shareholder's shares
of a Smith Barney money market fund to make additions to
the account. Additional
information is available from the Fund or a Smith Barney
Financial Consultant.
27
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
Initial Sales Charge Alternative - Class A Shares
The sales charges applicable to purchases of Class A
shares of the Fund are
as follows:
Sales Charge as Sales Charge
as Dealers
% of % of Amount
Reallowance as
Amount of Investment Offering Price Invested
% of Offering Price
- ----------------------------------------------------------
- ----------------------
Less than $25,000 5.00% 5.26%
4.50%
$25,000-$49,999 4.00 4.17
3.60
$50,000-$99,999 3.50 3.63
3.15
$100,000-$249,999 3.00 3.09
2.70
$250,000-$499,999 2.00 2.04
1.80
$500,000 and more * *
*
==========================================================
======================
* Purchases of Class A shares, which when combined with
current holdings of
Class A shares offered with a sales charge equal or exceed
$500,000 in the
aggregate, will be made at net asset value without any
initial sales charge, but
will be subject to a CDSC of 1.00% on redemptions made
within 12 months of
purchase. The CDSC on Class A shares is payable to Smith
Barney, which
compensates Smith Barney Financial Consultants and other
dealers whose clients
make purchases of $500,000 or more. The CDSC is waived in
the same circumstances
in which the CDSC applicable to Class B and Class C shares
is waived. See
"Deferred Sales Charge Alternatives" and "Waivers of
CDSC."
Members of the selling group may receive up to 90% of
the sales charge and
may be deemed to be underwriters of the Fund as defined in
the Securities Act of
1933, as amended.
The reduced sales charges shown above apply to the
aggregate of purchases of
Class A shares of the Fund made at one time by "any
person," which includes an
individual, his or her spouse and children, or a trustee
or other fiduciary of a
single trust estate or single fiduciary account. The
reduced sales charge
minimums may also be met by aggregating the purchase with
the net asset value of
all Class A shares offered with a sales charge held in
funds sponsored by Smith
Barney listed under "Exchange Privilege."
Initial Sales Charge Waivers
Purchases of Class A shares may be made at net asset
value without a sales
charge in the following circumstances: (a) sales to (i)
Directors, Trustees and
employees of Travelers and its subsidiaries and any of the
Smith Barney Mutual
Funds; the immediate families of such persons; and to a
pension, profit-sharing
or other benefit plan for such persons and (ii) employees
of members of the
National Association of Securities Dealers, Inc., provided
such sales are made
upon the assurance of the purchaser that the purchase is
made for investment
purposes and that the securities will not be resold except
through redemption or
repurchase; (b) offers of Class A shares to any other
investment company in
connection with the
28
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
combination of such company with the Fund by merger,
acquisition of assets or
otherwise; (c) purchases of Class A shares by any client
of a newly employed
Smith Barney Financial Consultant (for a period up to 90
days from the
commencement of the Financial Consultant's employment with
Smith Barney), on the
condition the purchase of Class A shares is made with the
proceeds of the
redemption of shares of a mutual fund which (i) was
sponsored by the Financial
Consultant's prior employer, (ii) was sold to the client
by the Financial
Consultant and (iii) was subject to a sales charge; (d)
shareholders who have
redeemed Class A shares in the Fund (or Class A shares of
another fund of the
Smith Barney Mutual Funds that are offered with a sales
charge equal to or
greater than the maximum sales charge of the Fund) and who
wish to reinvest
their redemption proceeds in the Fund provided the
reinvestment is made within
60 calendar days of the redemption; and (e) accounts
managed by registered
investment advisory subsidiaries of Travelers. In order to
obtain such
discounts, the purchaser must provide sufficient
information at the time of
purchase to permit verification that the purchaser would
qualify for the
elimination of the sales charge.
Right of Accumulation
Class A shares of the Fund may be purchased by "any
person" (as defined
above) at a reduced sales charge or at net asset value
determined by aggregating
the dollar amount of the new purchase and the total net
asset value of all Class
A shares of the Fund and of funds sponsored by Smith
Barney that are offered
with a sales charge listed under "Exchange Privilege" then
held by such person
and applying the sales charge applicable to such
aggregate. In order to obtain
such discount, the purchaser must provide sufficient
information at the time of
purchase to permit verification that the purchase
qualifies for the reduced
sales charge. The right of accumulation is subject to
modification or
discontinuance at any time with respect to all shares
purchased thereafter.
Group Purchases
Upon completion of certain automated systems, a reduced
sales charge or
purchase at net asset value will also be available to
employees (and partners)
of the same employer purchasing as a group, provided each
participant makes the
minimum initial investment required. The sales charge
applicable to purchases by
each member of such a group will be determined by the
table set forth above
under "Initial Sales Charge Alternative - Class A Shares,"
and will be based
upon the aggregate sales of Class A shares of Smith Barney
Mutual Funds offered
with a sales charge to, and share holdings of, all members
of the group. To be
eligible
29
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
for such reduced sales charges or to purchase at net asset
value, all purchases
must be pursuant to an employer- or partnership-sanctioned
plan meeting certain
requirements. One such requirement is that the plan must
be open to specified
partners or employees of the employer and its
subsidiaries, if any. Such plan
may, but is not required to, provide for payroll
deductions, IRAs or investments
pursuant to retirement plans under Sections 401 or 408 of
the Code. Smith Barney
may also offer a reduced sales charge or net asset value
purchase for
aggregating related fiduciary accounts under such
conditions that Smith Barney
will realize economies of sales related expenses. An
individual who is a member
of a qualified group may also purchase Class A shares of
the Fund at the reduced
sales charge applicable to the group as a whole. The sales
charge is based upon
the aggregate dollar value of Class A shares offered with
a sales charge that
have been previously purchased and are still owned by the
group, plus the amount
of the current purchase. A "qualified group" is one which
(a) has been in
existence for more than six months, (b) has a purpose
other than acquiring Fund
shares at a discount and (c) satisfies uniform criteria
which enable Smith
Barney to realize economies of scale in its costs of
distributing shares. A
qualified group must have more than 10 members, must be
available to arrange for
group meetings between representatives of the Fund and the
members, and must
agree to include sales and other materials related to the
Fund in its
publications and mailing to members at no cost to Smith
Barney. In order to
obtain such reduced sales charge or to purchase at net
asset value, the
purchaser must provide sufficient information at the time
of purchase to permit
verification that the purchase qualifies for the reduced
sales charge. Approval
of group purchase reduced sales charge plans is subject to
the discretion of
Smith Barney.
Letter of Intent
Class A Shares. A Letter of Intent for amounts of
$50,000 or more provides an
opportunity for an investor to obtain a reduced sales
charge by aggregating
investments over a 13 month period, provided that the
investor refers to such
Letter when placing orders. For purposes of a Letter of
Intent, the "Amount of
Investment" as referred to in the preceding sales charge
table includes
purchases of all Class A shares of the Fund and other
funds of the Smith Barney
Mutual Funds offered with a sales charge over the 13 month
period based on the
total amount of intended purchases plus the value of all
Class A shares
previously purchased and still owned. An alternative is to
compute the 13 month
period starting up to 90 days before the date of execution
of a Letter of
Intent. Each investment made during the period receives
the reduced sales charge
applicable to the total amount of the investment goal. If
the goal is not
achieved within the period, the investor must pay
30
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
the difference between the sales charges applicable to the
purchases made and
the charges previously paid, or an appropriate number of
escrowed shares will be
redeemed. Please contact a Smith Barney Financial
Consultant or First Data to
obtain a Letter of Intent application.
Class Y Shares. A Letter of Intent may also be used as
a way for investors to
meet the minimum investment requirement for Class Y
shares. Such investors must
make an initial minimum purchase of $1,000,000 of Class Y
shares of the Fund and
agree to purchase a total of $5,000,000 of Class Y shares
of the same Fund
within six months from the date of the Letter. If a total
investment of
$5,000,000 is not made within the six-month period, all
Class Y shares purchased
to date will be transferred to Class A shares, where they
will be subject to all
fees (including a service fee of 0.25%) and expenses
applicable to the Fund's
Class A shares, which may include a CDSC of 1.00%. The
Fund expects that such
transfer will not be subject to Federal income taxes.
Please contact a Smith
Barney Financial Consultant or First Data for further
information.
Deferred Sales Charge Alternatives
"CDSC Shares" are sold at net asset value next
determined without an initial
sales charge so that the full amount of an investor's
purchase payment may be
immediately invested in the Fund. A CDSC, however, may be
imposed on certain
redemptions of these shares. "CDSC Shares" are: (a) Class
B shares; (b) Class C
shares; and (c) Class A shares which when combined with
Class A shares offered
with a sales charge currently held by an investor equal or
exceed $500,000 in
the aggregate.
Any applicable CDSC will be assessed on an amount equal
to the lesser of the
original cost of the shares being redeemed or their net
asset value at the time
of redemption. CDSC Shares that are redeemed will not be
subject to a CDSC to
the extent that the value of such shares represents: (a)
capital appreciation of
Fund assets; (b) reinvestment of dividends or capital gain
distributions; (c)
with respect to Class B shares, shares redeemed more than
five years after their
purchase; or (d) with respect to Class C shares and Class
A shares that are CDSC
Shares, shares redeemed more than 12 months after their
purchase.
Class C shares and Class A shares that are CDSC Shares
are subject to a 1.00%
CDSC if redeemed within 12 months of purchase. In
circumstances in which the
CDSC is imposed on Class B shares, the amount of the
charge will depend on the
number of years since the shareholder made the purchase
payment from which the
amount is being redeemed. Solely for purposes of
determining the number
of years
31
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
since a purchase payment, all purchase payments made
during a month will be
aggregated and deemed to have been made on the last day of
the preceding Smith
Barney statement month. The following table sets forth the
rates of the charge
for redemptions of Class B shares by shareholders, except
in the case of
purchases by Participating Plans, as described below. See
"Purchase of Shares -
Smith Barney 401(k) Program."
Year Since Purchase
Payment was Made
CDSC
- ----------------------------------------------------------
- ----------------------
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth
0.00
Seventh
0.00
Eighth
0.00
==========================================================
======================
Class B shares automatically will convert to Class A
shares eight years after
the date on which they were purchased and thereafter will
no longer be subject
to any distribution fees. There also will be converted at
that time such
proportion of Class B Dividend Shares owned by the
shareholder as the total
number of his or her Class B shares converting at the time
bears to the total
number of outstanding Class B shares (other than Class B
Dividend Shares) owned
by the shareholder. Shareholders who held Class B shares
of Smith Barney
Shearson Short-Term World Income Fund (the "Short-Term
World Income Fund") that
were held on July 15, 1994 and who subsequently exchanged
those shares for Class
B shares of the Fund will be offered the opportunity to
exchange all such Class
B shares for Class A shares of the Fund four years after
the date on which those
shares were deemed to have been purchased. Holders of such
Class B shares will
be notified of the pending exchange in writing
approximately 30 days before the
fourth anniversary of the purchase date and, unless the
exchange has been
rejected in writing, the exchange will occur on or about
the fourth anniversary
date. See "Prospectus Summary - Alternative Purchase
Arrangements - Class B
Shares Conversion Feature."
The length of time that CDSC Shares acquired through an
exchange have been
held will be calculated from the date that the shares
exchanged were initially
acquired in one of the other Smith Barney Mutual Funds,
and Fund shares being
redeemed will be considered to represent, as applicable,
capital appreciation or
dividend and capital gain distribution reinvestments in
such other funds. For
Federal income tax purposes, the amount of the CDSC will
reduce the gain or
32
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
increase the loss, as the case may be, on the amount
realized on redemption. The
amount of any CDSC will be paid to Smith Barney.
To provide an example, assume an investor purchased 100
Class B shares at $10
per share for a cost of $1,000. Subsequently, the investor
acquired five
additional shares through dividend reinvestment. During
the 15th month after the
purchase, the investor decided to redeem $500 of the
investment. Assuming at the
time of the redemption the net asset value had appreciated
to $12 per share, the
value of the investor's shares would be $1,260 (105 shares
at $12 per share).
The CDSC would not be applied to the amount which
represents appreciation ($200)
and the value of the reinvested dividend shares ($60).
Therefore, $240 of the
$500 redemption proceeds ($500 minus $260) would be
charged at a rate of 4.00%
(the applicable rate for Class B shares) for a total
deferred sales charge of
$9.60.
Waivers of CDSC
The CDSC will be waived on: (a) exchanges (see
"Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less
than 1% per month of the
value of the shareholder's shares at the time the
withdrawal plan commences (see
"Automatic Cash Withdrawal Plan") provided, however, that
automatic cash
withdrawals in amounts equal to or less than 2% per month
of the value of the
shareholder's shares will be permitted for withdrawal
plans that were
established prior to November 7, 1994; (c) redemptions of
shares within 12
months following the death or disability of the
shareholder; (d) redemption of
shares made in connection with qualified distributions
from retirement plans or
IRAs upon the attainment of age 591/2; (e) involuntary
redemptions; and (f)
redemptions of shares in connection with a combination of
the Fund with any
investment company by merger, acquisition of assets or
otherwise. In addition, a
shareholder who has redeemed shares from other funds of
the Smith Barney Mutual
Funds may, under certain circumstances, reinvest all or
part of the redemption
proceeds within 60 days and receive pro rata credit for
any CDSC imposed on the
prior redemption.
CDSC waivers will be granted subject to confirmation
(by Smith Barney in the
case of shareholders who are also Smith Barney clients or
by First Data in the
case of all other shareholders) of the shareholder's
status or holdings, as the
case may be.
Smith Barney 401(k) Program
Investors may be eligible to participate in the Smith
Barney 401(k) Program,
which is generally designed to assist employers or plan
sponsors in the creation
and operation of retirement plans under Section 401(a) of
the Code. To the
extent
33
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
applicable, the same terms and conditions are offered to
all Participating Plans
in the Smith Barney 401(k) Program.
The Fund offers to Participating Plans Class A, Class
B, Class C and Class Y
shares, as investment alternatives under the Smith Barney
401(k) Program. The
Class A, Class B and Class C shares acquired through the
Smith Barney 401(k)
Program are subject to the same service and/or
distribution fees as, but
different sales charge and CDSC schedules than, the Class
A, Class B and Class C
shares acquired by other investors. Similar to those
available to other
investors, Class Y shares acquired through the Smith
Barney 401(k) Program are
not subject to any initial sales charge, CDSC or service
or distribution fees.
Once a Participating Plan has made an initial investment
in the Fund, all of its
subsequent investments in the Fund must be in the same
Class of shares, except
as otherwise described below.
Class A Shares. Class A shares of the Fund are offered
without any initial
sales charge to any Participating Plan that purchases from
$500,000 to
$4,999,999 of Class A shares of one or more funds of the
Smith Barney Mutual
Funds. Class A shares acquired through the Smith Barney
401(k) Program after
November 7, 1994 are subject to a CDSC of 1.00% of
redemption proceeds, if the
Participating Plan terminates within four years of the
date the Participating
Plan first enrolled in the Smith Barney 401(k) Program.
Class B Shares. Class B shares of the Fund are offered
to any Participating
Plan that purchases less than $250,000 of one or more
funds of the Smith Barney
Mutual Funds. Class B shares acquired through the Smith
Barney 401(k) Program
are subject to a CDSC of 3.00% of redemption proceeds, if
the Participating Plan
terminates within eight years of the date the
Participating Plan first enrolled
in the Smith Barney 401(k) Program.
Eight years after the date the Participating Plan
enrolled in the Smith
Barney 401(k) Program, it will be offered the opportunity
to exchange all of its
Class B shares for Class A shares of the Fund. Such Plans
will be notified of
the pending exchange in writing approximately 60 days
before the eighth
anniversary of the enrollment date and, unless the
exchange has been rejected in
writing, the exchange will occur on or about the eighth
anniversary date. Once
the exchange has occurred, a Participating Plan will not
be eligible to acquire
additional Class B shares of the Fund but instead may
acquire Class A shares of
the Fund. If the Participating Plan elects not to exchange
all of its Class B
shares at that time, each Class B share held by the
Participating Plan will have
the same conversion feature as Class B shares held by
other investors See
"Purchase of Sales - Deferred Sales Charge Alternatives."
34
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
Class C Shares. Class C shares of the Fund are offered
to any Participating
Plan that purchases from $250,000 to $499,999 of one or
more funds of the Smith
Barney Mutual Funds. Class C shares acquired through the
Smith Barney 401(k)
Program after November 7, 1994 are subject to a CDSC of
1.00% of redemption
proceeds, if the Participating Plan terminates within four
years of the date the
Participating Plan first enrolled in the Smith Barney
401(k) Program. In any
year after the date a Participating Plan enrolled in the
Smith Barney 401(k)
Program, if its total Class C holdings equal to least
$500,000 as of the
calendar year-end, the Participating Plan will be offered
the opportunity to
exchange all of its Class C shares for Class A shares of
the Fund. Such Plans
will be notified in writing within 30 days after the last
business day of the
calendar year, and unless the exchange offer has been
rejected in writing, the
exchange will occur on or about the last business day of
the following March.
Once the exchange has occurred, a Participating Plan will
not be eligible to
acquire Class C shares of the Fund but instead may acquire
Class A shares of the
Fund. Class C shares not converted will continue to be
subject to the
distribution fee.
Class Y Shares. Class Y shares of the Fund are offered
without any service or
distribution fees, sales charge or CDSC to any
Participating Plan that purchases
$5,000,000 or more of Class Y shares of one or more funds
of the Smith Barney
Mutual Funds.
No CDSC is imposed on redemptions of CDSC Shares to the
extent that the net
asset value of the shares redeemed does not exceed the
current net asset value
of the shares purchased through reinvestment of dividends
or capital gain
distributions, plus (a) with respect to Class A and Class
C shares, the current
net asset value of such shares purchased more than one
year prior to redemption
and, with respect to Class B shares, the current net asset
value of Class B
shares purchased more than eight years prior to the
redemption, plus (b) with
respect to Class A and Class C shares, increases in the
net asset value of the
shareholder's Class A or Class C shares above the purchase
payments made during
the preceding year and, with respect to Class B shares,
increases in the net
asset value of the shareholder's Class B shares above the
purchase payments made
during the preceding eight years. Whether or not the CDSC
applies to a
Participating Plan depends on the number of years since
the Participating Plan
first became enrolled in the Smith Barney 401(k) Program,
unlike the
applicability of the CDSC to other shareholders, which
depends on the number of
years since those shareholders made the purchase payment
from which the amount
is being redeemed.
The CDSC will be waived on redemptions of CDSC Shares
in connection with
lump-sum or other distributions made by a Participating
Plan as a result of: (a)
the
35
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
retirement of an employee in the Participating Plan; (b)
the termination of
employment of an employee in the Participating Plan; (c)
the death or disability
of an employee in the Participating Plan; (d) the
attainment of age 591 1/42 by
an employee in the Participating Plan; (e) hardship of an
employee in the
Participating Plan to the extent permitted under Section
401(k) of the Code; or
(f) redemptions of shares in connection with a loan made
by the Participating
Plan to an employee.
Participating Plans wishing to acquire shares of the
Fund through the Smith
Barney 401(k) Program must purchase such shares directly
from First Data. For
further information regarding the Smith Barney 401(k)
Program, investors should
contact a Smith Barney Financial Consultant.
- ----------------------------------------------------------
- ----------------------
Exchange Privilege
- ----------------------------------------------------------
- ----------------------
Except as otherwise noted below, shares of each Class
may be exchanged at the
net asset value next determined for shares of the same
Class in the following
funds of the Smith Barney Mutual Funds, to the extent
shares are offered for
sale in the shareholder's state of residence. Exchanges of
Class A, Class B and
Class C shares are subject to minimum investment
requirements and all shares are
subject to the other requirements of the fund into which
exchanges are made and
a sales charge differential may apply.
Fund Name
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Natural Resources Fund
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc.--Equity Income Portfolio
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
36
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
Taxable Fixed-Income Funds
*Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
**Smith Barney Funds, Inc.--Income Return Account
Portfolio
Smith Barney Funds, Inc.--Monthly Payment Government
Portfolio
+Smith Barney Funds, Inc.--Short-Term U.S. Treasury
Securities Portfolio
Smith Barney Funds, Inc.--U.S. Government Securities
Portfolio
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Tax-Exempt Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
**Smith Barney Intermediate Maturity California
Municipals Fund
**Smith Barney Intermediate Maturity New York Municipals
Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
**Smith Barney Muni Funds--California Limited Term
Portfolio
**Smith Barney Muni Funds--Florida Limited Term Portfolio
Smith Barney Muni Funds--Florida Portfolio
Smith Barney Muni Funds--Georgia Portfolio
** Smith Barney Muni Funds--Limited Term Portfolio
Smith Barney Muni Funds--New York Portfolio
Smith Barney Muni Funds--Ohio Portfolio
Smith Barney Muni Funds--Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
International Funds
Smith Barney World Funds, Inc. -- Emerging Markets
Portfolio
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- Global Government
Bond Portfolio
Smith Barney World Funds, Inc. -- International
Balanced Portfolio
Smith Barney World Funds, Inc. -- International Equity
Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
37
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
Smith Barney Concert Series, Inc.
Smith Barney Concert Series, Inc. -- Balanced Portfolio
Smith Barney Concert Series, Inc. -- Conservative
Portfolio
Smith Barney Concert Series, Inc. -- Growth Portfolio
Smith Barney Concert Series, Inc. -- High Growth
Portfolio
Smith Barney Concert Series, Inc. -- Income Portfolio
Money Market Funds
++ Smith Barney Exchange Reserve Fund
+++ Smith Barney Money Funds, Inc.--Cash Portfolio
+++ Smith Barney Money Funds, Inc.--Government Portfolio
*** Smith Barney Money Funds, Inc.--Retirement Portfolio
+ Smith Barney Municipal Money Market Fund, Inc.
+ Smith Barney Muni Funds--California Money Market
Portfolio
+ Smith Barney Muni Funds--New York Money Market
Portfolio
- ----------------------------------------------------------
- ----------------------
* Available for exchange with Class A, Class B and Class
Y shares of the Fund.
In addition, shareholders who own Class C shares of
the Fund through the
Smith Barney 401(k) Program may exchange those shares
for Class C shares of
this fund.
** Available for exchange with Class A, Class C and Class
Y shares of the Fund.
*** Available for exchange with Class A shares of the
Fund.
+ Available for exchange with Class A and Class Y shares
of the Fund.
++ Available for exchange with Class B and Class C shares
of the Fund.
+++ Available for exchange with Class A and Class Y shares
of the Fund. In
addition, shareholders who own Class C shares of the
Fund through the Smith
Barney 401(k) Program may exchange those shares for
Class C shares of this
fund.
Class A Exchanges. Class A shareholders of the Smith
Barney Mutual Funds sold
without a sales charge or with a maximum sales charge of
less than the maximum
charged by other Smith Barney Mutual Funds will be subject
to the appropriate
"sales charge differential" upon the exchange of their
shares for Class A shares
of a Fund sold with a higher sales charge. The "sales
charge differential" is
limited to a percentage rate no greater than the excess of
the sales charge rate
applicable to purchases of shares of the mutual fund being
acquired in the
exchange over the sales charge rate(s) actually paid on
the mutual fund shares
relinquished in the exchange and on any predecessor of
those shares. For
purposes of the exchange privilege, shares obtained
through automatic
reinvestment of dividends and capital gain distributions
are treated as having
paid the same sales charges applicable to the shares on
which the dividends or
distributions were paid; however, except in the case of
the Smith Barney 401(k)
Program, if no sales charge was imposed upon the initial
purchase of the shares,
any shares obtained through automatic reinvestment
38
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
will be subject to a sales charge differential upon
exchange.
Class B Exchanges. In the event a Class B shareholder
(unless such share
holder was a Class B shareholder of the Short-Term World
Income Fund on July 15,
1994) wishes to exchange all or a portion of his or her
shares in any of the
funds imposing a higher CDSC than that imposed by the
Fund, the exchanged Class
B shares will be subject to the higher applicable CDSC.
Upon an exchange, the
new Class B shares will be deemed to have been purchased
on the same date as the
Class B shares of the Fund that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C
shares will be deemed to
have been purchased on the same date as the Class C shares
of the Fund that have
been exchanged.
Class Y Exchanges. Class Y shareholders of the Fund who
wish to exchange all
or a portion of their Class Y shares for Class Y shares in
any of the funds
identified above may do so without imposition of any
charge.
Additional Information Regarding the Exchange
Privilege. Although the
exchange privilege is an important benefit, excessive
exchange transactions can
be detrimental to the Fund's performance and its
shareholders. SBMFM may
determine that a pattern of frequent exchanges is
excessive and contrary to the
best interests of the Fund's other shareholders. In this
event, SBMFM will
notify Smith Barney, and the Fund may, at its discretion,
decide to limit
additional purchases and/or exchanges by a shareholder.
Upon such a
determination, the Fund will provide notice in writing or
by telephone to the
shareholder at least 15 days prior to suspending the
exchange privilege and
during the 15 day period the shareholder will be required
to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund
or exchange into any
of the funds of the Smith Barney Mutual Funds ordinarily
available, which
position the shareholder would expect to maintain for a
significant period of
time. All relevant factors will be considered in
determining what constitutes an
abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by
telephone. See
"Redemption of Shares -- Telephone Redemption and Exchange
Program." Exchanges
will be processed at the net asset value next determined
after the redemption
proceeds are available. Redemption procedures discussed
below are also
applicable for exchanging shares, and exchanges will be
made upon receipt of all
supporting documents in proper form. If the account
registration of the shares
of the fund being acquired is identical to the
registration of the shares of the
fund exchanged, no signature guarantee is required. A
capital gain or loss for
tax purposes will be realized upon the exchange, depending
upon the cost or
other basis
39
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
of shares redeemed. Before exchanging shares, investors
should read the current
prospectus describing the shares to be acquired. The Fund
reserves the right to
modify or discontinue exchange privileges upon 60 days'
prior notice to
shareholders.
- ----------------------------------------------------------
- ----------------------
Redemption of Shares
- ----------------------------------------------------------
- ----------------------
The Fund is required to redeem the shares of the Fund
tendered to it, as
described below, at a redemption price equal to their net
asset value per share
next determined after receipt of a written request in
proper form at no charge
other than any applicable CDSC. Redemption requests
received after the close of
regular trading on the NYSE are priced at the net asset
value next determined.
If a shareholder holds shares in more than one Class,
any request for
redemption must specify the Class being redeemed. In the
event of a failure to
specify which Class, or if the investor owns fewer shares
of the Class than
specified, the redemption request will be delayed until
the Fund's transfer
agent receives further instructions from Smith Barney, or
if the shareholder's
account is not with Smith Barney, from the shareholder
directly. The redemption
proceeds will be remitted on or before the third day
following receipt of proper
tender, except on any days on which the NYSE is closed or
as permitted under the
1940 Act in extraordinary circumstances. Generally, if the
redemption proceeds
are remitted to a Smith Barney brokerage account, these
funds will not be
invested for the shareholder's benefit without specific
instruction and Smith
Barney will benefit from the use of temporarily uninvested
funds Redemption
proceeds for shares purchased by check, other than a
certified or official bank
check, will be remitted upon clearance of the check, which
may take up to ten
days or more.
Shares held by Smith Barney as custodian must be
redeemed by submitting a
written request to a Smith Barney Financial Consultant.
Shares other than those
held by Smith Barney as custodian may be redeemed through
an investor's
Financial Consultant, Introducing Broker or dealer in the
selling group or by
submitting a written request for redemption to:
Smith Barney Growth and Income Fund
Class A, B, C or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
40
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Redemption of Shares (continued)
- ----------------------------------------------------------
- ----------------------
A written redemption request must (a) state the Class
and number or dollar
amount of shares to be redeemed, (b) identify the
shareholder's account number
and (c) be signed by each registered owner exactly as the
shares are registered.
If the shares to be redeemed were issued in certificate
form, the certificates
must be endorsed for transfer (or be accompanied by an
endorsed stock power) and
must be submitted to First Data together with the
redemption request. Any
signature appearing on a redemption request in excess of
$2,000, share
certificate or stock power must be guaranteed by an
eligible guarantor
institution such as a domestic bank, savings and loan
institution, domestic
credit union, member bank of the Federal Reserve System or
member firm of a
national securities exchange. Written redemption requests
of $2,000 or less do
not require a signature guarantee unless more than one
such redemption request
is made in any 10-day period or the redemption proceeds
are to be sent to an
address other than the address of record. Unless otherwise
directed, redemption
proceeds will be mailed to an investor's address of
record. First Data may
require additional supporting documents for redemptions
made by corporations,
executors, administrators, trustees or guardians. A
redemption request will not
be deemed properly received until First Data receives all
required documents in
proper form.
Automatic Cash Withdrawal Plan
The Fund offers shareholders an automatic cash
withdrawal plan, under which
shareholders who own shares with a value of at least
$10,000 may elect to
receive cash payments of at least $50 monthly or
quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans
only where the
shareholder is eligible to receive qualified distributions
and has an account
value of at least $5,000. The withdrawal plan will be
carried over on exchanges
between funds or Classes of the Fund. Any applicable CDSC
will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per
month of the value of
the shareholder's shares subject to the CDSC at the time
the withdrawal plan
commences. (With respect to withdrawal plans in effect
prior to November 7,
1994, any applicable CDSC will be waived on amounts
withdrawn that do not exceed
2.00% per month of the value of the shareholder's shares
subject to the CDSC.)
For further information regarding the automatic cash
withdrawal plan,
shareholders should contact a Smith Barney Financial
Consultant.
Telephone Redemption and Exchange Program
Shareholders who do not have a Smith Barney brokerage
account may be eligible
to redeem and exchange Fund shares by telephone. To
determine if a share-
41
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Redemption of Shares (continued)
- ----------------------------------------------------------
- ----------------------
holder is entitled to participate in this program, he or
she should contact
First Data at 1-800-331-1710. Once eligibility is
confirmed, the shareholder
must complete and return a Telephone/Wire Authorization
Form, along with a
signature guarantee that will be provided by First Data
upon request.
(Alternatively, an investor may authorize telephone
redemption on the new
account application with the applicant's signature
guarantee when making his/her
initial investment in the Fund.)
Redemptions. Redemption requests of up to $10,000 of
any class or classes of
the Fund's shares may be made by eligible shareholders by
calling First Data at
1-800-331-1710. Such requests may be made between 9:00
a.m. and 5:00 p.m. (New
York City time) on any day the NYSE is open. Redemption
requests received after
the close of regular trading on the NYSE are priced at the
net asset value next
determined. Redemptions of shares (i) by retirement plans
or (ii) for which
certificates have been issued are not permitted under this
program.
A shareholder will have the option of having the
redemption proceeds mailed
to his/her address of record or wired to a bank account
predesignated by the
share holder. Generally, redemption proceeds will be
mailed or wired, as the
case may be, on the next business day following the
redemption request. In order
to use the wire procedures, the bank receiving the
proceeds must be a member of
the Federal Reserve System or have a correspondent
relationship with a member
bank. The Fund reserves the right to charge shareholders a
nominal fee for each
wire redemption. Such charges, if any, will be assessed
against the
shareholder's account from which shares were redeemed. In
order to change the
bank account designated to receive redemption proceeds, a
shareholder must
complete a new Telephone/Wire Authorization Form and, for
the protection of the
shareholder's assets, will be required to provide a
signature guarantee and
certain other documentation.
Exchanges. Eligible shareholders may make exchanges by
telephone if the
account registration of the shares of the fund being
acquired is identical to
the registration of the shares of the fund exchanged. Such
exchange requests may
be made by calling First Data at 1-800-331-1710 between
9:00 a.m. and 5:00 p.m.
(New York City time) on any day on which the NYSE is open.
Exchange requests
received after the close of regular trading on the NYSE
are processed at the net
asset value next determined.
Additional Information regarding Telephone Redemption
and Exchange Program.
Neither the Fund nor its agents will be liable for
following instructions
communicated by telephone that are reasonably believed to
be genuine. The Fund
and its agents will employ procedures designed to verify
the identity of the
caller
42
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Redemption of Shares (continued)
- ----------------------------------------------------------
- ----------------------
and legitimacy of instructions (for example, a
shareholder's name and account
number will be required and phone calls may be recorded).
The Fund reserves the
right to suspend, modify or discontinue the telephone
redemption and exchange
program or to impose a charge for this service at any time
following at least
seven (7) days' prior notice to shareholders.
- ----------------------------------------------------------
- ----------------------
Minimum Account Size
- ----------------------------------------------------------
- ----------------------
The Fund reserves the right to involuntarily liquidate
any shareholder's
account in the Fund if the aggregate net asset value of
the shares held in the
Fund account is less than $500. (If a shareholder has more
than one account in
this Fund, each account must satisfy the minimum account
size). The Fund,
however, will not redeem shares based solely on market
reductions in net asset
value. Before the Fund exercises such right, shareholders
will receive written
notice and will be permitted 60 days to bring accounts up
to the minimum to
avoid automatic redemption.
- ----------------------------------------------------------
- ----------------------
Performance
- ----------------------------------------------------------
- ----------------------
Total Return
From time to time, the Fund may include its total
return, average annual
total return and current dividend return in advertisements
and/or other types of
sales literature. These figures are computed separately
for Class A, Class B,
Class C and Class Y shares of the Fund. These figures are
based on historical
earnings and are not intended to indicate future
performance. Total return is
computed for a specified period of time assuming deduction
of the maximum sales
charge, if any, from the initial amount invested and
reinvestment of all income
dividends and capital gains distributions on the
reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the
value of the
investment at the end of the period so calculated by the
initial amount invested
and subtracting 100%. The standard average annual total
return, as prescribed by
the SEC, is derived from this total return, which provides
the ending redeemable
value. Such standard total return information may also be
accompanied by
nonstandard total return information for differing periods
computed in the same
manner but without annualizing the total return or taking
sales charges into
account. The Fund calculates current dividend return for
each Class by
annualizing the most recent monthly distribution and
dividing by the net asset
value or the maximum public offering price (including
sales
43
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Performance (continued)
- ----------------------------------------------------------
- ----------------------
charge) on the last day of the period for which current
dividend return is
presented. The current dividend return for each Class may
vary from time to time
depending on market conditions, the composition of its
investment portfolio and
operating expenses. These factors and possible differences
in the methods used
in calculating current dividend return should be
considered when comparing a
Class' current return to yields published for other
investment companies and
other investment vehicles. The Fund may also include
comparative performance
information in advertising or marketing its shares. Such
performance information
may include data from Lipper Analytical Services, Inc. and
other financial
publications.
- ----------------------------------------------------------
- ----------------------
Management of the Trust and the Fund
- ----------------------------------------------------------
- ----------------------
Board of Trustees
Overall responsibility for management and supervision
of the Trust and the
Fund rests with the Trust's Board of Trustees. The
Trustees approve all
significant agreements between the Trust and the companies
that furnish services
to the Fund, including agreements with the Trust's
distributor, custodian and
transfer agent and the Fund's investment adviser and
administrator. The
day-to-day operations of the Fund are delegated to the
Fund's investment adviser
and administrator. The Statement of Additional Information
contains background
information regarding each Trustee of the Trust and the
executive officers of
the Fund.
Investment Adviser -- SBMFM
SBMFM, located at 388 Greenwich Street, New York, New
York 10013, serves as
the Fund's investment adviser pursuant to a transfer of
the investment advisory
agreement effective November 7, 1994, from its affiliate,
Mutual Management
Corp., also a wholly owned subsidiary of Holdings.
Investment advisory services
continue to be provided to the Fund by the same portfolio
managers who had
provided services under the agreement with Mutual
Management Corp SBMFM (through
its predecessor) has been in the investment counseling
business since 1934 and
is a registered investment adviser. SBMFM renders
investment advice to
investment companies that had aggregate assets under
management as of January
31, 1996 in excess of $74 billion.
Subject to the supervision and direction of the Trust's
Board of Trustees,
SBMFM manages the Fund's portfolio in accordance with the
Fund's investment
objective and policies and makes investment decisions for
the Fund, places
orders to purchase and sell securities and employs
professional portfolio
managers and
44
<PAGE>
Smith Barney Growth and Income Fund
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- ----------------------
Management of the Trust and the Fund (continued)
- ----------------------------------------------------------
- ----------------------
securities analysts who provide research services to the
Fund. For investment
advisory services rendered, the Fund pays SBMFM a fee at
the annual rate of .45%
of the value of the Fund's average daily net assets.
Portfolio Management
R. Jay Gerken and George Novello, Managing Directors of
Smith Barney, have
served as Investment Officers of the Fund since it
commenced operations and
manage the day-to-day operations of the Fund, including
making all investment
decisions.
Management's discussion and analysis, and additional
performance information
regarding the Fund during the fiscal year ended January
31, 1996 is included in
the Annual Report dated January 31, 1996. A copy of the
Annual Report may be
obtained upon request and without charge from a Smith
Barney Financial
Consultant or by writing or calling the Fund at the
address or phone number
listed on page one of this Prospectus.
Administrator
SBMFM also serves as the Fund's administrator and
oversees all aspects of the
Fund's administration. For administration services
rendered, the Fund pays SBMFM
a fee at an annual rate of .20% of the value of the Fund's
average daily net
assets.
- ----------------------------------------------------------
- ----------------------
Distributor
- ----------------------------------------------------------
- ----------------------
Smith Barney is located at 388 Greenwich Street, New
York, New York 10013.
Smith Barney distributes shares of the Fund as principal
underwriter and as such
conducts a continuous offering pursuant to a "best
efforts" arrangement
requiring Smith Barney to take and pay for only such
securities as may be sold
to the public. Pursuant to a plan of distribution adopted
by the Fund under Rule
12b-1 under the 1940 Act (the "Plan"), Smith Barney is
paid a service fee with
respect to Class A, Class B and Class C shares of the Fund
at the annual rate of
0.25% of the value of the average daily net assets of the
respective Class.
Smith Barney is also paid an annual distribution fee with
respect to Class B and
Class C shares at the annual rate of 0.50% of the value of
the average daily net
assets attributable to those Classes. Class B shares which
automatically convert
to Class A shares eight years after the date of original
purchase will no longer
be subject to distribution fees. The fees are used by
Smith Barney to pay its
Financial Consultants for servicing shareholder
45
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Distributor (continued)
- ----------------------------------------------------------
- ----------------------
accounts and, in the case of Class B and Class C shares,
to cover expenses
primarily intended to result in the sale of those shares.
These expenses
include: advertising expenses; the cost of printing and
mailing prospectuses to
potential investors; payments to and expenses of Smith
Barney Financial
Consultants and other persons who provide support services
in connection with
the distribution of shares; interest and/or carrying
charges; and indirect and
overhead costs of Smith Barney associated with the sale of
Fund shares,
including lease, utility, communications and sale
promotion expenses.
The payments to Smith Barney Financial Consultants for
selling shares of a
Class include a commission or fee paid by the investor or
Smith Barney at the
time of sale and, with respect to Class A, Class B and
Class C shares, a
continuing fee for servicing shareholder accounts for as
long as a shareholder
remains a holder of that Class. Smith Barney Financial
Consultants may receive
different levels of compensation for selling different
Classes of shares.
Payments under the Plan with respect to Class B and
Class C shares are not
tied exclusively to the distribution and shareholder
service expenses actually
incurred by Smith Barney and the payments may exceed
distribution expenses
actually incurred. The Trust's Board of Trustees will
evaluate the
appropriateness of the Plan and its payment terms on a
continuing basis and in
so doing will consider all relevant factors, including
expenses borne by Smith
Barney, amounts received under the Plan and proceeds of
the CDSC.
- ----------------------------------------------------------
- ----------------------
Additional Information
- ----------------------------------------------------------
- ----------------------
The Trust was organized on January 8, 1986 under the
laws of the Commonwealth
of Massachusetts and is a business entity commonly known
as a "Massachusetts
business trust." The Trust offers shares of beneficial
interest of separate
funds with a par value of $.001 per share. The Fund offers
shares of beneficial
interest currently classified into four Classes - A, B, C
and Y. Each Class
represents an identical interest in the Fund's investment
portfolio. As a
result, the Classes have the same rights, privileges and
preferences, except
with respect to: (a) the designation of each Class; (b)
the effect of the
respective sales charges, if any, for each Class; (c) the
distribution and/or
service fees borne by each Class; (d) the expenses
allocable exclusively to each
Class; (e) voting rights on matters exclusively affecting
a single Class; (f)
the exchange privilege of each Class; and (g) the
conversion feature of the
Class B shares. The Trust's Board of Trustees does not
anticipate that there
will be any conflicts among the interests of the holders
of
46
<PAGE>
Smith Barney Growth and Income Fund
- ----------------------------------------------------------
- ----------------------
Additional Information (continued)
- ----------------------------------------------------------
- ----------------------
the different Classes. The Trustees, on an ongoing basis,
will consider whether
any such conflict exists and, if so, take appropriate
action.
The Trust does not hold annual shareholder meetings.
There normally will be
no meeting of shareholders for the purpose of electing
Trustees unless and until
such time as less than a majority of the Trustees holding
office have been
elected by shareholders. The Trustees will call a meeting
for any purpose upon
written request of shareholders holding at least 10% of
the Trust's outstanding
shares and the Fund will assist shareholders in calling
such a meeting as
required by the 1940 Act. Shareholders of record owning no
less than two-thirds
of the outstanding shares of the Trust may remove a
Trustee through a
declaration in writing or by vote cast in person or by
proxy at a meeting called
for that purpose.
When matters are submitted for shareholder vote,
shareholders of each Class
will have one vote for each full share owned and a
proportionate, fractional
vote for any fractional share held of that Class.
Generally, shares of the Trust
vote by individual fund on all matters except (a) matters
affecting only the
interests of one or more of the funds, in which case only
shares of the affected
fund or funds would be entitled to vote or (b) when the
1940 Act requires that
shares of the funds be voted in the aggregate. Similarly,
shares of the Fund
will be voted generally on a Fund-wide basis except for
matters affecting the
interests of one Class of shares.
PNC is located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania
19103, and serves as custodian of the Fund's investments.
First Data is located at Exchange Place, Boston,
Massachusetts 02109, and
serves as the Trust's transfer agent.
The Trust sends shareholders of the Fund a semi-annual
report and an audited
annual report, which include listings of the investment
securities held by the
Fund at the end of the reporting period. In an effort to
reduce the Fund's
printing and mailing costs, the Trust plans to consolidate
the mailing of its
semi-annual and annual reports by household. This
consolidation means that a
household having multiple accounts with the identical
address of record will
receive a single copy of each report. In addition, the
Trust also plans to
consolidate the mailing of the Fund's Prospectus so that a
shareholder
having multiple accounts (that is, individual, IRA and/or
self-employed
retirement plan accounts) will receive a single Prospectus
annually.
Shareholders who do not want this consolidation to apply
to their accounts
should contact a Smith Barney Financial Consultant or
First Data.
47
<PAGE>
SMITH BARNEY
- ------------
A Member of
Travelers Group [Logo]
Smith Barney
Growth and
Income
Fund
388 Greenwich Street
New York, New York 10013
FUND 228, 229, 230, 449
FD 0250 4/96
- ----------
PROSPECTUS
- ----------
SMITH BARNEY
Strategic
Investors
Fund
APRIL 22, 1996
Prospectus begins on page one
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus
April 22, 1996
- ----------------------------------------------------------
- ----------------------
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Strategic Investors Fund (the "Fund")
seeks high total return
consisting of current income and capital appreciation by
investing in a
combination of equity, fixed-income and money market
instruments and "Gold
Securities."
The Fund is one of a number of funds, each having
distinct investment
objectives and policies, making up Smith Barney Equity
Funds (the "Trust"). The
Trust is an open-end management investment company
commonly referred to as a
mutual fund.
This Prospectus sets forth concisely certain
information about the Fund and
the Trust, including sales charges, distribution and
service fees and expenses,
that prospective investors will find helpful in making an
investment decision.
Investors are encouraged to read this Prospectus carefully
and retain it for
future reference. Shares of the other funds offered by the
Trust are described
in separate prospectuses that may be obtained by calling
the Trust at the
telephone number set forth above or by contacting a Smith
Barney Financial
Consultant.
Additional information about the Fund and the Trust
is contained in a
Statement of Additional Information dated April 22, 1996,
as amended or
supplemented from time to time, that is available upon
request and without
charge by calling or writing the Trust at the telephone
number or address set
forth above or by contacting a Smith Barney Financial
Consultant. The Statement
of Additional Information has been filed with the
Securities and Exchange
Commission (the "SEC") and is incorporated by reference
into this Prospectus in
its entirety.
Smith Barney Inc.
Distributor
Smith Barney Strategy Advisers Inc.
Investment Adviser and Administrator
Smith Barney Mutual Funds Management Inc.
Investment Adviser and Administrator
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.
1
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Table of Contents
- ----------------------------------------------------------
- ----------------------
Prospectus Summary
3
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- ----------------------
Financial Highlights
10
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- ----------------------
Investment Objective and Management Policies
13
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- ----------------------
Valuation of Shares
20
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- ----------------------
Dividends, Distributions and Taxes
20
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- ----------------------
Purchase of Shares
21
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- ----------------------
Exchange Privilege
31
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- ----------------------
Redemption of Shares
35
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- ----------------------
Minimum Account Size
38
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Performance
38
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Management of the Trust and the Fund
39
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Distributor
40
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- ----------------------
Additional Information
42
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==========================================================
======================
No person has been authorized to give any information
or to make any
representations in connection with this offering other
than those contained in
this Prospectus and, if given or made, such other
information or representations
must not be relied upon as having been authorized by the
Trust or the
distributor. This Prospectus does not constitute an offer
by the Fund or the
distributor to sell or a solicitation of an offer to buy
any of the securities
offered hereby in any jurisdiction to any person to whom
it is unlawful to make
such an offer or solicitation in such jurisdiction.
==========================================================
======================
2
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus Summary
- ----------------------------------------------------------
- ----------------------
The following summary is qualified in its entirety by
detailed information
appearing elsewhere in this Prospectus and in the
Statement of Additional
Information. Cross references in this summary are to
headings in the Prospectus.
See "Table of Contents."
Investment Objective The fund is an open end, diversified
management investment
company that seeks high total return consisting of current
income and capital
appreciation by investing in a combination of equity,
fixed-income and money
market investments and gold securities, which are equity
and debt securities of
companies principally engaged in businesses relating to
the exploration, mining,
processing or distribution of gold and companies
principally engaged in
financing, managing, controlling or operating such
companies ("Gold
Securities"). See "Investment Objective and Management
Policies."
Alternative Purchase Arrangements The Fund offers several
classes of shares
("Classes") to investors designed to provide them with the
flexibility of
selecting an investment best suited to their needs. The
general public is
offered three classes of shares: Class A shares, Class B
shares and Class C
shares, which differ principally in terms of sales charges
and rates of expenses
to which they are subject. A fourth Class of shares, Class
Y shares, is offered
only to investors meeting an initial investment minimum of
$5,000,000. See
"Purchase of Shares" and "Redemption of Shares."
Class A Shares. Class A shares are sold at net asset
value plus an initial
sales charge of up to 5.00% and are subject to an annual
service fee of 0.25% of
the value of the average daily net assets of the Class.
The initial sales charge
may be reduced or waived for certain purchases. Purchases
of Class A shares,
which when combined with current holdings of Class A
shares offered with a sales
charge equal or exceed $500,000 in the aggregate, will be
made at net asset
value with no initial sales charge, but will be subject to
a contingent deferred
sales charge ("CDSC") of 1.00% on redemptions made within
12 months of purchase.
See "Prospectus Summary--Reduced or No Initial Sales
Charge."
Class B Shares. Class B shares are offered at net
asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by
1.00% each year after
the date of purchase to zero. This CDSC may be waived for
certain redemptions.
Class B shares are subject to an annual service fee of
0.25% and an annual
distribution fee of 0.75% of the value of the average
daily net assets of the
Class. The Class B shares' distribution fee may cause that
Class to have higher
expenses and pay lower dividends than Class A shares.
3
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus Summary (continued)
- ----------------------------------------------------------
- ----------------------
Class B Shares Conversion Feature. Class B shares
will convert
automatically to Class A shares, based on relative net
asset value, eight years
after the date of the original purchase. Upon conversion,
these shares will no
longer be subject to an annual distribution fee. In
addition, a certain portion
of Class B shares that have been acquired through the
reinvestment of dividends
and distributions ("Class B Dividend Shares") will be
converted at that time.
See "Purchase of Shares--Deferred Sales Charge
Alternatives."
Class C Shares. Class C shares are sold at net asset
value with no initial
sales charge. They are subject to an annual service fee of
0.25% and an annual
distribution fee of 0.75% of the value of the average
daily net assets of the
Class, and investors pay a CDSC of 1.00% if they redeem
Class C shares within 12
months of purchase. The CDSC may be waived for certain
redemptions. The Class C
shares' distribution fee may cause that Class to have
higher expenses and pay
lower dividends than Class A shares. Purchases of Fund
shares, which when
combined with current holdings of Class C shares of the
Fund equal or exceed
$500,000 in the aggregate, should be made in Class A
shares at net asset value
with no sales charge, and will be subject to a CDSC of
1.00% on redemptions made
within 12 months of purchase.
Class Y Shares. Class Y shares are available only to
investors meeting an
initial investment minimum of $5,000,000 (except for
purchases of Class Y shares
by Smith Barney Concert Series Inc., for which there is no
minimum purchase
amount). Class Y shares are sold at net asset value with
no initial sales charge
or CDSC. They are not subject to any service or
distribution fees.
In deciding which Class of Fund shares to purchase,
investors should
consider the following factors, as well as any other
relevant facts and
circumstances:
Intended Holding Period. The decision as to which
Class of shares is more
beneficial to an investor depends on the amount and
intended length of his or
her investment. Shareholders who are planning to establish
a program of regular
investment may wish to consider Class A shares; as the
investment accumulates
shareholders may qualify for reduced sales charges and the
shares are subject to
lower ongoing expenses over the term of the investment. As
an investment
alternative, Class B and Class C shares are sold without
any initial sales
charge so the entire purchase price is immediately
invested in the Fund. Any
investment return on these additional invested amounts may
partially or wholly
offset the higher annual expenses of these Classes.
Because the Fund's future
return cannot be predicted, however, there can be no
assurance that this would
be the case.
Finally, investors should consider the effect of the
CDSC period and any
4
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus Summary (continued)
- ----------------------------------------------------------
- ----------------------
conversion rights of the Classes in the context of their
own investment time
frame. For example, while Class C shares have a shorter
CDSC period than Class B
shares, they do not have a conversion feature, and
therefore, are subject to an
ongoing distribution fee. Thus, Class B shares may be more
attractive than Class
C shares to investors with longer term investment
outlooks.
Investors investing a minimum of $5,000,000 must
purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or
service or
distribution fee. The maximum purchase amount for Class A
shares is $4,999,999,
Class B shares is $249,999 and Class C shares is $499,999.
There is no maximum
purchase amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales
charge on Class A
shares may be waived for certain eligible purchasers, and
the entire purchase
price will be immediately invested in the Fund. In
addition, Class A share
purchases, which when combined with current holdings of
Class A shares offered
with a sales charge equal or exceed $500,000 in the
aggregate, will be made at
net asset value with no initial sales charge, but will be
subject to a CDSC of
1.00% on redemptions made within 12 months of purchase.
The $500,000 aggregate
investment may be met by adding the purchase to the net
asset value of all Class
A shares offered with a sales charge held in funds
sponsored by Smith Barney
Inc. ("Smith Barney") listed under "Exchange Privilege."
Other Class A share
purchases may also be eligible for a reduced sales charge.
See "Purchase of
Shares." Because the ongoing expenses of Class A shares
may be lower than those
for Class B and Class C shares, purchasers eligible to
purchase Class A shares
at net asset value or at a reduced sales charge should
consider doing so.
Smith Barney Financial Consultants may receive
different compensation for
selling each Class of shares. Investors should understand
that the purpose of
the CDSC on the Class B and Class C shares is the same as
that of the initial
sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Fund"
for a complete
description of the sales charges and service and
distribution fees for each
Class of shares and "Valuation of Shares," "Dividends,
Distributions and Taxes"
and "Exchange Privilege" for other differences between the
Classes of shares.
Smith Barney 401(k) Program Investors may be eligible to
participate in the
Smith Barney 401(k) Program, which is generally designed
to assist plan sponsors
in the creation and operation of retirement plans under
Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), as
well as other types
5
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus Summary (continued)
- ----------------------------------------------------------
- ----------------------
of participant directed, tax-qualified employee benefit
plans (collectively,
"Participating Plans"). Class A, Class B, Class C and
Class Y shares are
available as investment alternatives for Participating
Plans. See "Purchase of
Shares--Smith Barney 401(k) Program."
Purchase of Shares Shares may be purchased through the
Fund's distributor, Smith
Barney, a broker that clears securities transactions
through Smith Barney on a
fully disclosed basis (an "Introducing Broker") or an
investment dealer in the
selling group. Direct purchases by certain retirement
plans may be made through
the Fund's transfer agent, First Data Investor Services
Group, Inc. ("First
Data"). See "Purchase of Shares."
Investment Minimums Investors in Class A, Class B and
Class C shares may open an
account by making an initial investment of at least $1,000
for each account, or
$250 for an individual retirement account ("IRA") or a
Self- Employed Retirement
Plan. Investors in Class Y shares may open an account for
an initial investment
of $5,000,000. Subsequent investments of at least $50 may
be made for all
Classes. For participants in retirement plans qualified
under Section 403(b)(7)
or Section 401(a) of the Code, the minimum initial
investment requirement for
Class A, Class B, and Class C shares and the subsequent
investment requirement
for all Classes is $25. The minimum initial investment
requirement for Class A,
Class B, and Class C shares and the subsequent investment
minimum through the
Systematic Investment Plan described below is $50. See
"Purchase of Shares."
Systematic Investment Plan The Fund offers shareholders a
Systematic Investment
Plan under which they may authorize the automatic
placement of a purchase order
each month or quarter for Fund shares in an amount of at
least $50. See
"Purchase of Shares."
Redemption of Shares Shares may be redeemed on each day
the New York Stock
Exchange, Inc. ("NYSE") is open for business. See
"Redemption of Shares."
Management of the Trust and the Fund Smith Barney Strategy
Advisers Inc.
("Strategy Advisers") serves as the Fund's investment
adviser and is a wholly
owned subsidiary of Smith Barney Mutual Funds Management
Inc. ("SBMFM"). SBMFM
provides investment advisory and management services to
investment companies
affiliated with Smith Barney. SBMFM, which also serves as
the Fund's
administrator, is a wholly owned subsidiary of Smith
Barney Holdings
6
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus Summary (continued)
- ----------------------------------------------------------
- ----------------------
Inc. ("Holdings"), which in turn is a wholly owned
subsidiary of Travelers Group
Inc. ("Travelers"), a diversified financial services
company engaged through its
subsidiaries principally in four business segments:
Investment Services,
Consumer Finance Services, Life Insurance Services, and
Property & Casualty
Insurance Services.
Exchange Privilege Shares of a Class may be exchanged for
shares of the same
Class of certain other funds of the Smith Barney Mutual
Funds at the respective
net asset values next determined, plus any applicable
sales charge differential.
See "Exchange Privilege Services."
Valuation of Shares Net asset value of the Fund for the
prior day is generally
quoted daily in the financial section of most newspapers
and is also available
from any Smith Barney Financial Consultant. See "Valuation
of Shares."
Dividends and Distributions Dividends from net investment
income are paid
quarterly. Distributions of net realized capital gains, if
any, are declared and
paid annually. See "Dividends, Distributions and Taxes."
Reinvestment of Dividends Dividends and distributions paid
on shares of a Class
will be reinvested automatically, unless otherwise
specified by an investor, in
additional shares of the same Class at current net asset
value. Shares acquired
by dividend and distribution reinvestments will not be
subject to any sales
charge or CDSC. Class B shares acquired through dividend
and distribution
reinvestments will become eligible for conversion to Class
A shares on a pro
rata basis. See "Dividends, Distributions and Taxes."
Risk Factors and Special Considerations There can be no
assurance that the
Fund's investment objective will be achieved. The foreign
securities in which
the Fund may invest may be subject to certain risks in
addition to those
inherent in domestic investments. The Fund may make
certain investments and
employ certain investment techniques that involve other
risks and special
considerations. The techniques presenting the Fund with
risks or special
considerations are investing in restricted securities,
warrants, convertible
securities, securities of unseasoned issuers, options,
Gold Securities and
securities of developing countries, entering into
repurchase agreements and
lending portfolio securities. These risks and those
associated with when-issued
and delayed-delivery transactions and covered option
writing are described under
"Investment Objective and Management Policies--Risk
Factors and Special
Considerations."
7
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus Summary (continued)
- ----------------------------------------------------------
- ----------------------
THE FUND'S EXPENSES The following expense table lists the
costs and expenses an
investor will incur either directly or indirectly as a
shareholder of the Fund,
based on the maximum sales charge or maximum CDSC that may
be incurred at the
time of purchase or redemption and, unless otherwise
noted, the Fund's operating
expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
- ----------------------------------------------------------
- ---------------------------------------
<S>
<C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price)
5.00% None None None
Maximum CDSC
(as a percentage of original cost or redemption
proceeds, whichever is lower)
None* 5.00% 1.00% None
- ----------------------------------------------------------
- ---------------------------------------
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees
0.75% 0.75% 0.75% 0.75%
12b-1 fees**
0.25 1.00 1.00 None
Other expenses***
0.21 0.19 0.19 0.21
- ----------------------------------------------------------
- ---------------------------------------
TOTAL FUND OPERATING EXPENSES
1.21% 1.94% 1.94% 0.96%
==========================================================
=======================================
</TABLE>
* Purchases of Class A shares, which when combined with
current holdings of
Class A shares offered with a sales charge equal or
exceed $500,000 in the
aggregate, will be made at net asset value with no
sales charge, but will be
subject to a CDSC of 1.00% on redemptions made within
12 months.
** Upon conversion of Class B shares to Class A shares,
such shares will no
longer be subject to a distribution fee. Class C
shares do not have a
conversion feature and, therefore, are subject to an
ongoing distribution
fee. As a result, long-term shareholders of Class C
shares may pay more than
the economic equivalent of the maximum front-end sales
charge permitted by
the National Association of Securities Dealers, Inc.
*** For Class Y shares "other expenses" have been
estimated based on expenses
incurred by the Class A shares because there were no
Class Y purchases
during the year ended January 31, 1996.
The sales charge and CDSC set forth in the above
table are the maximum
charges imposed on purchases or redemptions of Fund shares
and investors may
actually pay lower or no charges, depending on the amount
purchased and, in the
case of Class B, Class C and certain Class A shares, the
length of time the
shares are held and whether the shares are held through
the Smith Barney 401(k)
Program. See "Purchase of Shares" and "Redemption of
Shares." Smith Barney
receives an annual 12b-1 service fee of 0.25% of the value
of average daily net
assets of Class A shares. Smith Barney also receives, with
respect to Class B
and Class C shares, an annual 12b-1 fee of 1.00% of the
value of average daily
net assets of the respective Class, consisting of a 0.75%
distribution fee and a
0.25% service fee. "Other expenses" in the above table
include fees for
shareholder services, custodial fees, legal and accounting
fees, printing costs
and registration fees.
8
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Prospectus Summary (continued)
- ----------------------------------------------------------
- ----------------------
EXAMPLE The following example is intended to assist an
investor in understanding
the various costs that an investor in the Fund will bear
directly or indirectly.
The example assumes payment by the Fund of operating
expenses at the levels set
forth in the table above. See "Purchase of Shares,"
"Redemption of Shares" and
"Management of the Trust and the Fund."
1 year 3 years
5 years 10 years*
- ----------------------------------------------------------
- ----------------------
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5.00% annual return and
(2) redemption at the end of each
time period:
Class A $62 $86
$113 $189
Class B 70 91
115 208
Class C 30 61
105 226
Class Y 10 31
53 118
An investor would pay the following
expenses on the same investment, assuming
the same annual return and no redemption:
Class A 62 86
113 189
Class B 20 61
105 208
Class C 20 61
105 226
Class Y 10 31
53 118
- ----------------------------------------------------------
- ----------------------
* Ten-year figures assume conversion of Class B shares
to Class A shares at
the end of the eighth year following the date of
purchase.
The example also provides a means for the investor to
compare expense
levels of funds with different fee structures over varying
investment periods.
To facilitate such comparison, all funds are required to
utilize a 5.00% annual
return assumption. However, the Fund's actual return will
vary and may result in
an actual return greater or less than 5.00%. This example
should not be
considered a representation of past or future expenses and
actual expenses may
be greater or less than those shown.
9
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Financial Highlights
- ----------------------------------------------------------
- ----------------------
The following information for the fiscal year ended
January 31, 1996 has
been audited by KPMG Peat Marwick LLP, independent
auditors, whose report
thereon appears in the Fund's Annual Report dated January
31, 1996. The
following information for the fiscal years ended January
31, 1987 through
January 31, 1995 has been audited by Coopers & Lybrand
L.L.P. The information
set out below should be read in conjunction with the
financial statements and
related notes that also appear in the Fund's Annual Report
which is incorporated
by reference into the Statement of Additional Information.
There is no
information presented for Class Y shares since there were
no Class Y shares
outstanding for the periods shown.
For a Class A share of beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
1996
1995 1994(1) 1993(2)
==========================================================
============================================
<S> <C>
<C> <C> <C>
Net Asset Value, Beginning of Period $ 15.91
$ 17.72 $ 16.85 $ 16.80
- ----------------------------------------------------------
- --------------------------------------------
Income (Loss) From Operations:
Net investment income 0.61
0.57 0.52 0.13
Net realized and unrealized gain (loss) 3.52
(1.25) 2.37 0.88
- ----------------------------------------------------------
- --------------------------------------------
Total Income (Loss) From Operations 4.13
(0.68) 2.89 1.01
- ----------------------------------------------------------
- --------------------------------------------
Less Distribution From:
Net investment income (0.52)
(0.47) (0.56) (0.11)
Net realized gains (0.52)
(0.66) (1.46) (0.85)
- ----------------------------------------------------------
- --------------------------------------------
Total Distributions (1.04)
(1.13) (2.02) (0.96)
- ----------------------------------------------------------
- --------------------------------------------
Net Asset Value, End of Period $ 19.00
$ 15.91 $ 17.72 $ 16.85
- ----------------------------------------------------------
- --------------------------------------------
Total Return++ 26.47%
(3.82)% 17.80% 6.12%##
- ----------------------------------------------------------
- --------------------------------------------
Net Assets, End of Period (000s) $175,007
$159,247 $ 6,216 $ 693
- ----------------------------------------------------------
- --------------------------------------------
Ratios to Average Net Assets:
Expenses 1.21%
1.33% 1.25% 1.25%+
Net investment income 3.10
2.89 2.85 3.61+
- ----------------------------------------------------------
- --------------------------------------------
Portfolio Turnover Rate 81%
103% 131% 93%
==========================================================
============================================
Average Commissions Paid on
Equity Security Transactions(3) $ 0.06
- -- -- --
==========================================================
============================================
</TABLE>
(1) Per share amounts have been calculated using the
monthly average shares
method, which more appropriately presents per share
data for this period
since use of the undistributed net investment income
method does not accord
with results of operations.
(2) For the period from November 6, 1992 (inception date)
to January 31, 1993.
(3) New SEC disclosure guidelines require that average
commissions per share be
calculated and presented for the current year only.
++ Total return represents the aggregate total return
for the period indicated
and does not reflect any applicable sales charge.
## Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
10
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Financial Highlights (continued)
- ----------------------------------------------------------
- ----------------------
For a Class B share of beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
1996 1995 1994(1)
1993 1992 1991 1990 1989
1988(2)
==========================================================
==========================================================
============
<S> <C> <C> <C>
<C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 15.97 $ 17.79 $ 16.84
$ 17.26 $ 15.61 $ 15.57 $ 15.03 $ 13.62 $
14.00
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Income (Loss) From
Investment Operations
Net investment income 0.49 0.39 0.38
0.51 0.52 0.54 0.53 0.52
0.36
Net realized and
unrealized gain/(loss) 3.53 (1.20) 2.37
1.06 2.56 0.47 1.10 1.48
(0.44)
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Total Income (Loss) From
Operations 4.02 (0.81) 2.75
1.57 3.08 1.01 1.63 2.00
(0.08)
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Less Distributions From:
Net investment income (0.42) (0.35) (0.34)
(0.50) (0.55) (0.51) (0.69) (0.48)
(0.23)
Net realized gains (0.52) (0.66) (1.46)
(1.49) (0.88) (0.46) (0.38) (0.11)
(0.07)
Capital -- -- --
- -- -- -- (0.02) -- --
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Total Distributions (0.94) (1.01) (1.80)
(1.99) (1.43) (0.97) (1.09) (0.59)
(0.30)
==========================================================
==========================================================
============
Net Asset Value,
End of Period $ 19.05 $ 15.97 $ 17.79
$ 16.84 $ 17.26 $ 15.61 $ 15.57 $ 15.03 $
13.62
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Total Return++ 25.58% (4.54%) 16.88%
9.68% 19.96% 6.80% 10.76% 15.10%
(0.57%)##
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Net Assets, End of
Period (000s) $226,360 $216,035 $334,408
$287,983 $234,321 $197,170 $206,385 $146,987
$151,223
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Ratios to Average
Net Assets:
Expenses 1.94% 2.00% 1.98%
2.02% 2.06% 2.09% 2.24% 2.29%
2.14%+
Net investment income 2.37 2.21 2.11
2.84 3.02 3.43 3.46 3.59
2.83+
- ----------------------------------------------------------
- ----------------------------------------------------------
- ------------
Portfolio Turnover Rate 81% 103% 131%
93% 76% 56% 61% 42% 56%
==========================================================
==========================================================
============
Average Commissions
Paid on Equity Security
Transactions(3) $ 0.06 -- --
- -- -- -- -- -- --
==========================================================
==========================================================
============
</TABLE>
(1) The per share amounts have been calculated using the
monthly average shares
method, which more appropriately presents per share
data for this year
since use of the undistributed net investment income
method does not accord
with results of operations.
(2) The Fund commenced operations on February 2, 1987. On
November 6, 1992, the
Fund commenced selling Class B shares. Any shares
outstanding prior to
November 6, 1992 were designated as Class B shares.
(3) New SEC disclosure guidelines require that average
commissions per share be
calculated and presented for the current year only.
++ Total return represents the aggregate total return
for the period indicated
and does not reflect any applicable sales charge.
+ Annualized.
## Total return is not annualized, as it may not be
representative of the
total return for the year.
11
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Financial Highlights (continued)
- ----------------------------------------------------------
- ----------------------
For a Class C share(1) of beneficial interest outstanding
throughout each
period:
1996
1995 1994(2)(3)
==========================================================
======================
Net Asset Value, Beginning of Period $ 15.97 $
17.79 $ 17.54
- ----------------------------------------------------------
- ----------------------
Income (Loss) From Operations:
Net investment income 0.45
0.38 0.32
Net realized and unrealized gain (loss) 3.60
(1.19) 1.67
- ----------------------------------------------------------
- ----------------------
Total Income (Loss) From Operations 4.05
(0.81) 1.99
- ----------------------------------------------------------
- ----------------------
Less Distribution From:
Net investment income (0.42)
(0.35) (0.28)
Net realized gains (0.52)
(0.66) (1.46)
- ----------------------------------------------------------
- ----------------------
Total Distributions (0.94)
(1.01) (1.74)
- ----------------------------------------------------------
- ----------------------
Net Asset Value, End of Period $ 19.08 $
15.97 $ 17.79
- ----------------------------------------------------------
- ----------------------
Total Return 25.77%
(4.54)% 11.83%##
- ----------------------------------------------------------
- ----------------------
Net Assets, End of Period (000s) $ 3,396 $
1,972 $ 399
- ----------------------------------------------------------
- ----------------------
Ratios to Average Net Assets:
Expenses 1.94%
1.98% 1.93%+
Net investment income 2.31
2.24 2.16+
- ----------------------------------------------------------
- ----------------------
Portfolio Turnover Rate 81%
103% 131%
==========================================================
======================
Average Commissions Paid on
Equity Security Transactions(4) $ 0.06
- -- --
==========================================================
======================
(1) On November 7, 1994, the former Class D shares were
renamed Class C shares.
(2) Per share amounts have been calculated using the
monthly average shares
method, which more appropriately presents per share
data for this period
since use of the undistributed net investment income
method does not accord
with results of operations.
(3) For the period from May 5, 1993 (inception date) to
January 31, 1994.
(4) New SEC disclosure guidelines require that average
commissions per share be
calculated and presented for the current year only.
++ Total return represents the aggregate total return
for the period indicated
and does not reflect any applicable sales charge.
## Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
12
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies
- ----------------------------------------------------------
- ----------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is high total
return consisting of
capital appreciation and current income. The Fund's
investment objective may be
changed only with the approval of a majority of the Fund's
outstanding voting
securities. There can be no assurance the Fund's
investment objective will be
achieved.
The Fund seeks to achieve its objective by investing
in a variable
combination of equity, fixed-income and money market
instruments and Gold
Securities. The percentages of the Fund's assets invested
in each of these four
types of securities are adjusted from time to time to
conform to the asset
allocation percentages most recently determined by the
Investment Policy Group
of Smith Barney, the Fund's asset allocation consultant.
These percentages
represent Smith Barney's conclusions concerning the
portions of a model
portfolio that should be invested in equity, fixed-income
and money market
securities and gold in light of current economic and
market conditions. Although
the asset allocation may call for an investment in gold,
the Fund will not hold
gold bullion or coins but will seek to comply with Smith
Barney's asset
allocation to gold by investing in Gold Securities. Gold
Securities in which the
Fund may invest consist of equity and debt securities of
companies principally
engaged in businesses relating to the exploration, mining,
processing or
distribution of gold and companies principally engaged in
financing, managing,
controlling or operating such companies. As of September
30, 1995, the Fund's
asset allocation approach resulted in 59% of the Fund's
assets being invested in
equity securities, 25% in fixed-income securities and 16%
in cash. The mix of
the Fund's investments will vary from time to time in the
future, and at any
given time the Fund may be substantially or entirely
invested in equity,
fixed-income or money market securities. The Fund's
investments in Gold
Securities may represent up to 25% of its total assets.
Strategy Advisers has responsibility for the
selection of specific
securities on behalf of the Fund. See "Management of the
Trust and the Fund." As
soon as practicable after Smith Barney's asset allocations
become available,
except as described below, Strategy Advisers enters into
purchase and sale
transactions that will result in the Fund's holding assets
in appropriate
percentages. Strategy Advisers may diverge from the
allocations determined by
Smith Barney when Strategy Advisers believes that a higher
cash position is
necessary in order to meet anticipated redemption requests
or that strict
adherence to designated allocations might affect the
Fund's ability to qualify
as a regulated investment company or cause the Fund to
violate an applicable
investment restriction. Strategy Advisers adjusts the
Fund's assets to coincide
with the immediately preceding allocation to each category
of investments when
the percentage of assets invested in a category
13
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
varies by more than 10% from Smith Barney's designated
percentage. For example,
if Smith Barney had assigned an allocation of 60% to
equity securities, Strategy
Advisers would adjust the Fund's assets to conform to the
60% allocation if the
percentage of the Fund's assets invested in equity
securities increased or
decreased by more than 6%. Following this asset allocation
strategy may involve
frequent shifts among classes of investments and result in
the Fund's having a
relatively high portfolio turnover rate.
The equity portion of the assets of the Fund will
consist generally of
common stocks of established companies traded on exchanges
or over-the-counter
that represent an opportunity for total return on a long-
term basis. In
evaluating companies for investment, Strategy Advisers
selects securities of
companies that it believes are undervalued based on
relevant indicators such as
price/earnings ratios, return on assets and ratios of
market value to book
value, or that are trading at depressed prices because of
perceived current
problems or industry conditions. Equity investments may be
made without regard
to the size of companies and generally will be made in a
broad spectrum of
industries. The Fund also may invest in preferred stock,
securities convertible
into or exchangeable for common stock and warrants. The
fixed-income portion of
the Fund's assets will be composed primarily of investment-
grade corporate
bonds, debentures and notes and obligations of the United
States government or
its agencies or instrumentalities ("U.S. government
securities"). The Fund's
fixed-income assets may be short-, medium-or long-term, as
determined at the
discretion of Strategy Advisers based upon an evaluation
of economic and market
trends. The money market securities in which the Fund may
invest include
commercial paper, bank obligations and short-term U.S.
government securities. Up
to 10% of the Fund's assets may be invested in equity and
debt securities of
foreign issuers. The Fund also may write covered call
options and lend its
portfolio securities. Risk factors and special
considerations associated with
the Fund's investments are described under "Investment
Strategies and
Techniques" and "Risk Factors and Special Considerations"
below.
INVESTMENT STRATEGIES AND TECHNIQUES
In attempting to achieve its investment objective,
the Fund may employ,
among others, one or more of the strategies and techniques
set forth below. The
Fund is under no obligation to use any of the strategies
or techniques at any
given time or under any particular economic condition.
More detailed information
concerning these strategies and techniques and their
related risks is contained
in the Statement of Additional Information.
Repurchase Agreements. The Fund may enter into
repurchase agreements
14
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
with banks which are the issuers of instruments acceptable
for purchase by the
Fund and certain dealers on the Federal Reserve Bank of
New York's list of
reporting dealers. Under the terms of a typical repurchase
agreement, the Fund
would acquire an underlying debt obligation for a
relatively short period of
time (usually not more than seven days), subject to an
obligation of the seller
to repurchase, and the Fund to resell, the obligation at
an agreed-upon price
and time, thereby determining the yield during the Fund's
holding period. This
arrangement results in a fixed rate of return that is not
subject to market
fluctuations during the Fund's holding period. The value
of the underlying
securities will be monitored on an ongoing basis by
Strategy Advisers to ensure
that the value is at least equal at all times to the total
amount of the
repurchase obligation, including interest. Strategy
Advisers, acting under the
supervision of the Trust's Board of Trustees, reviews on
an ongoing basis the
value of the collateral and the creditworthiness of those
banks and dealers with
which the Fund enters into repurchase agreements to
evaluate potential risks.
Lending of Portfolio Securities. The Fund has the
ability to lend portfolio
securities to brokers, dealers and other financial
organizations. Loans, if and
when made, may not exceed 20% of the Fund's net asset
value. Loans of portfolio
securities by the Fund will be collateralized by cash,
letters of credit or U.S.
government securities that are maintained at all times in
a segregated account
in an amount at least equal to the current market value of
the loaned
securities.
Covered Option Writing. The Fund may write covered
call options on
portfolio securities and will realize fees (referred to as
"premiums") for
granting the rights evidenced by the options. In return
for a premium, the Fund
will forfeit the right to any appreciation in the value of
the underlying
security for the life of the option (or until a closing
purchase transaction can
be effected). The purchaser of a call option written by
the Fund has the right
to purchase from the Fund an underlying security owned by
the Fund at an
agreed-upon price for a specified time period. Upon the
exercise of a call
option written by the Fund, the Fund may suffer a loss
equal to the underlying
security's market value at the time of the option's
exercise over the exercise
price plus the premium received for writing the option.
Whenever the Fund writes
a call option, it will (a) continue to own or have the
absolute and immediate
right to acquire the underlying security without
additional cash consideration
or (b) hold a call option at the same or a lower exercise
price for the same
exercise period on the same underlying security as the
call option written, for
as long as it remains obligated as the writer of the
option.
The Fund may engage in a closing purchase transaction
to realize a profit,
to prevent an underlying security from being called or to
unfreeze an underlying
security (thereby permitting its sale or the writing of a
new option on the
security
15
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
prior to the outstanding option's expiration). To effect a
closing purchase
transaction, the Fund would purchase, prior to the
holder's exercise of an
option the Fund has written, an option of the same series
as that on which the
Fund desires to terminate its obligation. The obligation
of the Fund under an
option it has written would be terminated by a closing
purchase transaction, but
the Fund would not be deemed to own an option as the
result of the transaction.
There can be no assurance that the Fund will be able to
effect closing purchase
transactions at a time when it wishes to do so. To
facilitate closing purchase
transactions, however, the Fund will ordinarily write
options only if a
secondary market for the options exists on a domestic
securities exchange or in
the over-the-counter market.
ADDITIONAL INVESTMENTS
Money Market Instruments. The Fund may hold cash and
invest in money market
instruments without limitation when deemed advantageous by
Strategy Advisers and
SBMFM. Short-term instruments in which the Fund may invest
include: U.S.
government securities; bank obligations (including
certificates of deposit, time
deposits and bankers' acceptances of domestic or foreign
banks, domestic savings
and loan associations and other banking institutions
having total assets in
excess of $500 million); commercial paper rated no lower
than A-2 by Standard &
Poor's Corporation ("S&P") or Prime-2 by Moody's Investors
Service, Inc.
("Moody's") or the equivalent from another nationally
recognized rating service
or, if unrated, of an issuer having an outstanding,
unsecured debt issue then
rated within the three highest rating categories. A
description of the
commercial paper rating categories of Moody's and S&P is
contained in the
Appendix to the Statement of Additional Information.
U.S. Government Securities. The U.S. government
securities in which the
Fund may invest include: direct obligations of the United
States Treasury and
obligations issued or guaranteed by U.S. government
agencies and
instrumentalities, including instruments supported by the
full faith and credit
of the United States; securities supported by the right of
the issuer to borrow
from the United States Treasury; and securities supported
solely by the credit
of the instrumentality.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund involves special
considerations, such as those
described below:
Restricted Securities. The Fund may not be able to
dispose of restricted
securities at a time when, or at a price which, it desires
to do so and may have
to bear expenses associated with registering the
securities.
16
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
Warrants. Because a warrant does not carry with it
the right to dividends
or voting rights with respect to the securities that the
warrant holder is
entitled to purchase, and because a warrant does not
represent any rights to the
assets of the issuer, a warrant may be considered more
speculative than certain
other types of investments. In addition, the value of a
warrant does not
necessarily change with the value of the underlying
security and a warrant
ceases to have value if it is not exercised prior to its
expiration date. The
investment in warrants, valued at the lower of cost or
market, may not exceed
5.00% of the value of the Fund's net assets. Included
within that amount, but
not to exceed 2.00% of the value of the Fund's net assets,
may be warrants that
are not listed on the NYSE or the American Stock Exchange.
Warrants acquired by
the Fund in units or attached to securities may be deemed
to be without value.
Securities of Unseasoned Issuers. Securities in which
the Fund may invest
may have limited marketability and, therefore, may be
subject to wide
fluctuations in market value. In addition, certain
securities may be issued by
companies that lack a significant operating history and
are dependent on
products or services without an established market share.
Options. Option writing for the Fund may be limited
by position and
exercise limits established by national securities
exchanges and by requirements
of the Code for qualification as a regulated investment
company. See "Dividends,
Distributions and Taxes." In addition to writing covered
call options to
generate current income, the Fund may enter into options
transactions as hedges
to reduce investment risk, generally by making an
investment expected to move in
the opposite direction of a portfolio position. A hedge is
designed to offset a
loss on a portfolio position with a gain on the hedge
position; at the same
time, however, a properly correlated hedge will result in
a gain on the
portfolio position being offset by a loss on the hedge
position. The Fund bears
the risk that the prices of the securities being hedged
will not move in the
same amount as the hedge. The Fund will engage in hedging
transactions only when
deemed advisable by Strategy Advisers. Successful use by
the Fund of options
will be subject to Strategy Advisers' ability to predict
correctly movements in
the direction of the stock or index underlying the option
used as a hedge.
Losses incurred in hedging transactions and the costs of
these transactions will
affect the Fund's performance.
The ability of the Fund to engage in closing
transactions with respect to
options depends on the existence of a liquid secondary
market. While the Fund
generally will write options only if a liquid secondary
market appears to exist
for the options purchased or sold, for some options no
such secondary market may
exist or the market may cease to exist. If the Fund cannot
enter into a closing
purchase transaction with
17
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
respect to a call option it has written, the Fund will
continue to be subject to
the risk that its potential loss upon exercise of the
option will increase as a
result of any increase in the value of the underlying
security. The Fund could
also face higher transaction costs, including brokerage
commissions, as a result
of its options transactions.
Repurchase Agreements. The Fund bears a risk of loss
in the event that the
other party to a repurchase agreement defaults on its
obligations and the Fund
is delayed or prevented from exercising its rights to
dispose of the underlying
securities, including the risk of a possible decline in
the value of the
underlying securities during the period in which the Fund
seeks to assert its
rights to them, the risk of incurring expenses associated
with asserting those
rights and the risk of losing all or a part of the income
from the agreement.
Foreign Securities. Certain risks are involved in
investing in the
securities of companies and governments of foreign nations
that go beyond the
usual risks inherent in U.S. investments. These risks
include those resulting
from revaluation of currencies, future adverse political
and economic
developments, the possible imposition of restrictions on
the repatriation of
currencies or other foreign governmental laws or
restrictions, reduced
availability of public information concerning issuers and
the lack of uniform
accounting, auditing and financial reporting standards or
of other regulatory
practices and requirements comparable to those applicable
to domestic companies.
The value of the assets of the Fund invested in foreign
securities may be
adversely affected by fluctuations in value of one or more
foreign currencies
relative to the dollar. Moreover, securities of many
foreign companies may be
less liquid and their prices more volatile than those of
securities of
comparable domestic companies. In addition, the
possibility exists in certain
foreign countries of expropriation, nationalization,
confiscatory taxation and
limitations on the use or removal of funds or other assets
of the Fund,
including the withholding of dividends. Foreign securities
may be subject to
foreign government taxes that could reduce the yield on
such securities. Because
the Fund will invest in securities denominated or quoted
in currencies other
than the U.S. dollar, changes in foreign currency exchange
rates may adversely
affect the value of portfolio securities and the
appreciation or depreciation of
investments. Investment in foreign securities may also
result in higher expenses
due to the cost of converting foreign currency to U.S.
dollars, the payment of
fixed brokerage commissions on foreign exchanges, which
generally are higher
than commissions on domestic exchanges, and the expense of
maintaining
securities with foreign custodians.
Securities of Developing Countries. A developing
country generally is
considered to be a country that is in the initial stages
of its
industrialization cycle.
18
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Investment Objective and Management Policies (continued)
- ----------------------------------------------------------
- ----------------------
Investing in the equity and fixed-income markets of
developing countries
involves exposure to economic structures that are
generally less diverse and
mature, and to political systems that can be expected to
have less stability
than those of developed countries. Historical experience
indicates the markets
of developing countries have been more volatile than the
markets of the more
mature economies of developed countries; however, such
markets often have higher
rates of return to investors.
Gold Securities. Historically, stock prices of
companies involved in
gold-related industries have been volatile. Economic and
political conditions
prevailing in the countries that are the largest producers
of gold, particularly
the Republic of South Africa and the former Soviet Union,
may adversely affect
the value of the Gold Securities held by the Fund and may
present certain risks
that do not occur in domestic investments.
PORTFOLIO TRANSACTIONS AND TURNOVER
All orders for transactions in securities or options
on behalf of the Fund
are placed by Strategy Advisers with broker-dealers that
Strategy Advisers
selects, including Smith Barney and other affiliated
brokers. The Fund may
utilize Smith Barney or a broker that is affiliated with
Smith Barney in
connection with a purchase or sale of securities when
Strategy Advisers believes
that the charges for the transaction do not exceed usual
and customary levels.
The Fund also may use Smith Barney as a commodities broker
in connection with
entering into futures contracts and commodity options.
Smith Barney has agreed
to charge the Fund commodity commissions at rates
comparable to those charged by
Smith Barney to its most favored clients for comparable
trades in comparable
accounts. In selecting a broker for a transaction,
including Smith Barney or its
affiliates, the primary consideration is prompt and
effective execution of
orders at the most favorable price. Subject to that
primary consideration,
dealers may be selected for research, statistical or other
services to enable
SBMFM to supplement its own research and analysis with the
views and information
of other securities firms.
Short-term gains realized from portfolio transactions
are taxable to share
holders as ordinary income. In addition, higher portfolio
turnover rates can
result in corresponding increases in brokerage
commissions. The Fund will not
consider portfolio turnover rate a limiting factor in
making investment
decisions consistent with its objective and policies.
19
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Valuation of Shares
- ----------------------------------------------------------
- ----------------------
The Fund's net asset value per share is determined as
of the close of
regular trading on the NYSE on each day that the NYSE is
open, by dividing the
value of the Fund's net assets attributable to each Class
by the total number of
shares of the Class outstanding.
Generally, the Fund's investments are valued at
market value or, in the
absence of a market value with respect to any securities,
at fair value as
determined by or under the direction of the Fund's Board
of Trustees. Short-term
investments that mature in 60 days or less are valued at
amortized cost whenever
the Trustees determine that amortized cost is fair value.
Further information
regarding the Fund's valuation policies is contained in
the Statement of
Additional Information.
- ----------------------------------------------------------
- ----------------------
Dividends, Distributions and Taxes
- ----------------------------------------------------------
- ----------------------
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute substantially all
of its net investment
income (that is, its income other than its net realized
capital gains)
quarterly, and to declare and pay its net realized capital
gains, if any, once a
year, normally at the end of the year in which earned or
at the beginning of the
next year.
If a shareholder does not otherwise instruct,
dividends and capital gains
distributions will be reinvested automatically in
additional shares of the same
Class at net asset value, subject to no sales charge or
CDSC. In order to avoid
the application of a 4.00% nondeductible excise tax on
certain undistributed
amounts of ordinary income and capital gains, the Fund may
make an additional
distribution shortly before December 31 in each year of
any undistributed
ordinary income or capital gains and expects to pay any
other dividends and
distributions necessary to avoid the application of this
tax.
The per share dividends on Class B and Class C shares
of the Fund may be
lower than the per share dividends on Class A and Class Y
shares principally as
a result of the distribution fee applicable with respect
to Class B and Class C
shares. The per share dividends on Class A shares of the
Fund may be lower than
the per share dividends on Class Y shares principally as a
result of the service
fee applicable to Class A shares. Distributions of capital
gains, if any, will
be in the same amount for Class A, Class B, Class C and
Class Y shares.
TAXES
The Fund has qualified and intends to continue to
qualify each year as a
regulated investment company under the Code. Dividends
paid from net investment
20
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Dividends, Distributions and Taxes (continued)
- ----------------------------------------------------------
- ----------------------
income and distributions of net realized short-term
capital gains are taxable to
shareholders as ordinary income, regardless of how long
shareholders have held
their Fund shares and whether such dividends and
distributions are received in
cash or reinvested in additional Fund shares.
Distributions of net realized
long-term capital gains will be taxable to shareholders as
long-term capital
gains, regardless of how long shareholders have held Fund
shares and whether
such distributions are received in cash or are reinvested
in additional Fund
shares. Furthermore, as a general rule, a shareholder's
gain or loss on a sale
or redemption of Fund shares will be a long-term capital
gain or loss if the
shareholder has held the shares for more than one year and
will be a short-term
capital gain or loss if the shareholder has held the
shares for one year or
less. Some of the Fund's dividends declared from net
investment income may
qualify for the Federal dividends-received deduction for
corporations.
Statements as to the tax status of each shareholder's
dividends and
distributions are mailed annually. Each shareholder also
will receive, if
appropriate, various written notices after the close of
the Fund's prior taxable
year as to the Federal income tax status of his or her
dividends and
distributions which were received from the Fund during the
Fund's prior taxable
year. Shareholders should consult their tax advisors about
the status of the
Fund's dividends and distributions for state and local tax
liabilities.
- ----------------------------------------------------------
- ----------------------
Purchase of Shares
- ----------------------------------------------------------
- ----------------------
GENERAL
The Fund offers four Classes of shares. Class A
shares are sold to
investors with an initial sales charge and Class B and
Class C shares are sold
without an initial sales charge but are subject to a CDSC
payable upon certain
redemptions. Class Y shares are sold without an initial
sales charge or CDSC and
are available only to investors investing a minimum of
$5,000,000 (except for
purchases of Class Y shares by Smith Barney Concert Series
Inc., for which there
is no minimum purchase amount). See "Prospectus Summary--
Alternative Purchase
Arrangements" for a discussion of factors to consider in
selecting which Class
of shares to purchase.
Purchases of Fund shares must be made through a
brokerage account
maintained with Smith Barney, an Introducing Broker or an
investment dealer in
the selling group, except for investors purchasing shares
of the Fund through a
qualified retirement plan who may do so directly through
First Data. When
purchasing shares
21
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
of the Fund, investors must specify whether the purchase
is for Class A, Class
B, Class C or Class Y shares. No maintenance fee will be
charged by the Fund in
connection with a brokerage account through which an
investor purchases or holds
shares.
Investors in Class A, Class B and Class C shares may
open an account by
making an initial investment of at least $1,000 for each
account, or $250 for an
IRA or a Self-Employed Retirement Plan in the Fund.
Investors in Class Y shares
may open an account by making an initial investment of
$5,000,000. Subsequent
investments of at least $50 may be made for all Classes.
For participants in
retirement plans qualified under Section 403(b)(7) or
Section 401(a) of the
Code, the minimum initial investment requirement for Class
A, Class B and Class
C shares and the subsequent investment requirement for all
Classes in the Fund
is $25. For the Fund's Systematic Investment Plan, the
minimum initial
investment requirement for Class A, Class B and Class C
shares and the minimum
subsequent investment is $50. There are no minimum
investment requirements for
Class A shares for employees of Travelers and its
subsidiaries, including Smith
Barney, and Trustees of the Trust and their spouses and
children. The Fund
reserves the right to waive or change minimums, to decline
any order to purchase
its shares and to suspend the offering of shares from time
to time. Shares
purchased will be held in the share holder's account by
the Fund's transfer
agent, First Data. Share certificates are issued only upon
a shareholder's
written request to First Data.
Purchase orders received by the Fund or Smith Barney
prior to the close of
regular trading on the NYSE, on any day the Fund
calculates its net asset value,
are priced according to the net asset value determined on
that day. Orders
received by dealers or Introducing Brokers prior to the
close of regular trading
on the NYSE on any day the Fund calculates its net asset
value, are priced
according to the net asset value determined on that day,
provided the order is
received by the Fund or Smith Barney prior to Smith
Barney's close of business
(the "trade date"). Payment for Fund shares is due on the
third business day
after the trade date.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at
any time by purchasing
shares through a service known as the Systematic
Investment Plan. Under the
Systematic Investment Plan, Smith Barney or First Data is
authorized through
preauthorized transfers of $50 or more to charge the
regular bank account or
other financial institution indicated by the shareholder
on a monthly or
quarterly basis to provide systematic additions to the
shareholder's Fund
account. A shareholder who has insufficient funds to
complete the transfer will
be charged a fee of up to $25
22
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
by Smith Barney or First Data. The Systematic Investment
Plan also authorizes
Smith Barney to apply cash held in the shareholder's Smith
Barney brokerage
account or redeem the shareholder's shares of a Smith
Barney money market fund
to make additions to the account. Additional information
is available from the
Fund or a Smith Barney Financial Consultant.
INITIAL SALES CHARGE ALTERNATIVE -- Class A Shares
The sales charges applicable to purchases of Class A
shares of the Fund are
as follows:
Sales Charge as Sales Charge
as Dealers
% of % of Amount
Reallowance as
Amount of Investment Offering Price Invested
% of Offering Price
- ----------------------------------------------------------
- ----------------------
Less than $25,000 5.00% 5.26%
4.50%
$25,000-$49,999 4.00 4.17
3.60
$50,000-$99,999 3.50 3.63
3.15
$100,000-$249,999 3.00 3.09
2.70
$250,000-$499,999 2.00 2.04
1.80
$500,000 and more * *
*
==========================================================
======================
* Purchases of Class A shares, which when combined with
current holdings of
Class A shares offered with a sales charge equal or
exceed $500,000 in the
aggregate, will be made at net asset value without any
initial sales charge,
but will be subject to a CDSC of 1.00% on redemptions
made within 12 months
of purchase. The CDSC on Class A shares is payable to
Smith Barney, which
compensates Smith Barney Financial Consultants and
other dealers whose
clients make purchases of $500,000 or more. The CDSC is
waived in the same
circumstances in which the CDSC applicable to Class B
and Class C shares is
waived. See "Deferred Sales Charge Alternatives" and
"Waivers of CDSC."
Members of the selling group may receive up to 90% of
the sales charge and
may be deemed to be underwriters of the Fund as defined in
the Securities Act of
1933, as amended.
The reduced sales charges shown above apply to the
aggregate of purchases
of Class A shares of the Fund made at one time by "any
person," which includes
an individual, his or her spouse and children, or a
trustee or other fiduciary
of a single trust estate or single fiduciary account. The
reduced sales charge
minimums may also be met by aggregating the purchase with
the net asset value of
all Class A shares offered with a sales charge held in
funds sponsored by Smith
Barney listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset
value without a sales
charge in the following circumstances: (a) sales to (i)
Directors, Trustees and
employees of Travelers and its subsidiaries and any of the
Smith Barney Mutual
23
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
Funds; the immediate families of such persons; and to a
pension, profit-sharing
or other benefit plan for such persons and (ii) employees
of members of the
National Association of Securities Dealers, Inc., provided
such sales are made
upon the assurance of the purchaser that the purchase is
made for investment
purposes and that the securities will not be resold except
through redemption of
repurchase; (b) offers of Class A shares to any other
investment company in
connection with the combination of such company with the
Fund by merger,
acquisition of assets or otherwise; (c) purchases of Class
A shares by any
client of a newly employed Smith Barney Financial
Consultant (for a period up to
90 days from the commencement of the Financial
Consultant's employment with
Smith Barney), on the condition the purchase of Class A
shares is made with the
proceeds of the redemption of shares of a mutual fund
which (i) was sponsored by
the Financial Consultant's prior employer, (ii) was sold
to the client by the
Financial Consultant and (iii) was subject to a sales
charge; (d) shareholders
who have redeemed Class A shares in the Fund (or Class A
shares of another fund
of the Smith Barney Mutual Funds that are offered with a
sales charge equal to
or greater than the maximum sales charge of the Fund) and
who wish to reinvest
their redemption proceeds in the Fund, provided the
reinvestment is made within
60 calendar days of the redemption; (e) accounts managed
by registered
investment advisory subsidiaries of Travelers; and (f)
purchases of Class A
shares of the Fund by Section 403(b) or Section 401(a) or
(k) accounts
associated with Copeland Retirement Programs. In order to
obtain such discounts,
the purchaser must provide sufficient information at the
time of purchase to
permit verification that the purchase would qualify for
the elimination of the
sales charge.
RIGHT OF ACCUMULATION
Class A shares of the Fund may be purchased by "any
person" (as defined
above) at a reduced sales charge or at net asset value
determined by aggregating
the dollar amount of the new purchase and the total net
asset value of all Class
A shares of the Fund and of funds sponsored by Smith
Barney that are offered
with a sales charge listed under "Exchange Privilege" then
held by such person
and applying the sales charge applicable to such
aggregate. In order to obtain
such discount, the purchaser must provide sufficient
information at the time of
purchase to permit verification that the purchase
qualifies for the reduced
sales charge. The right of accumulation is subject to
modification or
discontinuance at any time with respect to all shares
purchased thereafter.
GROUP PURCHASES
Upon completion of certain automated systems, a
reduced sales charge or
24
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
purchase at net asset value will also be available to
employees (and partners)
of the same employer purchasing as a group, provided each
participant makes the
minimum initial investment required. The sales charge
applicable to purchases by
each member of such a group will be determined by the
table set forth above
under "Initial Sales Charge Alternative -- Class A
Shares," and will be based
upon the aggregate sales of Class A shares of Smith Barney
Mutual Funds offered
with a sales charge to, and share holdings of, all members
of the group. To be
eligible for such reduced sales charges or to purchase at
net asset value, all
purchases must be pursuant to an employer- or partnership-
sanctioned plan
meeting certain requirements. One such requirement is that
the plan must be open
to specified partners or employees of the employer and its
subsidiaries, if any.
Such plan may, but is not required to, provide for payroll
deductions, IRAs or
investments pursuant to retirement plans under Sections
401 or 408 of the Code.
Smith Barney may also offer a reduced sales charge or net
asset value purchase
for aggregating related fiduciary accounts under such
conditions that Smith
Barney will realize economies of sales efforts and sales
related expenses. An
individual who is a member of a qualified group may also
purchase Class A shares
of the Fund at the reduced sales charge applicable to the
group as a whole. The
sales charge is based upon the aggregate dollar value of
Class A shares offered
with a sales charge that have been previously purchased
and are still owned by
the group, plus the amount of the current purchase. A
"qualified group" is one
which (a) has been in existence for more than six months,
(b) has a purpose
other than acquiring Fund shares at a discount and (c)
satisfies uniform
criteria which enable Smith Barney to realize economies of
scale in its costs of
distributing shares. A qualified group must have more than
10 members, must be
available to arrange for group meetings between
representatives of the Fund and
the members, and must agree to include sales and other
materials related to the
Fund in its publications and mailings to members at no
cost to Smith Barney. In
order to obtain such reduced sales charge or to purchase
at net asset value, the
purchaser must provide sufficient information at the time
of purchase to permit
verification that the purchase qualifies for the reduced
sales charge. Approval
of group purchase reduced sales charge plans is subject to
the discretion of
Smith Barney.
LETTER OF INTENT
Class A Shares. A Letter of Intent for amounts of
$50,000 or more provides
an opportunity for an investor to obtain a reduced sales
charge by aggregating
investments over a 13 month period, provided that the
investor refers to such
Letter when placing orders. For purposes of a Letter of
Intent, the "Amount of
Investment" as referred to in the preceding sales charge
table includes
purchases of all Class A shares of the Fund and other
funds of the Smith Barney
Mutual Funds offered with a sales charge over the 13 month
period based on the
total amount of intended purchases plus the value of all
Class A
25
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
shares previously purchased and still owned. An
alternative is to compute the 13
month period starting up to 90 days before the date of
execution of a Letter of
Intent. Each investment made during the period receives
the reduced sales charge
applicable to the total amount of the investment goal. If
the goal is not
achieved within the period, the investor must pay the
difference between the
sales charges applicable to the purchases made and the
charges previously paid,
or an appropriate number of escrowed shares will be
redeemed. Please contact a
Smith Barney Financial Consultant or First Data to obtain
a Letter of Intent
application.
Class Y Shares. A Letter of Intent may also be used
as a way for investors
to meet the minimum investment requirement for Class Y
shares. Such investors
must make an initial minimum purchase of $1,000,000 in
Class Y shares of the
Fund and agree to purchase a total of $5,000,000 of Class
Y shares of the same
Fund within six months from the date of the Letter. If a
total investment of
$5,000,000 is not made within the six-month period, all
Class Y shares purchased
to date will be transferred to Class A shares, where they
will be subject to all
fees (including a service fee of 0.25%) and expenses
applicable to the Fund's
Class A shares, which may include a CDSC of 1.00%. The
Fund expects that such
transfer will not be subject to Federal income taxes.
Please contact a Smith
Barney Financial Consultant or First Data for further
information.
DEFERRED SALES CHARGE ALTERNATIVES
"CDSC Shares" are sold at net asset value next
determined without an
initial sales charge so that the full amount of an
investor's purchase payment
may be immediately invested in the Fund. A CDSC, however,
may be imposed on
certain redemptions of these shares. "CDSC Shares" are:
(a) Class B shares; (b)
Class C shares; and (c) Class A shares which when combined
with Class A shares
offered with a sales charge currently held by an investor
equal or exceed
$500,000 in the aggregate.
Any applicable CDSC will be assessed on an amount
equal to the lesser of
the original cost of the shares being redeemed or their
net asset value at the
time of redemption. CDSC Shares that are redeemed will not
be subject to a CDSC
to the extent that the value of such shares represents:
(a) capital appreciation
of Fund assets; (b) reinvestment of dividends or capital
gain distributions; (c)
with respect to Class B shares, shares redeemed more than
five years after their
purchase; or (d) with respect to Class C shares and Class
A shares that are CDSC
Shares, shares
26
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
redeemed more than 12 months after their purchase.
Class C shares and Class A shares that are CDSC
shares are subject to a
1.00% CDSC if redeemed within 12 months of purchase. In
circumstances in which
the CDSC is imposed on Class B shares, the amount of the
charge will depend on
the number of years since the shareholder made the
purchase payment from which
the amount is being redeemed. Solely for purposes of
determining the number of
years since a purchase payment, all purchase payments made
during a month will
be aggregated and deemed to have been made on the last day
of the preceding
Smith Barney statement month. The following table sets
forth the rates of the
charge for redemptions of Class B shares by shareholders,
except in the case of
purchases by Participating Plans, as described below. See
"Purchase of Shares --
Smith Barney 401(k) Program."
Year Since Purchase
Payment was Made
CDSC
- ----------------------------------------------------------
- ----------------------
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth
0.00
Seventh
0.00
Eighth
0.00
==========================================================
======================
Class B shares automatically will convert to Class A
shares eight years
after the date on which they were purchased and thereafter
will no longer be
subject to any distribution fees. There also will be
converted at that time such
proportion of Class B Dividend Shares owned by the
shareholder as the total
number of his or her Class B shares converting at the time
bears to the total
number of outstanding Class B shares (other than Class B
Dividend Shares) owned
by the shareholder. Shareholders who held Class B shares
of Smith Barney
Shearson Short-Term World Income Fund (the "Short-Term
World Income Fund") that
were held on July 15, 1994 and who subsequently exchanged
those shares for Class
B shares of the Fund will be offered the opportunity to
exchange all such Class
B shares for Class A shares of the Fund four years after
the date on which those
shares were deemed to have been purchased. Holders of such
Class B shares will
be notified of the pending exchange in writing
approximately 30 days before the
fourth anniversary of the purchase date and, unless the
exchange has been
rejected in writing, the exchange will occur on or about
the fourth anniversary
date. See "Prospectus Summary --Alternative Purchase
Arrangements -- Class B
Shares Conversion Feature."
27
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
The length of time that CDSC Shares acquired through
an exchange have been
held will be calculated from the date that the shares
exchanged were initially
acquired in one of the other Smith Barney Mutual Funds,
and Fund shares being
redeemed will be considered to represent, as applicable,
capital appreciation or
dividend and capital gain distribution reinvestments in
such other funds. For
Federal income tax purposes, the amount of the CDSC will
reduce the gain or
increase the loss, as the case may be, on the amount
realized on redemption. The
amount of any CDSC will be paid to Smith Barney.
To provide an example, assume an investor purchased
100 Class B shares at
$10 per share for a cost of $1,000. Subsequently, the
investor acquired 5
additional shares through dividend reinvestment. During
the fifteenth month
after the purchase, the investor decided to redeem $500 of
the investment.
Assuming at the time of the redemption the net asset value
had appreciated to
$12 per share, the value of the investor's shares would be
$1,260 (105 shares at
$12 per share). The CDSC would not be applied to the
amount which represents
appreciation ($200) and the value of the reinvested
dividend shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500
minus $260) would be
charged at a rate of 4.00% (the applicable rate for Class
B shares) for a total
deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see
"Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less
than 1% per month of the
value of the shareholder's shares at the time the
withdrawal plan commences (see
"Automatic Cash Withdrawal Plan"), provided, however, that
automatic cash
withdrawals in amounts equal to or less than 2% per month
of the value of the
share holder's shares will be permitted for withdrawal
plans that were
established prior to November 7, 1994; (c) redemptions of
shares within 12
months following the death or disability of the
shareholder; (d) redemption of
shares made in connection with qualified distributions
from retirement plans or
IRAs upon the attainment of age 59 1/2; (e) involuntary
redemptions; and (f)
redemptions of shares in connection with a combination of
the Fund with any
investment company by merger, acquisition of assets or
otherwise. In addition, a
shareholder who has redeemed shares from other funds of
the Smith Barney Mutual
Funds may, under certain circumstances, reinvest all or
part of the redemption
proceeds within 60 days and receive pro rata credit for
any CDSC imposed on the
prior redemption.
CDSC waivers will be granted subject to confirmation
(by Smith Barney in
the case of shareholders who are also Smith Barney clients
or by First Data in
the case of all other shareholders) of the shareholder's
status or holdings, as
the case may be.
28
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
SMITH BARNEY 401(K) PROGRAM
Investors may be eligible to participate in the Smith
Barney 401(k)
Program, which is generally designed to assist plan
sponsors in the creation and
operation of retirement plans under Section 401(a) of the
Code. To the extent
applicable, the same terms and conditions are offered to
all Participating Plans
in the Smith Barney 401(k) Program.
The Fund offers to Participating Plans Class A, Class
B, Class C and Class
Y shares, as investment alternatives under the Smith
Barney 401(k) Program.
Class A, Class B and Class C shares acquired through the
Smith Barney 401(k)
Program are subject to the same service and/or
distribution fees as, but
different sales charge and CDSC schedules than, the Class
A, Class B and Class C
shares acquired by other investors. Similar to those
available to other
investors, Class Y shares acquired through the Smith
Barney 401(k) Program are
not subject to any initial sales charge, CDSC or service
or distribution fees.
Once a Participating Plan has made an initial investment
in the Fund, all of its
subsequent investments in the Fund must be in the same
Class of shares, except
as otherwise described below.
Class A Shares. Class A shares of the Fund are
offered without any initial
sales charge to any Participating Plan that purchases from
$500,000 to
$4,999,999 of Class A shares of one or more funds of the
Smith Barney Mutual
Funds. Class A shares acquired through the Smith Barney
401(k) Program after
November 7, 1994 are subject to a CDSC of 1.00% of
redemption proceeds, if the
Participating Plan terminates within four years of the
date the Participating
Plan first enrolled in the Smith Barney 401(k) Program.
Class B Shares. Class B shares of the Fund are
offered to any Participating
Plan that purchases less than $250,000 of one or more
funds of the Smith Barney
Mutual Funds. Class B shares acquired through the Smith
Barney 401(k) Program
are subject to a CDSC of 3.00% of redemption proceeds, if
the Participating Plan
terminates within eight years of the date the
Participating Plan first enrolled
in the Smith Barney 401(k) Program.
Eight years after the date the Participating Plan
enrolled in the Smith
Barney 401(k) Program, it will be offered the opportunity
to exchange all of its
Class B shares for Class A shares of the Fund. Such Plans
will be notified of
the pending exchange in writing approximately 60 days
before the eighth
anniversary of the enrollment date and, unless the
exchange has been rejected in
writing, the exchange will occur on or about the eighth
anniversary date. Once
the exchange has occurred, a Participating Plan will not
be eligible to acquire
additional Class B shares of the Fund but instead may
acquire Class A shares of
the Fund. If the Participating Plan elects not to exchange
all of its Class B
shares at that time, each Class B share held by the
29
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
Participating Plan will have the same conversion feature
as Class B shares held
by other investors. See "Purchase of Shares -- Deferred
Sales Charge
Alternatives."
Class C Shares. Class C shares of the Fund are
offered to any Participating
Plan that purchases from $250,000 to $499,999 of one or
more funds of the Smith
Barney Mutual Funds. Class C shares acquired through the
Smith Barney 401(k)
Program after November 7, 1994 are subject to a CDSC of
1.00% of redemption
proceeds, if the Participating Plan terminates within four
years of the date the
Participating Plan first enrolled in the Smith Barney
401(k) Program. In any
year after the date a Participating Plan enrolled in the
Smith Barney 401(k)
Program if its total Class C holdings equal at least
$500,000 as of the calendar
year-end, the Participating Plan will be offered the
opportunity to exchange all
of its Class C shares for Class A shares of the Fund. Such
Plans will be
notified in writing within 30 days after the last business
day of the calendar
year, and unless the exchange offer has been rejected in
writing, the exchange
will occur on or about the last business day of the
following March. Once the
exchange has occurred, a Participating Plan will not be
eligible to acquire
Class C shares of the Fund but instead may acquire Class A
shares of the Fund.
Class C shares not converted will continue to be subject
to the distribution
fee.
Class Y Shares. Class Y shares of the Fund are
offered without any service
or distribution fees, sales charge or CDSC to any
Participating Plan that
purchases $5,000,000 or more of Class Y shares of one or
more funds of the Smith
Barney Mutual Funds.
No CDSC is imposed on redemptions of CDSC Shares to
the extent that the net
asset value of the shares redeemed does not exceed the
current net asset value
of the shares purchased through reinvestment of dividends
or capital gain
distributions, plus (a) with respect to Class A and Class
C shares, the current
net asset value of such shares purchased more than one
year prior to redemption
and, with respect to Class B shares, the current net asset
value of Class B
shares purchased more than eight years prior to the
redemption, plus (b) with
respect to Class A and Class C shares, increases in the
net asset value of the
shareholder's Class A or Class C shares above the purchase
payments made during
the preceding year and, with respect to Class B shares,
increases in the net
asset value of the shareholder's Class B shares above the
purchase payments made
during the preceding eight years. Whether or not the CDSC
applies to a
Participating Plan depends on the number of years since
the Participating Plan
first became enrolled in the Smith Barney 401(k) Program,
unlike the
applicability of the CDSC to other shareholders, which
depends on the number of
years since those shareholders made the purchase payment
from which the amount
is being redeemed.
30
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Purchase of Shares (continued)
- ----------------------------------------------------------
- ----------------------
The CDSC will be waived on redemptions of CDSC Shares
in connection with
lump-sum or other distributions made by a Participating
Plan as a result of: (a)
the retirement of an employee in the Participating Plan;
(b) the termination of
employment of an employee in the Participating Plan; (c)
the death or disability
of an employee in the Participating Plan; (d) the
attainment of age 591/2 by an
employee in the Participating Plan; (e) hardship of an
employee in the
Participating Plan to the extent permitted under Section
401(k) of the Code; or
(f) redemptions of shares in connection with a loan made
by the Participating
Plan to an employee.
Participating Plans wishing to acquire shares of the
Fund through the Smith
Barney 401(k) Program must purchase such shares directly
from First Data. For
further information regarding the Smith Barney 401(k)
Program, investors should
contact a Smith Barney Financial Consultant.
- ----------------------------------------------------------
- ----------------------
Exchange Privilege
- ----------------------------------------------------------
- ----------------------
Except as otherwise noted below, shares of each Class
may be exchanged at
the net asset value next determined for shares of the same
Class in the
following funds of the Smith Barney Mutual Funds, to the
extent shares are
offered for sale in the shareholder's state of residence.
Exchanges of Class A,
Class B and Class C shares are subject to minimum
investment requirements and
all shares are subject to the other requirements of the
fund into which
exchanges are made and a sales charge differential may
apply.
FUND NAME
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Natural Resources Fund
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Equity Income Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Utilities Fund
31
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
Taxable Fixed-Income Funds
* Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
** Smith Barney Funds, Inc. -- Income Return Account
Portfolio
Smith Barney Funds, Inc. -- Monthly Payment
Government Portfolio
+ Smith Barney Funds, Inc. -- Short-Term U.S. Treasury
Securities Portfolio
Smith Barney Funds, Inc. -- U.S. Government
Securities Portfolio
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Tax-Exempt Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
** Smith Barney Intermediate Maturity California
Municipals Fund
** Smith Barney Intermediate Maturity New York
Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
** Smith Barney Muni Funds -- California Limited Term
Portfolio
** Smith Barney Muni Funds -- Florida Limited Term
Portfolio
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
** Smith Barney Muni Funds -- Limited Term Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Ohio Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
International Funds
Smith Barney World Funds, Inc.-- Emerging Markets
Portfolio
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- Global Government
Bond Portfolio
Smith Barney World Funds, Inc. -- International
Balanced Portfolio
Smith Barney World Funds, Inc. -- International
Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
32
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
Smith Barney Concert Series
Smith Barney Concert Series Inc. -- Balanced
Portfolio
Smith Barney Concert Series Inc. -- Conservative
Portfolio
Smith Barney Concert Series Inc. -- Growth Portfolio
Smith Barney Concert Series Inc. -- High Growth
Portfolio
Smith Barney Concert Series Inc. -- Income Portfolio
Money Market Funds
++ Smith Barney Exchange Reserve Fund
+++ Smith Barney Money Funds, Inc. -- Cash Portfolio
+++ Smith Barney Money Funds, Inc. -- Government
Portfolio
*** Smith Barney Money Funds, Inc. -- Retirement
Portfolio
+ Smith Barney Municipal Money Market Fund, Inc.
+ Smith Barney Muni Funds--California Money Market
Portfolio
+ Smith Barney Muni Funds--New York Money Market
Portfolio
- ----------------------------------------------------------
- ----------------------
* Available for exchange with Class A, Class B and Class
Y shares of the Fund.
In addition, shareholders who own Class C shares of
the Fund through the
Smith Barney 401(k) Program may exchange those shares
for Class C shares of
this fund.
** Available for exchange with Class A, Class C and Class
Y shares of the Fund.
*** Available for exchange with Class A shares of the
Fund.
+ Available for exchange with Class A and Class Y shares
of the Fund.
++ Available for exchange with Class B and Class C shares
of the Fund.
+++ Available for exchange with Class A and Class Y shares
of the Fund. In
addition, shareholders who own Class C shares of the
Fund through the Smith
Barney 401(k) Program may exchange those shares for
Class C shares of this
fund.
Class A Exchanges. Class A shares of the Smith Barney
Mutual Funds sold
without a sales charge or with a maximum sales charge of
less than the maximum
charged by other Smith Barney Mutual Funds will be subject
to the appropriate
"sales charge differential" upon the exchange of such
shares for Class A shares
of a fund sold with a higher sales charge. The "sales
charge differential" is
limited to a percentage rate no greater than the excess of
the sales charge rate
applicable to purchases of shares of the mutual fund being
acquired in the
exchange over the sales charge rate(s) actually paid on
the mutual fund shares
relinquished in the exchange and on any predecessor of
those shares. For
purposes of the exchange privilege, shares obtained
through automatic
reinvestment of dividends and capital gain distributions
are treated as having
paid the same sales charges applicable to the shares on
which the dividends or
distributions were paid; however, except in the case of
the Smith Barney 401(k)
Program, if no sales charge was imposed upon the
33
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
initial purchase of the shares, any shares obtained
through automatic
reinvestment will be subject to a sales charge
differential upon exchange.
Class B Exchanges. In the event a Class B shareholder
(unless such
shareholder was a Class B shareholder of the Short-Term
World Income Fund on
July 15, 1994) wishes to exchange all or a portion of his
or her shares in any
of the funds imposing a higher CDSC than that imposed by
the Fund, the exchanged
Class B shares will be subject to the higher applicable
CDSC. Upon an exchange,
the new Class B shares will be deemed to have been
purchased on the same date as
the Class B shares of the Fund that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C
shares will be deemed
to have been purchased on the same date as the Class C
shares of the Fund that
have been exchanged.
Class Y Exchanges. Class Y shareholders of the Fund
who wish to exchange
all or a portion of their Class Y shares for Class Y
shares in any of the funds
identified above may do so without imposition of any
charge.
Additional Information Regarding the Exchange
Privilege. Although the
exchange privilege is an important benefit, excessive
exchange transactions can
be detrimental to the Fund's performance and its
shareholders. Strategy Advisers
may determine that a pattern of frequent exchanges is
excessive and contrary to
the best interests of the Fund's other shareholders. In
this event, Strategy
Advisers will notify Smith Barney and the Fund may, at its
discretion, decide to
limit additional purchases and/or exchanges by a
shareholder. Upon such a
determination, the Fund will provide notice in writing or
by telephone to the
shareholder at least 15 days prior to suspending the
exchange privilege and
during the 15 day period the shareholder will be required
to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund
or exchange into any
of the funds of the Smith Barney Mutual Funds ordinarily
available, which
position the shareholder would be expected to maintain for
a significant period
of time. All relevant factors will be considered in
determining what constitutes
an abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by
telephone. See
"Redemption of Shares -- Telephone Redemption and Exchange
Program." Exchanges
will be processed at the net asset value next determined
after the redemption
proceeds are available. Redemption procedures discussed
below are also
applicable for exchanging shares, and exchanges will be
made upon receipt of all
supporting documents in proper form. If the account
registration of the shares
of the fund being acquired is identical to the
registration of the shares of the
fund exchanged, no signature guarantee is required. A
capital gain or loss for
tax purposes will be realized upon the exchange, depending
upon the cost or
other basis
34
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Exchange Privilege (continued)
- ----------------------------------------------------------
- ----------------------
of shares redeemed. Before exchanging shares, investors
should read the current
prospectus describing the shares to be acquired. The Fund
reserves the right to
modify or discontinue exchange privileges upon 60 days'
prior notice to
shareholders.
- ----------------------------------------------------------
- ----------------------
Redemption of Shares
- ----------------------------------------------------------
- ----------------------
The Fund is required to redeem the shares of the Fund
tendered to it, as
described below, at a redemption price equal to their net
asset value per share
next determined after receipt of a written request in
proper form at no charge
other than any applicable CDSC. Redemption requests
received after the close of
regular trading on the NYSE are priced at the net asset
value next determined.
If a shareholder holds shares in more than one Class,
any request for
redemption must specify the Class being redeemed. In the
event of a failure to
specify which Class, or if the investor owns fewer shares
of the Class than
specified, the redemption request will be delayed until
the Fund's transfer
agent receives further instructions from Smith Barney, or
if the shareholder's
account is not with Smith Barney, from the shareholder
directly. The redemption
proceeds will be remitted on or before the third day
following receipt of proper
tender, except on any days on which the NYSE is closed or
as permitted under the
Investment Company Act of 1940, as amended (the "1940
Act") in extraordinary
circumstances. Generally, if the redemption proceeds are
remitted to a Smith
Barney brokerage account, these funds will not be invested
for the shareholder's
benefit without specific instruction and Smith Barney will
benefit from the use
of temporarily uninvested funds. Redemption proceeds for
shares purchased by
check, other than a certified or official bank check, will
be remitted upon
clearance of the check, which may take up to ten days or
more.
Shares held by Smith Barney as custodian must be
redeemed by submitting a
written request to a Smith Barney Financial Consultant.
Shares other than those
held by Smith Barney as custodian may be redeemed through
an investor's
Financial Consultant, Introducing Broker or dealer in the
selling group or by
submitting a written request for redemption to:
Smith Barney Strategic Investors Fund
Class A, B, C or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
35
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Redemption of Shares (continued)
- ----------------------------------------------------------
- ----------------------
A written redemption request must (a) state the Class
and number or dollar
amount of shares to be redeemed, (b) identify the
shareholder's account number
and (c) be signed by each registered owner exactly as the
shares are registered.
If the shares to be redeemed were issued in certificate
form, the certificates
must be endorsed for transfer (or be accompanied by an
endorsed stock power) and
must be submitted to First Data together with the
redemption request. Any
signature appearing on a redemption request in excess of
$2,000, share
certificate or stock power must be guaranteed by an
eligible guarantor
institution such as a domestic bank, savings and loan
institution, domestic
credit union, member bank of the Federal Reserve System or
member firm of a
national securities exchange. Written redemption requests
of $2,000 or less do
not require a signature guarantee unless more than one
such redemption request
is made in any 10-day period or the redemption proceeds
are to be sent to an
address other than the address of record. Unless otherwise
directed, redemption
proceeds will be mailed to an investor's address of
record. First Data may
require additional supporting documents for redemptions
made by corporations,
executors, administrators, trustees or guardians. A
redemption request will not
be deemed properly received until First Data receives all
required documents in
proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash
withdrawal plan, under which
shareholders who own shares with a value of at least
$10,000 may elect to
receive cash payments of at least $50 monthly or
quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans
only where the
shareholder is eligible to receive qualified distributions
and has an account
value of at least $5,000. The withdrawal plan will be
carried over on exchanges
between funds or Classes of the Fund. Any applicable CDSC
will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per
month of the value of
the shareholder's shares subject to the CDSC at the time
the withdrawal plan
commences. (With respect to withdrawal plans in effect
prior to November 7,
1994, any applicable CDSC will be waived on amounts
withdrawn that do not exceed
2.00% per month of the value of the shareholder's shares
subject to the CDSC.)
For further information regarding the automatic cash
withdrawal plan,
shareholders should contact a Smith Barney Financial
Consultant.
TELEPHONE REDEMPTION AND EXCHANGE PROGRAM
Shareholders who do not have a Smith Barney brokerage
account may be
eligible to redeem and exchange Fund shares by telephone.
To determine if a
share-
36
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Redemption of Shares (continued)
- ----------------------------------------------------------
- ----------------------
holder is entitled to participate in this program, he or
she should
contact First Data at 1-800-331-1710. Once eligibility is
confirmed, the
shareholder must complete and return a Telephone/Wire
Authorization Form, along
with a signature guarantee that will be provided by First
Data upon request.
(Alternatively, an investor may authorize telephone
redemption on the new
account application with the applicant's signature
guarantee when making his/her
initial investment in the Fund.)
Redemptions. Redemption requests of up to $10,000 of
any class or classes
of the Fund's shares may be made by eligible shareholders
by calling First Data
at 1-800-331-1710. Such requests may be made between 9:00
a.m. and 5:00 p.m.
(New York City time) on any day the NYSE is open.
Redemption requests received
after the close of regular trading on the NYSE are priced
at the net asset value
next determined. Redemptions of shares (i) by retirement
plans or (ii) for which
certificates have been issued are not permitted under this
program.
A shareholder will have the option of having the
redemption proceeds mailed
to his/her address of record or wired to a bank account
predesignated by the
share holder. Generally, redemption proceeds will be
mailed or wired, as the
case may be, on the next business day following the
redemption request. In order
to use the wire procedures, the bank receiving the
proceeds must be a member of
the Federal Reserve System or have a correspondent
relationship with a member
bank. The Fund reserves the right to charge shareholders a
nominal fee for each
wire redemption. Such charges, if any, will be assessed
against the
shareholder's account from which shares were redeemed. In
order to change the
bank account designated to receive redemption proceeds, a
shareholder must
complete a new Telephone/Wire Authorization Form and, for
the protection of the
shareholder's assets, will be required to provide a
signature guarantee and
certain other documentation.
Exchanges. Eligible shareholders may make exchanges
by telephone if the
account registration of the shares of the fund being
acquired is identical to
the registration of the shares of the fund exchanged. Such
exchange requests may
be made by calling First Data at 1-800-331-1710 between
9:00 a.m. and 5:00 p.m.
(New York City time) on any day on which the NYSE is open.
Exchange requests
received after the close of regular trading on the NYSE
are processed at the net
asset value next determined.
Additional Information regarding Telephone Redemption
and Exchange Program.
Neither the Fund nor its agents will be liable for
following instructions
communicated by telephone that are reasonably believed to
be genuine. The Fund
and its agents will employ procedures designed to verify
the identity of the
caller
37
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Redemption of Shares (continued)
- ----------------------------------------------------------
- ----------------------
and legitimacy of instructions (for example, a
shareholder's name and account
number will be required and phone calls may be recorded).
The Fund reserves the
right to suspend, modify or discontinue the telephone
redemption and exchange
program, or to impose a charge for this service at any
time following at least
seven (7) days' prior notice to shareholders.
- ----------------------------------------------------------
- ----------------------
Minimum Account Size
- ----------------------------------------------------------
- ----------------------
The Fund reserves the right to involuntarily
liquidate any shareholder's
account in the Fund if the aggregate net asset value of
the shares held in the
Fund account is less than $500. (If a shareholder has more
than one account in
this Fund, each account must satisfy the minimum account
size.) The Fund,
however, will not redeem shares based solely on market
reductions in net asset
value. Before the Fund exercises such right, shareholders
will receive written
notice and will be permitted 60 days to bring accounts up
to the minimum to
avoid automatic redemption.
- ----------------------------------------------------------
- ----------------------
Performance
- ----------------------------------------------------------
- ----------------------
TOTAL RETURN
From time to time, the Fund may include its total
return, average annual
total return and current dividend return in advertisements
and/or other types of
sales literature. These figures are computed separately
for Class A, Class B,
Class C and Class Y shares of the Fund. These figures are
based on historical
earnings and are not intended to indicate future
performance. Total return is
computed for a specified period of time assuming deduction
of the maximum sales
charge, if any, from the initial amount invested and
reinvestment of all income
dividends and capital gains distributions on the
reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the
value of the
investment at the end of the period so calculated by the
initial amount invested
and subtracting 100%. The standard average annual total
return, as prescribed by
the SEC, is derived from this total return, which provides
the ending redeemable
value. Such standard total return information may also be
accompanied by
nonstandard total return information for differing periods
computed in the same
manner but without annualizing the total return or taking
sales charges into
account. The Fund calculates current dividend return for
each Class by
annualizing the most recent monthly distribution and
38
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Performance (continued)
- ----------------------------------------------------------
- ----------------------
dividing by the net asset value or the maximum public
offering price (including
sales charge) on the last day of the period for which
current dividend return is
presented. The current dividend return for each Class may
vary from time to time
depending on market conditions, the composition of its
investment portfolio and
operating expenses. These factors and possible differences
in the methods used
in calculating current dividend return should be
considered when comparing a
Class' current return to yields published for other
investment companies and
other investment vehicles. The Fund may also include
comparative performance
information in advertising or marketing its shares. Such
performance information
may include data from Lipper Analytical Services, Inc. and
other financial
publications.
- ----------------------------------------------------------
- ----------------------
Management of the Trust and the Fund
- ----------------------------------------------------------
- ----------------------
BOARD OF TRUSTEES
Overall responsibility for management and supervision
of the Trust and the
Fund rests with the Trust's Board of Trustees. The
Trustees approve all
significant agreements between the Trust and the companies
that furnish services
to the Fund, including agreements with the Trust's
distributor, custodian and
transfer agent and the Fund's investment adviser and
administrator. The
day-to-day operations of the Fund are delegated to the
Fund's investment adviser
and administrator. The Statement of Additional Information
contains background
information regarding each Trustee of the Trust and
executive officer of the
Fund.
INVESTMENT ADVISER--STRATEGY ADVISERS
Strategy Advisers, located at 388 Greenwich Street,
New York, New York
10013, serves as the Fund's investment adviser. As
investment adviser, Strategy
Advisers, subject to the supervision and direction of the
Trust's Board of
Trustees, is generally responsible for furnishing, or
causing to be furnished to
the Fund, investment management services. Included among
the specific services
provided by Strategy Advisers as investment adviser are:
the review of all
purchases and sales of portfolio instruments made by the
Fund to assess
compliance with its stated investment objectives and
policies; the monitoring of
the selection of brokers and dealers effecting investment
transactions on behalf
of the Fund; and the payment of reasonable salaries and
expenses of those of the
Fund's officers and employees, and the fees and expenses
of those members of the
Trust's Board of Trustees, who are directors, officers or
employees of Strategy
Advisers. Strategy Advisers provides investment
management, investment advisory
and/or administrative services to
39
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Management of the Trust and the Fund (continued)
- ----------------------------------------------------------
- ----------------------
individual, institutional and investment company clients
that had aggregate
assets under management, as of January 31, 1996, in excess
of $3.3 billion. For
advisory services rendered to the Fund, under an Advisory
Agreement dated August
14, 1995, the Fund pays Strategy Advisers a fee at the
annual rate of 0.55% of
the value of the Fund's average daily net assets.
ADMINISTRATOR--SBMFM
SBMFM serves as the Fund's administrator and
generally assists in all
aspects of the Fund's administration and operation. SBMFM
provides investment
management and administration services to a wide variety
of individual,
institutional and investment companies that had aggregate
assets under
management, as of January 31, 1996, in excess of $74
billion. For administration
services rendered, the Fund pays SBMFM a fee at the annual
rate of 0.20% of the
value of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Robert J. Brady and Ellen S. Cammer, each a Managing
Director of Smith
Barney, have served as portfolio managers of the Fund
since June 15, 1995, and
manage the day-to-day operations of the Fund, including
making all investment
decisions.
Management's discussion and analysis and additional
performance information
regarding the Fund during the fiscal year ended January
31, 1996 is included in
the Annual Report dated January 31, 1996. A copy of the
Annual Report may be
obtained upon request and without charge from a Smith
Barney Financial
Consultant or by writing or calling the Fund at the
address or phone number
listed on page one of this prospectus.
ASSET ALLOCATION CONSULTANT
Smith Barney, located at 388 Greenwich Street, New
York, New York 10013,
serves without compensation as asset allocation consultant
to the Fund. As asset
allocation consultant, Smith Barney provides the asset
allocation mix that may
be a primary determinant of the Fund's investment
performance.
- ----------------------------------------------------------
- ----------------------
Distributor
- ----------------------------------------------------------
- ----------------------
Smith Barney is located at 388 Greenwich Street, New
York, New York 10013.
Smith Barney distributes shares of the Fund as principal
underwriter and as
40
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Distributor (continued)
- ----------------------------------------------------------
- ----------------------
such conducts a continuous offering pursuant to a "best
efforts" arrangement
requiring Smith Barney to take and pay for only such
securities as may be sold
to the public. Pursuant to a plan of distribution adopted
by the Fund under Rule
12b-1 under the 1940 Act (the "Plan"), Smith Barney is
paid a service fee with
respect to Class A, Class B and Class C shares of the Fund
at the annual rate of
0.25% of the value of the average daily net assets of the
respective Class.
Smith Barney is also paid an annual distribution fee with
respect to Class B and
Class C shares at the annual rate of 0.75% of the value of
the average daily net
assets attributable to those Classes. Class B shares which
automatically convert
to Class A shares eight years after the date of original
purchase will no longer
be subject to distribution fees. The fees are used by
Smith Barney to pay its
Financial Consultants for servicing shareholder accounts
and, in the case of
Class B and Class C shares, to cover expenses primarily
intended to result in
the sale of those shares. These expenses include:
advertising expenses; the cost
of printing and mailing prospectuses to potential
investors; payments to and
expenses of Smith Barney Financial Consultants and other
persons who provide
support services in connection with the distribution of
shares; interest and/or
carrying charges; and indirect and overhead costs of Smith
Barney associated
with the sale of Fund shares, including lease, utility,
communications and sales
promotion expenses.
The payments to Smith Barney Financial Consultants
for selling shares of a
Class include a commission or fee paid by the investor or
Smith Barney at the
time of sale and, with respect to Class A, Class B and
Class C shares, a
continuing fee for servicing shareholder accounts for as
long as a shareholder
remains a holder of that Class. Smith Barney Financial
Consultants may receive
different levels of compensation for selling different
Classes of shares.
Payments under the Plan with respect to Class B and
Class C shares are not
tied exclusively to the distribution and shareholder
services expenses actually
incurred by Smith Barney and the payments may exceed such
expenses actually
incurred. The Trust's Board of Trustees will evaluate the
appropriateness of the
Plan and its payment terms on a continuing basis and in so
doing will consider
all relevant factors, including expenses borne by Smith
Barney, amounts received
under the Plan and proceeds of the CDSC.
41
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Additional Information
- ----------------------------------------------------------
- ----------------------
The Trust was organized on January 8, 1986 under the
laws of the
Commonwealth of Massachusetts and is a business entity
commonly known as a
"Massachusetts business trust." The Trust offers shares of
beneficial interest
of separate funds with a par value of $.001 per share. The
Fund offers shares of
beneficial interest currently classified into four Classes
- -- A, B, C and Y.
Each Class represents an identical interest in the Fund's
investment portfolio.
As a result, the Classes have the same rights, privileges
and preferences,
except with respect to: (a) the designation of each Class;
(b) the effect of the
respective sales charges, if any, for each Class; (c) the
distribution and/or
service fees borne by each Class; (d) the expenses
allocable exclusively to each
Class; (e) voting rights on matters exclusively affecting
a single Class; (f)
the exchange privilege of each Class; and (g) the
conversion feature of the
Class B shares. The Trust's Board of Trustees does not
anticipate that there
will be any conflicts among the interests of the holders
of the different
Classes. The Trustees, on an ongoing basis, will consider
whether any such
conflict exists and, if so, take appropriate action.
The Trust does not hold annual shareholder meetings.
There normally will be
no meeting of shareholders for the purpose of electing
Trustees unless and until
such time as less than a majority of the Trustees holding
office have been
elected by shareholders. The Trustees will call a meeting
for any purpose upon
written request of shareholders holding at least 10% of
the Trust's outstanding
shares and the Fund will assist shareholders in calling
such a meeting as
required by the 1940 Act. Shareholders of record owning no
less than two-thirds
of the outstanding shares of the Trust may remove a
Trustee through a
declaration in writing or by vote cast in person or by
proxy at a meeting called
for that purpose.
When matters are submitted for shareholder vote,
shareholders of each Class
will have one vote for each full share owned and a
proportionate, fractional
vote for any fractional share held of that Class.
Generally, shares of the Trust
vote by individual fund on all matters except (a) matters
affecting only the
interests of one or more of the funds, in which case only
shares of the affected
fund or funds would be entitled to vote or (b) when the
1940 Act requires that
shares of the funds be voted in the aggregate. Similarly,
shares of the Fund
will be voted generally on a Fund-wide basis except with
respect to matters
affecting the interests of one Class of shares.
PNC Bank, National Association, is located at 17th
and Chestnut Streets,
Philadelphia, Pennsylvania 19103, and serves as custodian
of the Fund's
investments.
First Data is located at Exchange Place, Boston,
Massachusetts 02109, and
serves as the Trust's transfer agent.
42
<PAGE>
Smith Barney Strategic Investors Fund
- ----------------------------------------------------------
- ----------------------
Additional Information (continued)
- ----------------------------------------------------------
- ----------------------
The Trust sends shareholders of the Fund a semi-
annual report and an
audited annual report, which include listings of the
investment securities held
by the Fund at the end of the reporting period. In an
effort to reduce the
Fund's printing and mailing costs, the Trust plans to
consolidate the mailing of
the Fund's semi-annual and annual reports by household.
This consolidation means
that a household having multiple accounts with the
identical address of record
will receive a single copy of each report. In addition,
the Trust also plans to
consolidate the mailing of the Fund's Prospectus so that a
shareholder having
multiple accounts (that is, individual, IRA and/or Self-
Employed Retirement Plan
accounts) will receive a single Prospectus annually.
Shareholders who do not
want this consolidation to apply to their accounts should
contact a Smith Barney
Financial Consultant or First Data.
43
<PAGE>
Smith Barney
- ------------
A Member of
Travelers Group[Logo]
Smith Barney
Strategic
Investors
Fund
388 Greenwich Street
New York, New York 10013
FUND 38, 233, 246, 454
FD0225 4/96
Smith Barney
EQUITY FUNDS
388 Greenwich Street
New York, New York 10013
(212) 723-9218 STATEMENT
OF ADDITIONAL INFORMATION April 22,
1996
This Statement of Additional Information expands upon
and supplements the information contained in the current
Prospectuses, each dated April 22, 1996 , as amended
or supplemented from time to time, of Smith Barney Equity
Funds (the "Trust") relating to Smith Barney Strategic
Investors Fund ("Strategic Investors Fund") and Smith
Barney Growth and Income Fund ("Growth and Income Fund")
(each, a "Fund" and collectively, the "Funds"), each a
series of the Trust, and should be read in conjunction
with the Prospectuses. The Prospectuses may be obtained
from a Smith Barney Financial Consultant or by writing or
calling the Trust at the address or telephone number set
forth above. This Statement of Additional Information,
although not in itself a prospectus, is incorporated by
reference into the Prospectuses in its entirety.
CONTENTS
For ease of reference, the same section headings are
used in the Prospectuses and in this Statement of
Additional Information, except where shown below:
Management of the
Trust.....................................................
.. .................... ..... 2
Investment Objectives and Management
Policies............................................
6 Purchase of
Shares....................................................
.. ................................... 15
Redemption of
Shares....................................................
.. .............................. 15
Distributor...............................................
.. ....................................................
16 Valuation of
Shares....................................................
.. .................................. 19
Exchange
Privilege.................................................
.. ..................................... 20
Performance Data (See in each Prospectus
"Performance")............................ 21
Taxes (See in each Prospectus "Dividends, Distributions
and Taxes")............ 23
Additional
Information...............................................
.. ................................. 27
Financial
Statements................................................
.. ................................... 27
Appendix..................................................
.. ...................................................
A1
MANAGEMENT OF THE TRUST
The executive officers of the Trust are employees of
certain of the organizations that provide services to the
Trust. These organizations are the following:
Name Service
Smith Barney Inc.
("Smith
Barney")..................................................
.. Distributor
Smith Barney Mutual Funds Management Inc. Investment
Adviser to Growth and Income Fund
("SBMFM").................................................
.. .........and Administrator
Smith Barney Strategy Advisers Inc.
("Strategy
Advisers")...............................................I
nv estment Adviser to Strategic Investors Fund
PNC Bank, National Association
("PNC")...................................................
.. ..............Custodian
First Data Investor Services Group
("First
Data)....................................................
.. .....Transfer Agent
These organizations and the services they perform for
the Trust and the Funds are discussed in the Prospectuses
and in this Statement of Additional Information.
Trustees and Executive Officers of The Trust
The names of the Trustees and the executive officers of
the Trust, together with information as to their principal
business occupations, are set forth below. Each Trustee
who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, as amended (the "1940
Act"), is indicated by
an asterisk.
Lee Abraham, Trustee (Age 67). Retired; formerly Chairman
and Chief Executive Officer of Associated Merchandising
Corporation, a major retail merchandising and sourcing
organization. His address is 35 Old Forge Road, Wilton,
Connecticut 06897.
Antoinette C. Bentley, Trustee (Age 57). Retired; formerly
Senior Vice President and Associate General Counsel of
Crum and Foster, Inc., an insurance holding company. Her
address is 24 Fowler Road, Far Hills, New Jersey 07931.
Allan J. Bloostein, Trustee (Age 65). Consultant; formerly
Vice Chairman of the Board of and Consultant to The May
Department Stores Company; Director of Crystal Brands,
Inc., Melville Corp. and R.G. Barry Corp. His address is
27 West 67th Street, New York, New York 10023.
Richard E. Hanson, Jr., Trustee (Age 53). Headmaster, The
Peck School, Morristown, NJ; prior to July 1, 1994,
Headmaster, Lawrence Country Day School--Woodmere Academy,
Woodmere, New York . His address is 247 South
Street, Morristown, NJ 07960.
*Heath B. McLendon, Chairman of the Board and Investment
Officer (Age 61). Managing Director of Smith Barney and
Chairman of the Board of Strategy Advisers; prior to July
1993, Senior Executive Vice President of Shearson Lehman
Brothers Inc. ("Shearson Lehman Brothers"); Vice Chairman
of Shearson Asset Management, a Director of PanAgora Asset
Management, Inc. and PanAgora Asset Management Limited.
Mr. McLendon also serves as Chairman of the Board of 41
other mutual funds of the Smith Barney Mutual Funds.
His address is 388 Greenwich Street, New York, New
York 10013.
Madelon DeVoe Talley, Trustee (Age 62). Author; Governor
at Large of the National Association of Securities
Dealers, Inc. ; Commissioner of Port Authority of New
York and New Jersey as of 1996 . Her address is 876
Park Avenue, New York, New York 10021.
Jessica M. Bibliowicz, President (Age 35). Executive Vice
President of Smith Barney; prior to 1994, Director of
Sales and Marketing for Prudential Mutual Funds. Ms.
Bibliowicz also serves as President of 39 other mutual
funds of the Smith Barney Mutual Funds. Her address is 388
Greenwich Street, New York, New York, 10013.
R. Jay Gerken, Investment Officer (Age 43). Managing
Director of Smith Barney; prior to July 1993 Managing
Director of Shearson Lehman Advisors. His address is 388
Greenwich Street, New York, New York 10013.
George V. Novello, Investment Officer (Age 52). Managing
Director of Smith Barney; prior to July 1993, Managing
Director of Shearson Lehman Advisors. His address is 388
Greenwich Street, New York, New York 10013.
Lewis E. Daidone, Senior Vice President and Treasurer (Age
37). Managing Director of Smith Barney; Director and
Senior Vice President of SBMFM. Mr. Daidone also serves as
Senior Vice President and Treasurer of 41 other funds of
the Smith Barney Mutual Funds. His address is 388
Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary (Age 44). Managing Director
of Smith Barney; General Counsel and Secretary of SBMFM.
Ms. Sydor also serves as Secretary of 41 other funds of
the Smith Barney Mutual Funds. Her address is 388
Greenwich Street, New York, New York 10013.
Robert J. Brady, Investment Officer (Age 56 ).
Managing Director of Smith Barney. Mr. Brady was
previously Director of Investment Strategy at EF Hutton
and Special Situations Analyst for Forbes Inc. His address
is 388 Greenwich Street, New York, New York 10013.
Ellen S. Cammer, Investment Officer (Age 41 ).
Managing Director of Smith Barney. Her address is 388
Greenwich Street, New York, New York 10013.
As of March 29, 1996, the Trust's Trustees and
officers of the Funds as a group owned less than 1.00% of
the outstanding shares of the Trust.
No officer, director or employee of Smith Barney, or
of any parent or subsidiary receives any compensation from
the Trust for serving as an officer or Trustee of the
Trust. The
Trust pays each Trustee who is not an officer, director or
employee of Smith Barney or any of its affiliates a fee of
$6,000 per annum plus $1,000 per meeting attended and
reimburses each Trustee for travel and out-of-pocket
expenses. For the fiscal year ended January 31, 1996,
such fees and expenses totalled $72,450.00.
For the fiscal year ended January 31, 1996 ,
the Trustees of the Trust were paid the following
compensation:
Aggregate
Compensation
Aggregate Compensation from the
Smith Barney
Trustee(*) from the Fund**
Mutual Funds
Lee Abraham(9)....................................
$52,700 $52,700
Antoinette C. Bentley(9)#......................
48,750 48,750
Allan J. Bloostein(15)............................
52,800 91,300
Richard E. Hanson, Jr.(9)......................
52,800 52,800
Madelon Devoe Talley(10)## ................ 48,050
67,550
(*) Number of directorships/trusteeships held with other
mutual funds in the Smith Barney Mutual Funds.
** The aggregate remunueration paid to the Trustees by
the
Trust for the fiscal year ended January 31, 1996, which
includes reimbursement for travel and out-of-pocket
expenses.
# 1996 fees 100% deferred
## 1996 fees 50% deferred
Investment Advisers and Administrator
SBMFM (formerly known as Smith, Barney Advisers, Inc.)
serves as investment adviser to Growth and Income Fund
pursuant to a transfer of the investment advisory
agreement effective November 7, 1994, from its affiliate,
Mutual Management Corp. Mutual Management Corp. and SBMFM
are both wholly owned subsidiaries of Smith Barney
Holdings Inc. ("Holdings"), which in turn is a wholly
owned subsidiary of Travelers Group Inc. ("Travelers").
The Advisory Agreement (the "Advisory Agreement") is dated
August 31, 1994, and was first approved by the Trust's
Board of Trustees, including a majority of the Trustees
who are not "interested persons" of the Trust or SBMFM
("Independent Trustees") on April 6, 1993. The Advisory
Agreement was most recently approved by the Board of
Trustees, including a majority of the Independent Trustees
of the Trust, on August 9, 1995. The services provided by
SBMFM under the Advisory Agreement are described in the
Prospectus under "Management of the Trust and the Fund."
SBMFM bears all expenses in connection with the
performance of its services and pays the salary of any
officer and employee who is employed by both it and the
Trust. As compensation for investment advisory services
rendered to Growth and Income Fund, the Fund pays a fee
computed daily and paid monthly at the annual rate of
0.45%
of the value of the average daily net assets of the Fund.
SBMFM also serves as administrator to the Funds
pursuant to a written agreement (the "Administration
Agreement") dated August 31, 1994, which was most recently
approved by the Trust's Board of Trustees, including a
majority of the Independent Trustees, on August 9, 1995.
For administration services rendered, the Funds pay
SBMFM a fee at the annual rate of 0.20% of the value of of
the Funds average daily net assets.
Certain of the services provided to the Funds by
SBMFM are described in the Prospectuses under "Management
of the Trust and the Fund." In addition to those services,
SBMFM pays the salaries of all officers and employees who
are employed by SBMFM and the Fund, maintains office
facilities for each Fund, furnishes each Fund with
statistical and research data, clerical help and
accounting, data processing, bookkeeping, internal
auditing and legal services and certain other services
required by the Funds, prepares reports to the Funds'
shareholders and prepares tax returns, reports to and
filings with the Securities and Exchange Commission (the
"SEC") and state Blue Sky authorities. SBMFM bears all
expenses in connection with the performance of its
services.
Strategy Advisers serves as investment adviser to
Strategic Investors Fund pursuant to a written agreement
(the "Strategy Advisory Agreement"), which was approved
most recently by the Trust's Board of Trustees, including
a majority of the Independent Trustees, on August 9, 1995.
Strategy Advisers is a wholly owned subsidiary of
Holdings. Certain of the services provided by Strategy
Advisers under the Strategy Advisory Agreement are
described in the Prospectus under "Management of the Trust
and the Fund." As compensation for Strategy Advisers'
services rendered to Strategic Investors Fund, the Fund
pays a fee computed daily and paid monthly at the annual
rate of .55% of the value of the Fund's average daily net
assets.
Each of SBMFM and Strategy Advisers (each, an
"Adviser" and collectively, the "Advisers") pays the
salaries of all officers and employees who are employed by
both it and the Trust, and maintains office facilities for
the Funds. Each of the service providers also bears all
expenses in connection with the performance of its
services under its agreement relating to a Fund.
For the fiscal years ended January 31, 1994, 1995 and
1996, the Funds paid investment advisory and/or
administration fees to their respective Advisers and
the administrator as follows:
Growth and Income Fund
Fiscal Year Ended January
31, 1994 1995 1996
Investment Advisory
fees...........................................$264,363
$847,149 $918,110
Administration
fees.....................................................1
17 ,495 376,511 408,049
Strategic Investors Fund
Fiscal Year Ended January
31, 1994 1995 1996
Investment Advisory
fees...........................................$1,702,756
$2,013,080 $2,095,050
Administration
fees......................................................
.. 609,031 732,029 761,836
Each Adviser and the administrator has agreed
that if in any fiscal year the aggregate expenses of the
Fund it serves (including fees payable pursuant to its
agreement with respect to the Fund, but excluding
interest, taxes, brokerage, fees paid pursuant to the
Trust's services and distribution plan, and, if permitted
by the relevant state securities commissions,
extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over the Fund, the Adviser
and administrator, to the extent required by state law,
will reduce their fees to the Fund by the amount of such
excess expense, such amount to be allocated between
them in the same proportion as their respective fees
bear to the combined fees for investment advice and
administration. Such fee reduction, if any, will be
estimated and reconciled on a monthly basis. The most
restrictive state expense limitation currently applicable
to any Fund requires a reduction of fees in any year that
such expenses exceed 2.50% of the Fund's first $30 million
of average net assets, 2.00% of the next $70 million of
average net assets and 1.50% of the remaining average net
assets.
Smith Barney serves as asset allocation consultant to
Strategic Investors Fund pursuant to a written agreement
with the Trust, under which Smith Barney provides the Fund
with its conclusions concerning the portion of a model
portfolio's assets that should be invested in equity,
fixedincome and money market instruments and gold
securities in light of current economic and market
conditions. Strategic Investors Fund does not pay any fee
to Smith Barney for performing this service, and Smith
Barney bears all expenses in connection with providing
this service.
Counsel and Auditors
Willkie Farr & Gallagher serves as legal counsel to the
Trust. Stroock & Stroock & Lavan serves as counsel to the
Independent Trustees of the Funds.
KMPG Peat Marwick LLP, 345 Park Avenue, New
York, New York 10154, has been selected as the Trusts
independent auditor to examine and report on the Trusts
financial statements and highlights for the fiscal year
ending January 31, 1997.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectuses discuss the investment objectives of the
Funds and the policies employed to achieve those
objectives. This section contains supplemental information
concerning the types of securities and other instruments
in which the Funds may invest, the investment policies and
portfolio strategies the Funds may utilize and certain
risks attendant to such investments, policies and
strategies. There can be no assurance that the respective
investment objectives of
the Funds will be achieved.
United States Government Securities. United States
government securities include debt obligations of varying
maturities issued or guaranteed by the United States
government or its agencies or instrumentalities ("U.S.
government securities"). Direct obligations of the United
States Treasury include a variety of securities that
differ in their interest rates, maturities and dates of
issuance.
U.S. government securities include not only direct
obligations of the United States Treasury, but also
include securities issued or guaranteed by the Federal
Housing Administration, Federal Financing Bank, Export-
Import Bank of the United States, Small Business
Administration, Government National Mortgage Association,
General Services Administration, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal National
Mortgage Association, Maritime Administration, Resolution
Trust Corporation, Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association
and various institutions that previously were or currently
are part of the Farm Credit System (which has been
undergoing a reorganization since 1987). Because the
United States government is not obligated by law to
provide support to an instrumentality that it sponsors, a
Fund will invest in obligations issued by such an
instrumentality only if the Fund's Adviser determines that
the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the
Fund.
Venture Capital Investments (Strategic Investors
Fund). Strategic Investors Fund may invest up to 5% of its
total assets in venture capital investments, that is, new
and early stage companies whose securities are not
publicly traded. Venture capital investments may present
significant opportunities for capital appreciation but
involve a high degree of business and financial risk that
can result in substantial losses. The disposition of U.S.
venture capital investments, which may include limited
partnership interests, normally would be restricted under
Federal securities laws. Generally, restricted securities
may be sold only in privately negotiated transactions or
in public offerings registered under the Securities Act of
1933, as amended. The Fund also may be subject to
restrictions contained in the securities laws of other
countries in disposing of portfolio securities. As a
result of these restrictions, the Fund may be unable to
dispose of such investments at times when disposal is
deemed appropriate due to investment or liquidity
considerations; alternatively, the Fund may be forced to
dispose of such investments at less than fair market
value. Where registration is required, the Fund may be
obligated to pay part or all of the expenses of such
registration.
Lending of Portfolio Securities. Each Fund has the
ability to lend portfolio securities to brokers, dealers
and other financial organizations. These loans, if and
when made, may not exceed 20% of a Fund's total assets
taken at value. A Fund will not lend portfolio securities
to Smith Barney unless it has applied for and received
specific authority to do so from the SEC. Loans of
portfolio securities will be collateralized by cash,
letters of credit or U.S. government securities that are
maintained at all times in a segregated account in an
amount equal to 100% of the current market value of the
loaned securities. From time
to time, a Fund may pay a part of the interest earned from
the investment of collateral received for securities
loaned to the borrower and/or a third party that is
unaffiliated with the Fund and that is acting as a
"finder."
By lending its securities, a Fund can increase its
income by continuing to receive interest on the loaned
securities as well as by either investing the cash
collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when U.S.
government securities are used as collateral. A Fund will
comply with the following conditions whenever its
portfolio securities are loaned: (a) the Fund must receive
at least 100% cash collateral or equivalent securities
from the borrower; (b) the borrower must increase such
collateral whenever the market value of the securities
loaned rises above the level of such collateral; (c) the
Fund must be able to terminate the loan at any time; (d)
the Fund must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on
the loaned securities, and any increase in market value;
(e) the Fund may pay only reasonable custodian fees in
connection with the loan; and (f) voting rights on the
loaned securities may pass to the borrower, provided,
however, that if a material event adversely affecting the
investment in the loaned securities occurs, the Trust's
Board of Trustees must terminate the loan and regain the
right to vote the securities. The risks in lending
portfolio securities, as with other extensions of secured
credit, consist of a possible delay in receiving
additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms
deemed by each Fund's Adviser to be of good standing and
will not be made unless, in its judgment, the
consideration to be earned from such loans would justify
the risk.
Options on Securities. The Funds may write covered
call options and enter into closing transactions with
respect thereto. The principal reason for writing covered
call options on securities is to attempt to realize,
through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a
premium, the writer of a covered call option forfeits the
right to any appreciation in the value of the underlying
security above the strike price for the life of the option
(or until a closing purchase transaction can be effected).
Nevertheless, the call writer retains the risk of a
decline in the price of the underlying security. The size
of the premiums a Fund may receive may be adversely
affected as new or existing institutions, including other
investment companies, engage in or increase their option-
writing activities.
Options written by the Funds normally will have
expiration dates between one and nine months from the date
they are written. The exercise price of the options may be
below ("in-the-money"), equal to ("at-the-money"), or
above ("out-of-the-money") the market values of the
underlying securities at the times the options are
written. A Fund may write (a) in-the-money call options
when its Adviser expects that the price of the underlying
security will remain flat or decline moderately during the
option period, (b) at-themoney call options when its
Adviser expects that the price of the underlying security
will remain flat or advance moderately during the option
period and (c) out-of-the-money
call options when its Adviser expects that the price of
the underlying security may increase but not above a price
equal to the sum of the exercise price plus the premiums
received from writing the call option. In any of the
preceding situations, if the market price of the
underlying security declines and the security is sold at
this lower price, the amount of any realized loss will be
offset wholly or in part by the premium received.
So long as the obligation of a Fund as the writer of
an option continues, the Fund may be assigned an exercise
notice by the broker-dealer through which the option was
sold requiring the Fund to deliver the underlying security
against payment of the exercise price. This obligation
terminates when the option expires or the Fund effects a
closing purchase transaction. A Fund can no longer effect
a closing purchase transaction with respect to an option
once it has been assigned an exercise notice. To secure
its obligation to deliver the underlying security when it
writes a call option, a Fund will be required to deposit
in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing
Corporation (the "Clearing Corporation") and of the
domestic securities exchange on which the option is
written.
An option position may be closed out only where there
exists a secondary market for an option of the same series
on a securities exchange or in the over-the-counter
market. Strategic Investors Fund expects to write options
only on domestic securities exchanges. A Fund may realize
a profit or loss upon entering into a closing transaction.
In cases in which a Fund has written an option, it will
realize a profit if the cost of the closing purchase
transaction is less than the premium received upon writing
the original option and will incur a loss if the cost of
the closing purchase transaction exceeds the premium
received upon writing the original option.
Although Strategic Investors Fund generally will
write only those options for which the Fund's Adviser
believes there is an active secondary market so as to
facilitate closing transactions, there is no assurance
that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for
any particular option or at any particular time, and for
some options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other
unforeseen events, have at times rendered certain of the
facilities of the Clearing Corporation and the domestic
securities exchanges inadequate and resulted in the
institution of special procedures, such as trading
rotations, restrictions on certain types of orders or
trading halts or suspensions in one or more options. There
can be no assurance that similar events, or events that
otherwise may interfere with the timely execution of
customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in
particular options. If, as a covered call option writer, a
Fund is unable to effect a closing purchase transaction in
a secondary market, it will not be able to sell the
underlying security until the option expires or it
delivers the underlying security upon exercise.
Securities exchanges have established limitations
governing the maximum number of calls and puts of each
class
that may be held or written, or exercised within certain
time periods, by an investor or group of investors acting
in concert (regardless of whether the options are written
on the same or different national securities exchanges or
are held, written or exercised in one or more accounts or
through one or more brokers). It is possible that the
Funds and other clients of their respective Advisers and
certain of their affiliates may be considered to be such a
group. A securities exchange may order the liquidation of
positions found to be in violation of these limits and it
may impose certain other sanctions.
In the case of options written by a Fund that are
deemed covered by virtue of the Fund's holding convertible
or exchangeable preferred stock or debt securities, the
time required to convert or exchange and obtain physical
delivery of the underlying common stocks with respect to
which the Fund has written options may exceed the time
within which the Fund must make delivery in accordance
with an exercise notice. In these instances, a Fund may
purchase or temporarily borrow the underlying securities
for purposes of physical delivery. By so doing, the Fund
will not bear any market risk because the Fund will have
the absolute right to receive from the issuer of the
underlying securities an equal number of shares to replace
the borrowed stock, but the Fund may incur additional
transaction costs or interest expense in connection with
any such purchase or borrowing.
Money Market Instruments. Subject to the
restrictions noted in the Prospectuses, the money market
instruments in which the Funds may invest are: U.S.
government securities; certificates of deposit ("CDs"),
time deposits ("TDs") and bankers' acceptances issued by
domestic banks (including their branches located outside
the United States and subsidiaries located in Canada),
domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade
commercial paper; and repurchase agreements with respect
to the foregoing types of instruments. The following is a
more detailed description of such money market
instruments.
Bank Obligations. CDs are short-term, negotiable
obligations of commercial banks; TDs are non-negotiable
deposits maintained in banking institutions for specified
periods of time at stated interest rates; and bankers'
acceptances are time drafts drawn on commercial banks by
borrowers usually in connection with international
transactions. Domestic commercial banks organized under
Federal law are supervised and examined by the Comptroller
of the Currency and are required to be members of the
Federal Reserve System and to be insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Domestic banks
organized under state law are supervised and examined by
state banking authorities but are members of the Federal
Reserve System only if they elect to join. Most state
banks are insured by the FDIC (although such insurance may
not be of material benefit to a Fund, depending upon the
principal amount of CDs of each bank held by the Fund) and
are subject to federal examination and to a substantial
body of Federal law and regulation. As a result of
governmental regulations, domestic branches of domestic
banks, among other things, generally are required to
maintain specified levels of reserves, and are subject to
other supervision and regulation designed to promote
financial soundness.
Obligations of foreign branches of domestic banks,
such
as CDs and TDs, may be general obligations of the parent
bank in addition to the issuing branch, or may be limited
by the terms of a specific obligation and governmental
regulations. Such obligations are subject to different
risks than are those of domestic banks or domestic
branches of foreign banks. These risks include foreign
economic and political developments, foreign governmental
restrictions that may adversely affect payment of
principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes
on interest income. Foreign branches of domestic banks are
not necessarily subject to the same or similar regulatory
requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping
requirements. In addition, less information may be
publicly available about a foreign branch of a domestic
bank than about a domestic bank. CDs issued by wholly
owned Canadian subsidiaries of domestic banks are
guaranteed as to repayment of principal and interest (but
not as to sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may
be general obligations of the parent bank in addition to
the issuing branch, or may be limited by the terms of a
specific obligation and by Federal and state regulation as
well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a
foreign bank with assets in excess of $1 billion may or
may not be subject to reserve requirements imposed by the
Federal Reserve System or by the state in which the branch
is located if the branch is licensed in that state. In
addition, branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State
Branches") may or may not be required to: (a) pledge to
the regulator by depositing assets with a designated bank
within the state, an amount of its assets equal to 5% of
its total liabilities; and (b) maintain assets within the
state in an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank
payable at or through all of its agencies or branches
within the state. The deposits of State Branches may not
necessarily be insured by the FDIC. In addition, there may
be less publicly available information about a domestic
branch of a foreign bank than about a domestic bank.
In view of the foregoing factors associated with the
purchase of CDs and TDs issued by foreign branches of
domestic banks or by domestic branches of foreign banks,
each Fund's Adviser will carefully evaluate such
investments on a case-by-case basis. Savings and loan
associations, the CDs of which may be purchased by the
Funds, are supervised by the Office of Thrift Supervision
and are insured by the Savings Association and Insurance
Fund. As a result, such savings and loan associations are
subject to regulation and examination.
Commercial Paper. Commercial paper is a short-term,
unsecured negotiable promissory note of a domestic or
foreign company. A Fund may invest in short-term debt
obligations of issuers that at the time of purchase are
rated A-2, A-1 or A-1+ by Standard & Poor's Corporation
("S&P") or Prime-2 or Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, are issued by
companies having an outstanding unsecured debt issue
currently rated within the two highest ratings of S&P or
Moody's. A discussion of S&P and Moody's rating categories
appears in
the Appendix to this Statement of Additional Information.
A Fund also may invest in variable rate master demand
notes, which typically are issued by large corporate
borrowers providing for variable amounts of principal
indebtedness and periodic adjustments in the interest rate
according to the terms of the instrument. Demand notes are
direct lending arrangements between the Fund and an
issuer, and are not normally traded in a secondary market.
A Fund, however, may demand payment of principal and
accrued interest at any time. In addition, while demand
notes generally are not rated, their issuers must satisfy
the same criteria as those set forth above for issuers of
commercial paper. Each Fund's Adviser will consider the
earning power, cash flow and other liquidity ratios of
issuers of demand notes and continually will monitor their
financial ability to meet payment on demand.
Convertible Securities. The Funds may invest in
convertible securities. Convertible securities are fixed
income securities that may be converted at either a stated
price or stated rate into underlying shares of common
stock. Convertible securities have general characteristics
similar to both fixed-income and equity securities.
Although to a lesser extent than with fixed-income
securities generally, the market value of convertible
securities tends to decline as interest rates increase
and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature,
the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying
common stocks and, therefore, also will react to
variations in the general market for equity securities. A
unique feature of convertible securities is that as the
market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a
yield basis, and thus may not experience market value
declines to the same extent as the underlying common
stock. When the market price of the underlying common
stock increases, the prices of the convertible securities
tend to rise as a reflection of the value of the
underlying common stock. While no securities investments
are without risk, investments in convertible securities
generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities
are investments that provide for a stable stream of income
with generally higher yields than common stocks. Of
course, like all fixed-income securities, there can be no
assurance of current income because the issuers of the
convertible securities may default on their obligations.
Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible
securities of similar quality because of the potential for
capital appreciation. A convertible security, in addition
to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market
price of the underlying common stock. There can be no
assurance of capital appreciation, however, because
securities prices fluctuate.
Convertible securities generally are subordinated to
other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt
obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is
senior to common stock, of the same issuer. Because of the
subordination feature, however, convertible securities
typically have lower ratings than similar non-convertible
securities.
Preferred Stock. The Funds may invest in preferred
stocks. Preferred stocks, like debt obligations, are
generally fixed-income securities. Shareholders of
preferred stocks normally have the right to receive
dividends at a fixed rate when and as declared by the
issuer's board of directors, but do not participate in
other amounts available for distribution by the issuing
corporation. Dividends on the preferred stock may be
cumulative, and all cumulative dividends usually must be
paid prior to common stockholders receiving any dividends.
Preferred stock dividends must be paid before common stock
dividends and for that reason preferred stocks generally
entail less risk than common stocks. Upon liquidation,
preferred stocks are entitled to a specified liquidation
preference, which is generally the same as the par or
stated value, and are senior in right of payment to common
stock. Preferred stocks are, however, equity securities in
the sense that they do not represent a liability of the
issuer and therefore do not offer as great a degree of
protection of capital or assurance of continued income as
investments in corporate debt securities. In addition,
preferred stocks are subordinated in right of payment to
all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other
preferred stock of the same issuer.
American, European and Continental Depositary
Receipts. The assets of Strategic Investors Fund may be
invested in the securities of foreign issuers in the form
of American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs"). These securities may not
necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are U.S.
dollardenominated receipts typically issued by a domestic
bank or trust company that evidence ownership of
underlying securities issued by a foreign corporation.
EDRs, which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), are receipts issued in
Europe typically by nonU.S. banks and trust companies that
evidence ownership of either foreign or domestic
securities. Generally, ADRs in registered form are
designed for use in U.S. securities markets and EDRs and
CDRs in bearer form are designed for use in European
securities markets.
Investment Restrictions
The Trust has adopted the following investment
restrictions for the protection of shareholders.
Restrictions 1 through 8 below have been adopted by the
Trust with respect to each Fund as fundamental policies.
Under the 1940 Act, a fundamental policy of a Fund may not
be changed without the vote of a majority, as defined in
the 1940 Act, of the outstanding voting securities of the
Fund. Such majority is defined as the lesser of (a) 67% or
more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (b) more than 50% of
the outstanding shares. Investment restrictions 9 through
18 may be changed by vote of a majority of the Trust's
Board of Trustees at any time.
The investment policies adopted by the Trust prohibit
a Fund from:
1. Purchasing the securities of any issuer (other than
U.S. government securities) if as a result more than 5%
of the value of the Fund's total assets would be
invested in the securities of the issuer, except that up
to 25% of the value of the Fund's total assets may be
invested without regard to this 5% limitation.
2 Purchasing more than 10% of the voting securities
of any one issuer, or more than 10% of the securities of
any class of any one issuer; provided that this
limitation shall not apply to investments in U.S.
government securities.
3. Borrowing money, except that a Fund may borrow from
banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests
that might otherwise require the untimely disposition of
securities, in an amount not to exceed 10% of the value
of the Fund's total assets (including the amount
borrowed) valued at market less liabilities (not
including the amount borrowed) at the time the borrowing
is made. Whenever borrowings exceed 5% of the value of
the total assets of a Fund, the Fund will not make any
additional investments.
4. Underwriting the securities of other issuers,
except insofar as the Fund may be deemed an underwriter
under the Securities Act of 1933, as amended, by virtue
of disposing of portfolio securities.
5. Purchasing or selling real estate or interests in
real estate, except that the Fund may purchase and sell
securities that are secured by real estate and may
purchase securities issued by companies that invest or
deal in real estate.
6. Investing in commodities, except that upon 60
days' notice given to its shareholders, Strategic
Investors Fund may engage in hedging transactions
involving futures contracts and related options,
including foreign and domestic stock index futures
contracts and financial futures contracts.
7. Making loans to others, except through the purchase
of qualified debt obligations, loans of portfolio
securities and the entry into repurchase agreements.
8. Purchasing any securities (other than U.S.
government securities) which would cause more than 25%
of the value of the Fund's total assets at the time of
purchase to be invested in the securities of issuers
conducting their principal business activities in the
same industry.
9. Purchasing securities on margin. For purposes of
this restriction, the deposit or payment of initial or
variation margin in connection with futures contracts or
related options will not be deemed to be a purchase of
securities on margin by any Fund permitted to engage in
transactions in futures contracts or related options.
10. Making short sales of securities or maintaining a
short position.
11. Pledging, hypothecating, mortgaging or otherwise
encumbering more than 10% of the value of the Fund's
total assets. For purposes of this restriction, (a) the
deposit of assets in escrow in connection with the
writing of covered call options and (b) collateral
arrangements with respect to (i) the purchase and sale of
options on stock indices and (ii) initial or variation
margin for futures contracts, will not be deemed to be
pledges of a Fund's assets.
12. Investing in oil, gas or other mineral exploration
or development programs, except that the Fund may invest
in the securities of companies that invest in or sponsor
those programs.
13. Investing in securities of other investment
companies registered or required to be registered under
the 1940 Act, except as they may be acquired as part of a
merger, consolidation, reorganization or acquisition of
assets or an offer of exchange.
14. Writing or selling puts, calls, straddles, spreads
or combinations thereof, except that Strategic
Investors Fund may write covered call options.
15. Purchasing restricted securities, illiquid
securities (such as repurchase agreements with maturities
in excess of seven days) or other securities that are not
readily marketable if more than 10% of the total assets
of the Fund would be invested in such securities.
16. Purchasing any security if as a result the Fund
would then have more than 10% of its total assets
invested in securities of companies (including
predecessors) that have been in continuous operation for
fewer than three years.
17. Making investments for the purpose of exercising
control or management.
18. Purchasing or retaining securities of any company
if, to the knowledge of the Trust, any of a Fund's
officers or Trustees of the Trust or any officer or
director of an Adviser individually owns more than 1/2 of
1% of the outstanding securities of such company and
together they own beneficially more than 5% of such
securities.
The Trust may make commitments more restrictive than
the restrictions listed above with respect to a Fund so as to
permit the sale of shares of the Fund in certain states.
Should the Trust determine that any such commitment is no
longer in the best interests of a Fund and its shareholders,
the Trust will revoke the commitment by terminating the sale
of shares of the Fund in the relevant state. The percentage
limitations contained in the restrictions listed above apply
at the time of purchases of securities.
Portfolio Turnover
The Funds do not intend to seek profits through short-term
trading. Nevertheless, the Funds will not consider turnover
rate a limiting factor in making investment decisions.
Under certain market conditions, a Fund may experience
increased portfolio turnover as a result of its options
activities. For instance, the exercise of a substantial number
of options written by a Fund (due to appreciation of the
underlying security in the case of call options or
depreciation of the underlying security in the case of put
options) could result in a turnover rate in excess of 100%. In
addition, Strategic Investors Fund may experience increased
portfolio turnover as a result of the asset allocation
strategy that it employs. The portfolio turnover rate of a
Fund is calculated by dividing the lesser of purchases or
sales of portfolio securities for the year by the monthly
average value of portfolio securities. Securities with
remaining maturities of one year or less on the date of
acquisition are excluded from the calculation.
For the fiscal years ended January 31, 1995 and
1996 , the portfolio turnover rates of the Funds were as
follows:
1995 1996
Strategic Investors Fund 103 %
81%
Growth and Income Fund 127 %
15%
Portfolio Transactions
Most of the purchases and sales of securities for a Fund,
whether transacted on a securities exchange or in the
over-the-counter market, will be effected in the primary
trading market for the securities. The primary trading market
for a given security generally is located in the country in
which the issuer has its principal office. Decisions to buy
and sell securities for a Fund are made by its Adviser or sub-
investment adviser, which also is responsible for placing
these transactions, subject to the overall review of the
Trust's Trustees.
Although investment decisions for each Fund are made
independently from those of the other accounts managed by its
Adviser, investments of the type the Fund may make also may be
made by those other accounts. When a Fund and one or more
other accounts managed by its Adviser are prepared to invest
in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a
manner believed by the Adviser to be equitable to each. In
some cases, this procedure may adversely affect the price paid
or received by a Fund or the size of the position obtained or
disposed of by the Fund.
Transactions on domestic stock exchanges and some foreign
stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated,
the cost of transactions may vary among different brokers. On
most foreign exchanges, commissions are generally fixed. There
is generally no stated commission
in the case of securities traded in domestic or foreign over
the-counter markets, but the prices of those securities
include undisclosed commissions or mark-ups. The cost of
securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which
securities are purchased from and sold to dealers include a
dealer's mark-up or mark-down. U.S. government securities are
generally purchased from underwriters or
dealers, although certain newly issued U.S. government
securities may be purchased directly from the United States
Treasury or from the issuing agency or instrumentality,
respectively.
The following table sets forth certain information
regarding each Fund's payment of brokerage commissions:
Fiscal Year Strategic Ended
Investors
Growth and
January 31, Fund
Income Fund
Total Brokerage Commissions 1994 $467,989
$143,865
1995 541,403 567,988
1996 232,581
95,978
Commissions paid to 1994 106,879
19,650
Smith Barney or 1995 117,328
53,370
Shearson Lehman Brothers 1996 16,210
3,690
% of Total Brokerage
Commissions paid to
Smith Barney 1996 7%
4%
% of Total Transactions
involving Commissions paid
to Smith Barney 1996
9% 5%
The total brokerage commissions paid by the Funds for
each fiscal year vary primarily due to increases or decreases
in the Funds' volume of securities transactions on which
brokerage commissions are charged.
In selecting brokers or dealers to execute portfolio
transactions on behalf of a Fund, the Fund's Adviser seeks
the best overall terms available. In assessing the best
overall terms available for any transaction, each Adviser
will consider the factors the Adviser deems relevant,
including the breadth of the market in the security, the
price of the security, the financial condition and the
execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In addition, each
advisory agreement between the Trust and an Adviser relating
to a Fund authorizes the Adviser, in selecting brokers or
dealers to execute a particular transaction and in evaluating
the best overall terms available, to consider the brokerage
and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) provided to the
Fund, the other Funds and/or other accounts over which the
Adviser or its affiliates exercise investment discretion. The
fees under the advisory agreements relating to the Funds
between the Trust and the Advisers are not reduced by reason
of their receiving such brokerage and research services. The
Trust's Board of Trustees periodically will review the
commissions paid by the Funds to determine if the commissions
paid over representative
periods of time were reasonable in relation to the benefits
inuring to the Funds.
To the extent consistent with applicable provisions of
the 1940 Act and the rules and exemptions adopted by the SEC
thereunder, the Board of Trustees has determined that
transactions for a Fund may be executed through Smith Barney
and other affiliated broker-dealers if, in the judgment of
the Fund's Adviser, the use of such broker-dealer is likely
to result in price and execution at least as favorable as
those of other qualified broker-dealers, and if, in the
transaction, such broker-dealer charges the Fund a rate
consistent with that charged to comparable unaffiliated
customers in similar transactions. Smith Barney may directly
execute such transactions for the Funds on the floor of any
national securities exchange, provided (a) the Board of
Trustees has expressly authorized Smith Barney to effect such
transactions, and (b) Smith Barney annually advises the Trust
of the aggregate compensation it earned on such transactions.
Over-the-counter purchases and sales are transacted directly
with principal market makers except in those cases in which
better prices and executions may be obtained elsewhere.
The Funds will not purchase any security, including
U.S. government securities, during the existence of any
underwriting or selling group relating thereto of which Smith
Barney is a member, except to the extent permitted by the
SEC.
PURCHASE OF SHARES
Volume Discounts
The schedule of sales charges on Class A shares described in
the Prospectuses applies to purchases made by any
"purchaser," which is defined to include the following: (a)
an individual; (b) an individual's spouse and his or her
children purchasing shares for his or her own account; (c) a
trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified under
Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and qualified employee benefit plans of
employers who are "affiliated persons" of each other within
the meaning of the 1940 Act; (e) tax-exempt organizations
numerated in Section 501(c)(3) or (13) of the Code; and (f) a
trustee or other professional fiduciary (including a bank, or
an investment adviser registered with the SEC under the
Investment Advisers Act of 1940, as amended) purchasing
shares of a Fund for one or more trust estates or fiduciary
accounts. Purchasers who wish to combine purchase orders to
take advantage of volume discounts on Class A shares should
contact a Smith Barney Financial Consultant.
Combined Right of Accumulation
Reduced sales charges, in accordance with the schedules in
the Prospectuses, apply to any purchase of Class A shares if
the aggregate investment in Class A shares of any Fund and in
Class A shares of other funds of the Smith Barney Mutual
Funds that are offered with a sales charge, including the
purchase being made, of any purchaser is $25,000 or more. The
reduced sales charge is subject to confirmation of the
shareholder's holdings through a check of appropriate
records. The Trust reserves the right to terminate or amend
the combined right of accumulation at any time after written
notice to shareholders. For further information regarding the
combined right of accumulation, shareholders should contact a
Smith Barney Financial Consultant.
Determination of Public Offering Price
The Trust offers shares of the Funds to the public on a
continuous basis. The public offering price for Class A
shares of the Funds is equal to the net asset value per share
at the time of purchase, plus a sales charge based on the
aggregate amount of the investment. The public offering price
for Class B, Class C, Class Y and Class Z shares of a Fund
(and Class A share purchases, including applicable right of
accumulation, equalling or exceeding $500,000) is equal to
the net asset value per share at the time of purchase and no
sales charge is imposed at the time of purchase. A contingent
deferred sales charge ("CDSC"), however, is imposed on
certain redemptions of Class B and Class C shares and of
Class A shares when purchased in amounts equalling or
exceeding $500,000. The method of computation of the public
offering price is shown in the Funds' financial statements,
which are incorporated by reference in their entirety into
this Statement of Additional Information.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of
payment postponed (a) for any period during which the New
York Stock Exchange, Inc. ("NYSE") is closed (other than for
customary weekend and holiday closings), (b) when trading in
markets the Fund normally utilizes is restricted, or an
emergency exists, as determined by the SEC, so that disposal
of the Fund's investments or determination of its net asset
value is not reasonably practicable or (c) for such other
periods as the SEC by order may permit for protection of the
Fund's shareholders.
Distributions in Kind
If the Board of Trustees of the Trust determines that it
would be detrimental to the best interests of the remaining
shareholders to make a redemption payment wholly in cash, the
Fund may pay, in accordance with rules adopted by the SEC,
any portion of a redemption in excess of the lesser of
$250,000 or 1.00% of its net assets by distribution in kind
of portfolio securities in lieu of cash. Securities issued as
a distribution in kind may incur brokerage commissions when
shareholders subsequently sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan") is
available to shareholders who own shares with a value of at
least $10,000 and who wish to receive specific amounts of
cash monthly or quarterly. Withdrawals of at least $50
monthly may be made under the Withdrawal Plan by redeeming as
many shares of the Funds as may be necessary to cover the
stipulated withdrawal payment. Any applicable CDSC will not
be waived on amounts withdrawn by shareholders that exceed
1.00% per month of the value of a shareholder's shares at the
time the Withdrawal Plan commences . To the
extent withdrawals exceed dividends, distributions and
appreciation of the shareholder's investment in a Fund, there
will be a reduction in the value of the shareholder's
investment, and continued withdrawal payments will reduce the
shareholder's investment and may ultimately exhaust it.
Withdrawal payments should not be considered as income from
investment in a Fund. Furthermore, as it would not generally
be advantageous to a shareholder to make additional
investments in a Fund at the same time he or she is
participating in the Withdrawal Plan, purchases by such
shareholders in amounts of less than $5,000 ordinarily will
not be permitted.
Shareholders who wish to participate in the Withdrawal
Plan and who hold their shares in certificate form must
deposit their share certificates with First Data Investor
Services Group. ("First Data") as agent for Withdrawal Plan
members. All dividends and distributions on shares in the
Withdrawal Plan are automatically reinvested at net asset
value in additional shares of a Fund. Effective November 7,
1994, Withdrawal Plans should be set up with any Smith Barney
Financial Consultant. A shareholder who purchases shares
directly through First Data may continue to do so and
applications for participation in the Withdrawal Plan must be
received by First Data no later than the eighth day of the
month to be eligible for participation beginning with that
month's withdrawal. For additional information, shareholders
should contact a Smith Barney Financial Consultant.
DISTRIBUTOR
Shares of the Trust are distributed on a best efforts basis
by Smith Barney as exclusive sales agent of the Trust
pursuant to a written agreement (the "Distribution
Agreement").
When payment is made by the investor before settlement
date, unless otherwise noted by the investor, the funds will
be held as a free credit balance in the investor's brokerage
account and Smith Barney may benefit from the temporary use
of the Funds. The investor may designate another use for the
funds prior to settlement date, such as an investment in a
money market fund (other than Smith Barney Exchange Reserve
Fund) of the Smith Barney Mutual Funds. If the investor
instructs Smith Barney to invest the funds in a Fund of the
Smith Barney money market fund, the amount of the investment
will be included as part of the average daily net assets of
both the Fund and the Smith Barney money market fund, and
affiliates of Smith Barney that serve the funds in an
investment advisory or administrative capacity will benefit
from the fact they are receiving investment management fees
from both such investment companies for managing these assets
computed on the basis of their average daily net assets. The
Trust's Board of Trustees has been advised of the benefits to
Smith Barney resulting from these settlement procedures and
will take such benefits into consideration when reviewing the
Advisory, Administration and Distribution Agreements for
continuance.
Distribution Arrangements
To compensate Smith Barney for the services it provides and
for the expense it bears under the Distribution Agreement,
the Trust has adopted a services and distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the
Plan, the Trust pays Smith Barney with respect to each Fund a
service fee, accrued daily and paid monthly, calculated at
the annual rate of 0.25% of the value of the Fund's average
daily net assets attributable to the Fund's Class A, Class B
and Class C shares. In addition, the Trust pays Smith Barney
a distribution fee with respect to each Fund's Class B and
Class C shares primarily intended to compensate Smith Barney
for its initial expense of paying its Financial Consultants a
commission upon sales of those shares. The Class B and Class
C distribution fees are calculated at the annual rate of
0.75% for the Strategic Investors Fund and 0.50% for the
Growth and Income Fund of the value of a Fund's average daily
net assets attributable to the shares of that Class.
The following expenses were incurred during the periods
indicated:
Sales Charges (paid to Smith Barney or Shearson Lehman
Brothers, its predecessor).
Class A
Fiscal Year Fiscal Year
Fiscal Year
Name of Fund Ended 1/31/94 Ended 1/31/95
Ended 1/31/96
Strategic Investors $ 15,079 $13,735
$47,000
Growth and Income 51,877 39,518
69,000
CDSC (paid to Smith Barney or Shearson Lehman Brothers,
its predecessor)
Class B
Fiscal Year Fiscal Year
Fiscal Year
Name of Fund Ended 1/31/94 Ended 1/31/95
Ended 1/31/96
Strategic Investors $288,907 $ 311,572
$382,000
Growth and Income 131,421 271,979
216,000
Class C
(formerly Class D Shares)
Fiscal Year Fiscal Year
Ended 1/31/95 Ended 1/31/96
Name of Fund
Strategic Investors $55
$1,000
As of the fiscal year ended January 31, 1996, no Growth
and Income Fund Class C shares had been redeemed.
Service Fees (paid to Smith Barney or Shearson Lehman
Brothers, its predecessor)
Class A
Fiscal Year Fiscal Year
Fiscal Year
Name of Fund Ended 1/31/94 Ended 1/31/95
Ended 1/31/96
Strategic Investors $ 10,573 $ 148,061
$401,114
Growth and Income 9,731 97,689
256,112
Class B
Fiscal Year Fiscal Year
Fiscal Year
Name of Fund Ended 1/31/94 Ended 1/31/95
Ended 1/31/96
Strategic Investors $767,452 $ 764,217
$544,656
Growth and Income 135,701 372,877
252,848
Class C
(formerly Class D Shares)
Period
of 5/5/93 Fiscal Year Fiscal
Year
Through 1/31/94 Ended 1/31/95
Ended 1/31/96
Name of Fund
Strategic Investors*. $ 504 $2,759
$6,110
___________________________
* Class C Shares were first purchased by the public on May 5,
1993.
Class C
(formerly designated as Class D
Shares)
Period
of 8/15/94
Fiscal Year
Through 1/31/95 Ended
1/31/96
Name of Fund
Growth and Income* $39 $1,100
____________________________
* Class C Shares were first purchased by the public on August
15, 1994.
Distribution Fees (paid to Smith Barney or Shearson Lehman
Brothers, its predecessor)
Class B
Fiscal Year Fiscal Year
Fiscal Year
Name of Fund Ended 1/31/94 Ended 1/31/95
Ended 1/31/96
Strategic Investors $2,302,358 $ 2,292,652
$1,633,968
Growth and Income 271,401 745,754
505,697
Class C
(formerly Class D Shares)
Period
of 5/5/93 Fiscal Year
Fiscal Year
Through 1/31/94 Ended 1/31/95
Ended 1/31/96
Name of Fund
Strategic Investors* $1,511
$8,277 $18,328 _________________________________
* Class C Shares were first purchased by the public on May 5,
1993.
Class C
(formerly designated as Class D
Shares)
Period
of 8/15/94
Fiscal Year
Through 1/31/95 Ended
1/31/96
Name of Fund
Growth and Income* $78 $2,200
_____________________________
* Class C Shares were first purchased by the public on August
15, 1994.
For the fiscal year ended January 31, 1996, the
distribution expenses incurred by Smith Barney on Class B and
Class C shares totaled $2,160,193.
Under its terms, the Plan continues from year to year,
provided such continuance is approved annually by vote of the
Trust's Board of Trustees, including a majority of the
Independent Trustees who have no direct or indirect financial
interest in the operation of the Plan or in the Distribution
Agreement. The Plan may not be amended to increase the amount
of the service and distribution fees without shareholder
approval, and all material amendments of the Plan also must
be approved by the Trustees and such Independent Trustees in
the manner described above. The Plan may be terminated with
respect to a Class at any time, without penalty, by vote of a
majority of such Independent Trustees or by a vote of a
majority of the outstanding voting securities of the Class
(as defined in the 1940 Act). Pursuant to the Plan, Smith
Barney will provide the Trust's Board of Trustees with
periodic reports of amounts expended under the Plan and the
purpose for which such expenditures were made.
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each
day, Monday through Friday, except days on which the NYSE is
closed. The NYSE currently is scheduled to be closed on New
Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and
on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively.
Because of the differences in distribution fees and Class
specific expenses, the per share net asset value of each
Class may differ. The following is a description of the
procedures used by the Trust in valuing assets of the Funds.
A security that is listed or traded on more than one
exchange is valued at the quotation on the exchange
determined to be the primary market for such security. All
assets and liabilities initially expressed in foreign
currency values will be converted into U.S. dollar values at
the mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by any
recognized dealer. If such quotations are not available, the
rate of exchange will be determined in good faith by the
Trust's Board of Trustees. In carrying out the Board's
valuation policies, SBMFM, as administrator, may consult with
an independent pricing service (the "Pricing Service")
retained by the Trust.
Debt securities of domestic issuers (other than U.S.
government securities and short-term investments) are valued
by SBMFM, as administrator, after consultation with the
Pricing Service approved by the Trust's Board of Trustees.
When, in the judgment of the Pricing Service, quoted bid
prices for investments are readily available and are
representative of the bid side of the market, these
investments are valued at the mean between the quoted bid
prices and asked prices. Investments for which, in the
judgment of the Pricing Service, there are no readily
obtainable market quotations are carried at fair value as
determined by the Pricing Service. The procedures of the
Pricing Service are reviewed periodically by the officers of
the Funds under the general supervision and responsibility of
the Trust's Board of Trustees.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund of the Smith
Barney Mutual Funds may exchange all or part of their shares
for shares of the same class of other funds of the Smith
Barney Mutual Funds, to the extent such shares are offered
for sale in the shareholder's state of residence, on the
basis of relative net asset value per share at the time of
exchange as follows:
A. Class A shares of any fund purchased with a
sales charge may be exchanged for Class A shares of any
of the other funds, and the sales charge differential,
if any, will be applied. Class A shares of any fund may
be exchanged without a sales charge for shares of the
funds that are offered without a sales charge. Class A
shares of any fund purchased without a sales charge may
be exchanged for shares sold with a sales charge, and
the appropriate sales charge differential will be
applied.
B. Class A shares of any fund acquired by a previous
exchange of shares purchased with a sales charge may be
exchanged for Class A shares of any of the other funds,
and the sales charge differential, if any, will be
applied.
C. Class B shares of any fund may be exchanged without
a sales charge. Class B shares of a Fund exchanged for
Class B shares of another fund will be
subject to the higher applicable CDSC of the two funds
and, for purposes of calculating CDSC rates and
conversion periods, will be deemed to have been held
since the date the shares being exchanged were deemed to
be purchased.
Dealers other than Smith Barney must notify First Data
of the investor's prior ownership of Class A shares of Smith
Barney High Income Fund and the account number in order to
accomplish an exchange of shares of High Income Fund under
paragraph B above.
The exchange privilege enables shareholders to acquire
shares of the same Class in a fund with different investment
objectives when they believe that a shift between funds is an
appropriate investment decision. This privilege is available
to shareholders residing in any state in which the fund
shares being acquired may legally be sold. Prior to any
exchange, the shareholder should obtain and review a copy of
the current prospectus of each fund into which an exchange is
being considered. Prospectuses may be obtained from a Smith
Barney Financial Consultant.
Upon receipt of proper instructions and all necessary
supporting documents, shares submitted for exchange are
redeemed at the then-current net asset value and, subject to
any applicable CDSC, the proceeds are immediately invested,
at a price as described above, in shares of the fund being
acquired. Smith Barney reserves the right to reject any
exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders.
PERFORMANCE DATA
From time to time, the Trust may quote total return of the
Classes of the various Funds in advertisements or in reports
and other communications to shareholders. A Fund may
include comparative performance information in advertising or
marketing the Fund's shares. Such performance information may
include the following industry and financial publications:
Barron's, Business Week, CDA Investment Technologies,
Inc., Changing Times, Forbes, Fortune, Institutional
Investor, Investors Daily, Money, Morningstar Mutual Fund
Values, The New York Times, USA Today and The Wall Street
Journal . To the extent any advertisement or sales
literature of the Funds describes the expenses or performance
of Class A, Class B, Class C or Class Y, it will also
disclose such information for the other Classes.
Average Annual Total Return
"Average annual total return" figures are computed according
to a formula prescribed by the SEC. The formula can be
expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of
$1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a
hypothetical $1,000 payment made
at the beginning of the 1-, 5- or 10year
period at the
end of the 1-, 5- or 10-year period (or
fractional portion thereof),
assuming reinvestment of all dividends
and distributions.
The average annual total returns of the Funds' Class A
shares were as follows for the periods indicated:
Per Annum for
the
Period
from the
Commencement of
One Year Period Operations*
through
Ended 1/31/96 1/31/96
Name of Fund
Strategic Investors 20.14%
12.05%
Growth and Income 24.38
9.32
______________________________
*The Funds commenced selling Class A shares on November 6,
1992.
The average annual total returns of the Funds' Class B
shares were as follows for the
periods indicated:
Per Annum Per Annum
for the for the
Period
One Year Five Year from the Commencement
of
Period Ended Period Ended
Operations* through
1/31/96 1/31/96
1/31/96
Name of Fund
Strategic Investors(1) 20.58% 12.89%
10.70%
Growth and Income(2) 25.23 N/A
10.03
________________________________
(1) The Fund commenced selling Class B shares on February 2,
1987.
(2) The Fund commenced selling Class B shares on November 6,
1992.
The average annual total returns of the Funds' Class C
shares were as follows for the
periods indicated:
One Year Per Annum for
Period Ended the Period Ended
1/31/96 1/31/96
Name of Fund
Strategic Investors 24.77% 11.34%
Growth and Income 29.23 19.31
______________________________
*The Funds commenced selling Class C shares (previously Class
D shares) on January 29, 1993.
Average annual total return figures calculated in
accordance with the above formula assume that the maximum 5%
sales charge or maximum CDSC, as the case may be, has been
deducted from the hypothetical investment. A Fund's net
investment income changes in response to fluctuations in
interest rates and the expenses of the Fund.
Aggregate Total Return
"Aggregate total return" figures represent the cumulative
change in the value of an investment in the Class for the
specified period and are computed by the following formula:
ERV-P
-----
P
Where: P = a hypothetical initial payment of
$10,000.
ERV = Ending Redeemable Value of a hypothetical
$10,000 investment made at
the beginning of the 1-, 5- or 10-year period
at the end of the 1-, 5- or
10-year period (or fractional portion
thereof), assuming reinvestment of
all dividends and distributions.
The aggregate total returns (with fees waived) for the
following classes, were as follows for the periods
indicated:
Without Sales Charge With Sales
Charge
Period from | Period from
One Year Five Year Commencement |One Year Five
Year Commencement
Period Period of Operations |Period
Period of Operations
Ended Ended through |Ended
Ended tbrough
1/31/96* 1/31/96* 1/31/96* |1/31/96**
1/31/96** 1/31/96**
Strategic Investors
Class A+ 26.47% ----- 52.05% 20.14%
- ---- 44.49%
Class B (1) 25.58% 84.33% 149.55 20.58
83.33% 149.55
Class C++ 25.77 ----- 34.26
24.77 ---- 34.26
Growth and Income
Class A+ 30.97% ----- 40.46% 24.38%
- ---- 33.44%
Class B (2) 30.23 ----- 38.22 25.23
- ---- 36.22
Class C++ 30.23 ----- 29.47 29.23
- ---- 29.47
_____________________________________
* Figures do not include the effect of the maximum sales
charge or maximum applicable CDSC. If
they had been included, it would have had the effect of
lowering the returns shown.
** Figures include the effect of the maximum sales charge
or maximum applicable CDSC.
+ The Fund commenced selling Class A shares on November
6, 1992.
++ The Fund commenced selling Class C shares (previously
Class D shares) on January 29, 1993.
(1) The Fund commenced selling Class B shares on February 2,
1987.
(2) The Fund commenced selling Class B shares on November 6,
1992.
It is important to note that the total return figures
set forth above are based on historical earnings and are not
intended to indicate future performance.
A Class' performance will vary from time to time
depending on market conditions, the composition of the
relevant Fund's portfolio and operating expenses and the
expenses exclusively attributable to that Class.
Consequently, any given performance quotation should not be
considered representative of the Class' performance for any
specified period in the future. Because performance will
vary, it may not provide a basis for comparing an investment
in the Class with certain bank deposits or other investments
that pay a fixed yield for a stated period of time. Investors
comparing the Class' performance with that of other mutual
funds should give consideration to the quality and maturity
of the respective investment companies' portfolio securities.
TAXES
The following is a summary of certain Federal income tax
considerations that may affect the Funds and their
shareholders. This summary is not intended as a substitute
for individual tax advice, and investors are urged to consult
their own tax advisors as to the tax consequences of an
investment in any Fund of the
Trust.
Tax Status of the Funds
Each Fund will be treated as a separate taxable entity for
Federal income tax purposes with the result that: (a) each
Fund must meet separately the income and distribution
requirements for qualification as a regulated investment
company and (b) the amounts of investment income and capital
gains earned will be determined on a Fund-by-Fund (rather
than on a Trust-wide) basis.
Taxation of Shareholders
Dividends paid by a Fund from investment income and
distributions of short-term capital gains will be taxable to
shareholders as ordinary income for Federal income tax
purposes, whether received in cash or reinvested in
additional shares. Distributions of long-term capital gains
will be taxable to shareholders as long-term capital gains,
whether paid in cash or reinvested in additional shares, and
regardless of the length of time the investor has held his or
her shares of the Fund.
Dividends of investment income (but not capital gains)
from any Fund generally will qualify for the Federal
dividends-received deduction for corporate shareholders to
the extent such dividends do not exceed the aggregate amount
of dividends received by the Fund from domestic corporations.
If securities held by a Fund are considered to be "debt-
financed" (generally, acquired with borrowed funds), are held
by the Fund for less than 46 days (91 days in the case of
certain preferred stock), or are subject to certain forms of
hedges or short sales, the portion of the dividends paid by
the Fund that corresponds to the dividends paid with respect
to such securities will not be eligible for the corporate
dividends-received deduction.
If a shareholder (a) incurs a sales charge in acquiring
shares of a Fund, (b) disposes of those shares within 90 days
and (c) acquires shares in a mutual fund for which the
otherwise applicable sales charge is reduced by reason of a
reinvestment right (that is, an exchange privilege), the
sales charge increases the shareholder's tax basis in the
original shares only to the extent the otherwise applicable
sales charge for the second acquisition is not reduced. The
portion of the original sales charge that does not increase
the shareholder's tax basis in the original shares would be
treated as incurred with respect to the second acquisition
and, as a general rule, would increase the shareholder's tax
basis in the newly acquired shares. Furthermore, the same
rule also applies to a disposition of the newly acquired or
redeemed shares made within 90 days of the second
acquisition. This provision prevents a shareholder from
immediately deducting the sales charge by shifting his or her
investment in a family of mutual funds.
Capital Gains Distribution. In general, a shareholder
who redeems or exchanges his or her shares will recognize
long-term capital gain or loss if the shares have been held
for more than one year, and will recognize short-term capital
gain or loss if the shares have been held for one year or
less. If a shareholder receives a distribution taxable as
long-term capital gain with respect to shares of a Fund and
redeems or exchanges the shares before he or she has held
them for more than six months, any loss on such redemption or
exchange that is less than or equal to the amount of the
distribution will be treated as
long-term capital loss.
Backup Withholding. If a shareholder fails to furnish a
correct taxpayer identification number, fails to fully report
dividend and interest income, or fails to certify that he or
she has provided a correct taxpayer identification number and
that he or she is not subject to withholding, then the
shareholder may be subject to a 31% Federal backup
withholding tax with respect to (a) any dividends and
distributions and (b) any proceeds of any redemptions or
exchanges. An individual's taxpayer identification number is
his or her social security number. The backup withholding tax
is not an additional tax and may be credited against a
shareholder's regular Federal income tax liability.
Regulated Investment Company Status
Each Fund intends to continue to qualify in subsequent years
as a regulated investment company within the meaning of
Section 851 of the Code. The Trust will monitor each Fund's
investments so as to meet the requirements for qualification
on a continuing basis.
As a regulated investment company, a Fund will not be
subject to Federal income tax on the net investment income
and net capital gains, if any, that it distributes to its
shareholders, provided that at least 90% of the sum of
investment income and short-term capital gains is distributed
to its shareholders. All net investment income and net
capital gains earned by a Fund will be reinvested
automatically in additional shares of the Fund, unless the
shareholder elects to receive dividends and distributions in
cash. Amounts reinvested in additional shares will be
considered to have been distributed to shareholders.
To qualify as a regulated investment company, each Fund
must meet certain requirements set forth in the Code. One
requirement is that each Fund must earn at least 90% of its
gross income from (a) interest, (b) dividends, (c) payments
with respect to securities loans, (d) gains from the sale or
other disposition of stock or securities or foreign
currencies and (e) other income (including but not limited to
gains from options, futures, or forward contracts) derived
with respect to its business of investing in such stock,
securities, or currencies (the "90% Test"). An additional
requirement is that each Fund must earn less than 30% of its
gross income from the sale or other disposition of stock or
securities held for less than three months (the "30% Test").
Legislation currently pending before the U.S. Congress would
repeal the 30% Test. However, it is impossible at this
time to predict whether this legislation will become law and,
if it is so enacted, what form it will eventually take.
Each Fund will invest in a combination of common stock,
preferred stock, notes and bonds and will earn interest and
dividend income, gains from the sale of such securities, and
income from repurchase agreements entered into with respect
to such securities, all of which generally would be
considered to be qualified income under the 90% Test. Each
Fund generally will hold its investments longer than three
months and therefore should not risk disqualification under
the 30% Test. Depending upon the circumstances, however, a
Fund may be limited in the extent to which it may: (a) sell
securities held for less than three months; (b) effect short
sales of securities that are identical (or substantially
identical) to securities held by it for less than three
months; (c) write options that expire in less than three
months; and (d) effect closing transactions with respect to
call or put options that have been written or purchased
within the preceding three months. A Fund's gain or loss from
the sale (including open short sales) or other dispositions
of stock or securities (with the term "securities" defined to
include put and call options) held for less than three months
will be netted against its gain or loss on positions that are
part of a "designated hedge" with respect to such three-month
investments.
Taxation of Fund Investments
Gain or loss on the sale of a security by a Fund generally
will be long-term capital gain or loss if the Fund has held
the security for more than one year. Gain or loss on the sale
of a security held for not more than one year generally will
be short-term capital gain or loss. If a Fund acquires a debt
security at a substantial discount, a portion of any gain
upon sale or redemption of such debt security will be taxed
as ordinary income rather than capital gain to the
extent it reflects accrued market discount.
Options Transactions. The tax consequences of options
transactions entered into by a Fund will vary depending on
whether the underlying security is held as a capital asset,
whether the Fund is writing or purchasing the option and
whether the "straddle" rules, discussed separately below,
apply to the transaction.
A Fund may write a call option on an equity or
convertible debt security. If the option expires unexercised
or if the Fund enters into a closing purchase transaction,
the Fund will realize a gain or loss without regard to any
unrealized gain or loss on the underlying security.
Generally, any such gain or loss will be short-term capital
gain or loss, except that any loss on certain covered call
stock options will be treated as long-term capital loss. If a
call option written by a Fund is exercised, the Fund will
treat the premium received for writing such call option as
additional sales proceeds and will recognize a capital gain
or loss from the sale of the underlying security. Whether the
gain or loss will be long-term or short-term will depend on
the Fund's holding period for the underlying security.
If a Fund purchases a put option on an equity or
convertible debt security and it expires unexercised, the
Fund will realize a capital loss equal to the cost of the
option. If a Fund enters into a closing sale transaction with
respect to the option, it will realize a capital gain or loss
and such gain or loss will be short-term or longterm
depending on the Fund's holding period for the option. If a
Fund exercises such a put option, it will realize a short-
term or long-term capital gain or loss (depending on the
Fund's holding period for the underlying security) from the
sale of the underlying security. The amount realized on such
sale will be the sales proceeds reduced by the premium paid.
Mark-to-Market. The Code imposes a special "mark-to
market" system for taxing "Section 1256 contracts" including
options on nonconvertible debt securities (including U.S.
government securities), options on certain stock indexes and
certain foreign currency contracts. In general, gain or loss
on Section 1256 contracts will be taken into account for tax
purposes when actually realized (by a closing transaction, by
exercise, by taking delivery or by other termination). In
addition, any Section 1256 contracts held at the end of the
taxable year will be treated as though they were sold at
their year-end fair market value (that is, "marked to
market"), and the resulting gain or loss will be recognized
for tax purposes. Provided that a Fund holds its Section 1256
contracts as capital assets and they are not part of a
straddle, both the realized and the unrealized year-end gains
or losses from these investment positions (including premiums
on options that expire unexercised) will be treated as 60%
long-term and 40% short-term capital gain or loss, regardless
of the period of time particular positions have actually been
held by a Fund.
A portion of the mark-to-market gain on instruments
held for less than three months at the close of a Fund's
taxable year may represent a gain on securities held for less
than three months for purposes of the 30% Test discussed
above. Accordingly, the Funds may restrict their fourth-
quarter transactions in Section 1256 contracts.
Straddles. The Code contains rules applicable to
"straddles," which are "offsetting positions in actively
traded personal property," including equity securities and
options of the type in which a Fund may invest. If
applicable, the "straddle" rules generally override the other
provisions of the Code. In general, investment positions will
be offsetting if there is a substantial diminution in the
risk of loss from holding one position by reason of holding
one or more other positions. The Funds generally are
authorized to enter into put, call, and covered put and call
positions. Depending on what other investments are held by a
Fund at the time it enters into one of the above
transactions, a Fund may create a straddle for Federal income
tax purposes.
If two (or more) positions constitute a straddle,
recognition of a realized loss from one position (including a
mark-to-market loss) must be deferred to the extent of
unrecognized gain in an offsetting position. Interest and
other carrying charges allocable to personal property that is
part of a straddle must be capitalized. In addition, "wash
sale" rules apply to straddle transactions to prevent the
recognition of loss from the sale of a position at a loss
when a new offsetting position is or has been acquired within
a prescribed period. To the extent the straddle rules apply
to positions established by a Fund, losses realized by the
Fund may be deferred or recharacterized as long-term losses,
and long-term gains realized by the Fund may be converted to
short-term gains.
If a Fund chooses to identify a particular offsetting
position as being one component of a straddle, a realized
loss on any component of that straddle will be recognized no
earlier than upon the liquidation of all components of that
straddle. Special rules apply to "mixed" straddles (that is,
straddles consisting of a Section 1256 contract and an
offsetting position that is not a Section 1256 contract). If
the Trust makes certain elections, all or a portion of the
Section 1256 contract components of such mixed straddles of a
Fund will not be subject to the 60%/40% mark-to-market rules.
If any such election is made, the amount, the nature (as long-
term or short-term) and the timing of the recognition of the
Fund's gains or losses from the affected straddle
positions will be determined under rules that will vary
according to the type of election made.
ADDITIONAL INFORMATION
The Trust was organized as an unincorporated business trust
under the laws of The Commonwealth of Massachusetts pursuant
to a Master Trust Agreement dated January 8, 1986, as amended
from time to time (the "Trust Agreement"). The Trust
commenced business as an investment company on March 3, 1986,
under the name Shearson Lehman Special Equity Portfolios. On
December 6, 1988, August 27, 1990, November 5, 1992, July 30,
1993 and October 14, 1994, the Trust changed its name to SLH
Equity Portfolios, Shearson Lehman Brothers Equity
Portfolios, Shearson Lehman Brothers Equity Funds, Smith
Barney Shearson Equity Funds and Smith Barney Equity Funds,
respectively.
PNC is located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, and serves as custodian for
the Funds. Under its custodial agreement with the Trust, PNC
is authorized to appoint one or more foreign or domestic
banking institutions as sub-custodians of assets owned by a
Fund. For its custody services, PNC receives monthly fees
charged to each Fund based upon the month-end, aggregate net
asset value of the Fund, plus certain charges for securities
transactions. The assets of the Trust are held under bank
custodianship in accordance with the 1940 Act.
First Data is located at Exchange Place, Boston,
Massachusetts 02109, and serves as the Trust's transfer
agent. For its services as transfer agent, First Data
receives fees charged to the Funds at an annual rate based
upon the number of shareholder accounts maintained during the
year. First Data also is reimbursed by the Funds for its out-
of-pocket expenses.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year ended January
31, 1996 are incorporated into this Statement of Additional
Information by reference in their entirety.
APPENDIX
Description of Ratings
Description of S&P Corporate Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by S&P to a
debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only
in small degree.
A
Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds
in this category than for bonds in higher rated categories.
BB, B and CCC
Bonds rated BB and B are regarded, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB represents a lower degree of speculation than B
and CCC, the highest degrees of speculation. While such bonds
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Description of Moody's Corporate Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt-edge". Interest payments are
protected by a large or 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.
A-1
Aa
Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities, or fluctuation of protective elements may
be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A
Bonds which are rated A possess favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa
Bonds that are rated Caa are of poor standing. These issues
may be in default or present elements of danger may exist with
respect to principal or interest.
Moody's applies the numerical modifier 1, 2 and 3 to each generic
rating classification from Aa through B. The modifier 1 indicates
that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
A-2
Description of S&P Municipal Bond Ratings
AAA
Prime -- These are obligations of the highest quality. They
have the strongest capacity for timely payment of debt service.
General Obligation Bonds -- In a period of economic stress,
the issuers will suffer the smallest declines in income and will
be least susceptible to autonomous decline. Debt burden is
moderate. A strong revenue structure appears more than adequate
to meet future expenditure requirements. Quality of management
appears superior.
Revenue Bonds -- Debt service coverage has been, and is
expected to remain, substantial. Stability of the pledged
revenues is also exceptionally strong due to the competitive
position of the municipal enterprise or to the nature of the
revenues. Basic security provisions (including rate covenant,
earnings test for issuance of additional bonds, debt service
reserve requirements) are rigorous. There is evidence of superior
management.
AA
High Grade -- The investment characteristics of bonds in
this group are only slightly less marked than those of the prime
quality issues. Bonds rated AA have the second strongest capacity
for payment of debt service.
A
Good Grade -- Principal and interest payments on bonds in
this category are regarded as safe although the bonds are
somewhat more susceptible to the adverse affects of changes in
circumstances and economic conditions than bonds in higher rated
categories. This rating describes the third strongest capacity
for payment of debt service. Regarding municipal bonds, the
ratings differ from the two higher ratings because:
General Obligation Bonds -- There is some weakness, either
in the local economic base, in debt burden, in the balance
between revenues and expenditures, or in quality of management.
Under certain adverse circumstances, any one such weakness might
impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some
variations because of increased competition or economic
influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance appears
adequate.
A-3
BBB
Medium Grade -- Of the investment grade ratings, this is the
lowest. Bonds in this group are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds
in this category than for bonds in higher rated categories.
General Obligation Bonds -- Under certain adverse
conditions, several of the above factors could contribute to a
lesser capacity for payment of debt service. The difference
between A and BBB ratings is that the latter shows more than one
fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the
factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of
the pledged revenues could show substantial variations, with the
revenue flow possibly being subject to erosion over time. Basic
security provisions are no more than adequate. Management
performance could be stronger.
BB, B, CCC and CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB includes the lowest degree of speculation and CC
the highest degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
C
The rating C is reserved for income bonds on which no
interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a
plus or a minus sign, which is used to show relative standing
within the major rating categories, except in the AAA-Prime Grade
category.
Description of S&P Municipal Note Ratings
Municipal notes with maturities of three years or less are
usually given note ratings (designated SP-1, -2 or -3) to
distinguish more clearly the credit quality of notes as compared
to bonds. Notes rated SP-1 have a very strong or strong capacity
to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given the designation of
SP-1+. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
A-4
Description of Moody's Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities, or fluctuation of protective elements may
be of greater amplitude, or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A
Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterize bonds in this class.
B
Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
A-5
Caa
Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca
Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Moody's
applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. The modifier 1 indicates
that the security ranks in the higher end of its generic
ratings category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower end
of its generic ratings category.
Description of Moody's Municipal Note Ratings
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade (MIG)
and for variable rate demand obligations are designated Variable
Moody's Investment Grade (VMIG). This distinction recognizes the
differences between short- and long-term credit risk. Loans
bearing the designation MIG 1/VMIG 1 are the best quality,
enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to
the market for refinancing, or both. Loans bearing the
designation MIG 2/VMIG 2 are of high quality, with margins of
protection ample, although not as large as the preceding group.
Loans bearing the designation MIG 3/VMIG 3 are of favorable
quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well
established. Loans bearing the designation MIG 4/VMIG 4 are of
adequate quality. Protection commonly regarded as required of an
investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
Description of Commercial Paper Ratings
The rating A-1+ is the highest, and A-1 the second highest,
commercial paper rating assigned by S&P. Paper rated A-1+ must
have either the direct credit support of an issuer or guarantor
that possesses excellent long-term operating and financial
strength combined with strong liquidity characteristics
(typically, such issuers or guarantors would display credit
quality characteristics which would warrant a senior bond rating
of A\- or higher) or the direct credit support of an issuer or
guarantor that possesses above average long-term fundamental
operating and financing capabilities combined with ongoing
excellent liquidity characteristics. Paper rated A-1 must have
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; and the reliability and quality of
management are unquestioned.
A-6
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in
assigning ratings are the following: (a) evaluation of the
management of the issuer; (b) economic evaluation of the issuer's
industry or industries and an appraisal of speculative-type risks
which may be inherent in certain areas; (c) evaluation of the
issuer's products in relation to competition and customer
acceptance; (d) liquidity; (e) amount and quality of long-term
debt; (f) trend of earnings over a period of ten years; (g)
financial strength of parent company and the relationships which
exist with the issue; and (h) 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.
Short-term obligations, including commercial paper, rated
A-1+ by IBCA Limited or its affiliate IBCA Inc. are obligations
supported by the highest capacity for timely repayment.
Obligations rated A-1 have a very strong capacity for timely
repayment. Obligations rated A-2 have a strong capacity for
timely repayment, although such capacity may be susceptible to
adverse changes in business, economic and financial conditions.
Thomson BankWatch employs the rating "TBW-1" as its highest
category, which indicates that the degree of safety regarding
timely repayment of principal and interest is very strong.
"TBW-2" is its second highest rating category. While the degree
of safety regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated "TBW-1".
Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of
assurance of timely payment. The rating F-1 reflects an assurance
of timely payment only slightly less in degree than issues rated
F-1+, while the rating F-2 indicates a satisfactory degree of
assurance of timely payment although the margin of safety is not
as great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with
respect to top grade commercial paper and bank money instruments.
Duff 1+ indicates the highest certainty of timely payment:
short-term liquidity is clearly outstanding and safety is just
below risk-free U.S. Treasury short-term obligations. Duff 1
indicates high certainty of timely payment. Duff 2 indicates good
certainty of timely payment: liquidity factors and company
fundamentals are sound.
Various NRSROs utilize rankings within ratings categories
indicated by a + or -. The Funds, in accordance with industry
practice, recognize such ratings within categories as gradations,
viewing for example S&P's rating of A-1+ and A-1 as being in
S&P's highest rating category.
A-7
Smith Barney
EQUITY FUNDS
Growth and Income Fund
Strategic Investors Fund
Statement of
Additional
Information
April 22,
1996
Smith Barney
Equity Funds
388 Greenwich Street
New York, New York 10013 SMITH
BARNEY
SMITH BARNEY EQUITY FUNDS
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights
Included in Part B:
The Registrant's Annual Reports
for the fiscal year ended January 31, 1996
and the Report of Independent Accountants was
filed pursuant to Rule 30b-2 of the 1933 Act,
on April 16, 1996 as accession number 9115596-
000161.
Included in Part C:
Consent of Auditors (filed herewith)
(b) Exhibits
All references are to the Registrant's registration
statement on Form N-1A (the "Registration Statement") as
filed with the Securities and Exchange Commission (the
"SEC") on January 9, 1986 (File Nos. 33-2627 and 811-4551).
(1)(a) Amended and Restated Master Trust Agreement
and all Amendments are incorporated by reference to Post
Effective Amendment No. 26 to the Registration Statement
filed on January 31, 1994 ("Post-Effective Amendment No.
26").
(b) Amendment dated October 14, 1994 and Form of
Amendment to Amended and Restated Master Trust Agreement are
incorporated by reference to Post-Effective Amendment No. 29
to the Registration Statement filed on November 7, 1994
("Post-Effective Amendment No. 29").
(2) Registrant's By-Laws are incorporated by reference
to Pre-Effective Amendment No. 1 to the Registration
Statement filed on February 25, 1986 ("Pre-Effective
Amendment No. 1").
(3) Not applicable.
(4) Form of share certificate for Class A, B, C and Y
shares will be filed by amendment.
(5)(a) Investment Advisory Agreement between
Registrant and Smith Barney Strategy Advisers Inc., with
respect to Strategic Investors Fund, is incorporated by
reference to Post-Effective Amendment No. 31 to the
Registation Statement filed on January 30, 1996 (Post
Effective Amendment No. 31).
(b) Investment Advisory Agreement between
Registrant and Greenwich Street Advisors (relating to the
Growth and Income Fund) dated May 22, 1993 is incorporated
by reference to Post-Effective Amendment No. 26.
(c) Asset Allocation Consulting Agreement between
Registrant and Shearson Lehman Hutton Inc. (relating to the
Strategic Investors Portfolio) is incorporated by reference
to Post-Effective Amendment No. 4.
(6) Distribution Agreement between Registrant and Smith
Barney Shearson dated July 30, 1993 is incorporated by
reference to Post-Effective Amendment No. 26.
(7) Not applicable.
(8)(a) Custodian Agreement between Registrant and
PNC Bank, National Association (PNC Bank) is
incorporated by reference to Post-Effective Amendment No.
31.
(9)(a) Administration Agreements between Registrant
and SBMFM (relating to the Growth and Income Fund and
Strategic Investors Fund) dated May 4, 1994 are incorporated
by reference to Post-
Effective Amendment No. 29
(b) Transfer Agency Agreement between Registrant
and First Data Investor Services Group (formerly The
Shareholder Services Group, Inc.) dated August 5, 1993 is
incorporated by reference to Post-Effective Amendment No.
26.
(10) Not applicable.
(11) Not Applicable
(12) Not applicable.
(13) Not Applicable
(14) (a)Prototype Defined Contribution Plan relating
to 401(k) program (filed herewith)
(b) Form of Individual Retirement Account
Disclosure Statement (filed herewith).
(15) Amended Services and Distribution Plans pursuant
to Rule 12b-1 between the Registrant on behalf of Smith
Barney Growth and Income Fund and Smith Barney Strategic
Investors Fund are incorporated by reference to PostEffective
Amendment No. 29.
(16) Performance information is incorporated by
reference to Post-Effective Amendments No. 9 and 10.
(17) Financial Data Schedule (filed herewith).
(18) Plan pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No. 31.
Item 25 Persons Controlled by or Under Common Control
with
Registrant
None.
Item 26 Number of Holders of Securities
Number of Record Holders
by Class
Title of Class as of February
29, 1996
Beneficial Interest par value
$.001 per share Class A Class B
Class C Class Y
Smith Barney Strategic Investors Fund 21,417
20,727 186 0
Smith Barney Growth and Income Fund 12,660
11,000 124 3
Item 27 Indemnification
The response to this item is incorporated by reference to
Registrant's Pre-Effective Amendment No. 1 to the
Registration Statement.
Item 28(a) Business and Other Connections of Investment
Adviser
Investment Adviser - - Smith Barney Mutual Funds Management
Inc. ("SBMFM")
SBMFM, formerly known as Smith, Barney Advisers, Inc. SBMFM
was incorporated in December 1968 under the laws of the
State of Delaware. SBMFM is a wholly owned subsidiary of
Smith Barney Holdings Inc. ("Holdings") (formerly known as
Smith Barney Shearson Holdings Inc.), which in turn is a
wholly owned subsidiary of Travelers Group Inc. (formerly
known as Primerica Corporation) ("Travelers"). SBMFM
is
registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act").
The list required by this Item 28 of officers and directors
of SBMFM together with information as to any other business,
profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past
two fiscal years, is incorporated by reference to Schedules
A and D of FORM ADV filed by SBMFM pursuant to the Advisers
Act (SEC File No. 801-8314).
Item 28(a) Business and Other Connections of Investment
Adviser
Investment Adviser - Smith Barney Strategy Advisers Inc.
("Strategy Advisers")
Strategy Advisers was incorporated on October 22, 1986 under
the laws of the State of Delaware. Strategy Advisers is a
wholly owned subsidiary of SBMFM. Strategy Advisers
is
registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act"). Strategy Advisers
is also registered with the Commodity Futures Trading
Commission (the "CFTC") as a commodity pool operator under
the Commodity Exchange Act (the "CEA"), and is a member of
the National Futures Association (the "NFA").
The list required by this Item 28 of officers and directors
of SBMFM and Strategy Advisers, together with information as
to any other business, profession, vocation or employment of
a substantial nature engaged in by such officers and
directors during the past two years, in incorporated b
reference to Schedules A and D of FORM ADV filed by SBMFM on
behalf of Strategy Advisers pursuant to the Advisers Act
(SEC File No. 801-8314).
Item 29. Principal Underwriters
Smith Barney Inc. ("Smith Barney") currently acts
as
distributor for Smith Barney Managed Municipals Fund Inc.,
Smith Barney New York Municipals Fund Inc., Smith Barney
California Municipals Fund Inc., Smith Barney Massachusetts
Municipals Fund, Smith Barney Aggressive Growth Fund Inc.,
Smith Barney Appreciation Fund Inc., Smith Barney Principal
Return Fund, Smith Barney Managed Governments Fund Inc.,
Smith Barney Income Funds, Smith Barney Equity Funds, Smith
Barney Investment Funds Inc., Smith Barney Precious Metals
and Minerals Fund Inc., Smith Barney Telecommunications
Trust, Smith Barney Arizona Municipals Fund Inc., Smith
Barney New Jersey Municipals Fund Inc., The USA High Yield
Fund N.V., Garzarelli Sector Analysis Portfolio N.V., Smith
Barney Fundamental Value Fund Inc., Smith Barney Series
Fund, Consulting Group Capital Markets Funds, Smith Barney
Income Trust, Smith Barney Adjustable Rate Government Income
Fund, Smith Barney Florida Municipals Fund, Smith Barney
Oregon Municipals Fund, Smith Barney Funds, Inc., Smith
Barney Muni Funds, Smith Barney World Funds, Inc., Smith
Barney Money Funds, Inc., Smith Barney Tax Free Money Fund,
Inc., Smith Barney Variable Account Funds, Smith Barney U.S.
Dollar Reserve Fund (Cayman), Worldwide Special Fund, N.V.,
Worldwide Securities Limited, (Bermuda), Smith Barney
International Fund (Luxembourg) and various series of unit
investment trusts.
Smith Barney is a wholly owned subsidiary of Holdings. On
June 1, 1994, Smith Barney changed its name from Smith
Barney Shearson Inc. to its current name. The information
required by this Item 29 with respect to each director,
officer and partner of Smith Barney is incorporated by
reference to Schedule A of FORM BD filed by Smith Barney
pursuant to the Securities Exchange Act of 1934 (SEC File
No. 812-8510).
Item 30 . Location of Accounts and Records
(1) Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
(2) Smith Barney Equity Funds
388 Greenwich Street
New York, New York 10013
(3) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
(4) Smith Barney Strategy Advisers Inc.
388 Greenwich Street
New York, New York 10013
(5) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA 19103
(6) First Data Investor Services Group
One Exchange Place
Boston, Massachusetts 02109
Item 31 Management Services
Not Applicable.
Item 32 Undertakings
(a) The Registrant hereby undertakes to call a
meeting of its shareholders for the purpose of
voting upon the question of removal of a trustee
or trustees of Registrant when requested in to do
so by the holders of at least 10% of Registrant's
outstanding shares. Registrant undertakes further,
in connection with the meeting, to comply with the
provisions of Section 16(c) of the 1940 Act
relating to communications with the shareholders
of certain common-law trusts.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant, SMITH BARNEY EQUITY FUNDS, has duly
caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, State of New York
on the 18th day of April, 1996 .
SMITH BARNEY EQUITY FUNDS
By: /s/ Heath B. McLendon*
Heath B. McLendon, Chairman of
the Board
Pursuant to the requirements of the Securities Act of
1933, as amended, this Post-Effective Amendment to the
Registration Statement has been signed below by the
following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/ Heath B. McLendon Chairman of the Board
4/18/96
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Senior Vice President and
4/18/96
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer)
/s/ Lee Abraham* Trustee
4/18/96
Lee Abraham
/s/ Antoinette C. Bentley* Trustee
4/18/96
Antoinette C. Bentley
/s/ Allan J. Bloostein* Trustee
4/18/96
Allan J. Bloostein
/s/ Madelon Devoe-Talley* Trustee
4/18/96
Madelon Devoe-Talley
/s/ Richard E. Hanson* Trustee
4/18/96
Richard E. Hanson
* Signed by Lee. D. Augsburger, their duly authorized
attorney-in-fact, pursuant to power of attorney dated
October 27, 1992.
/s/ Lee D. Augsburger
Lee D. Augsburger
EXHIBITS
Exhibit No. Description of Exhibits
14(a) Prototype Defined
Contribution Plan
(b) Individual
Retirement Account Disclosure Statement
17 Financial Data Schedule
Auditors Consent
Cover Letter to SEC
Independent Auditors' Consent
To the Shareholders and Trustees of
Smith Barney Equity Funds:
We consent to the use of our reports dated March 21, 1996
with respect to the Smith Barney Growth and Income Fund and
the Smith Barney Strategic Investors Fund of Smith Barney
Equity Funds incorporated herein by reference and to the
references to our Firm under the headings "Financial
Highlights" in the Prospectuses and "Counsel and Auditors"
in the Statement of Additional Information.
KPMG PEAT MARWICK
LLP
New York, New York
April 18, 1996
SMITH BARNEY
DEFINED CONTRIBUTION PLAN DOCUMENT #05
PART I: PLAN DOCUMENT
SECTION 1. INTRODUCTION AND CONSTRUCTION
1.1 Introduction. This Smith Barney Prototype Defined
Contribution
Plan is established and maintained as a prototype
plan by the
Prototype Sponsor for its customers and the
customers of its
subsidiaries and affiliates. This Plan shall be adopted as
a prototype
plan only with the consent of the Prototype Sponsor or
one of its
subsidiaries or affiliates as set forth in the
related Adoption
Agreements and shall be maintained as a prototype
plan only in
accordance with the terms and conditions set forth in this
Plan.
1.2 Controlling Laws. To the extent such laws are not
preempted by
federal law, this Plan and the related Adoption Agreement
and Trust
Agreement shall be construed and interpreted under the
laws of the
state specified in the Adoption Agreement; provided, if
Smith Barney
Corporate Trust Company has been appointed as Trustee,
the Trust
Agreement shall be governed by and construed in accordance
with the
laws of the State of Delaware.
1.3 Construction. The headings and subheadings in this
Plan have been
inserted for convenience of reference only and are to be
ignored in
the construction of its provisions. Wherever
appropriate, the
masculine shall be read as the feminine, the plural as the
singular,
and the singular as the plural. References in this Plan
to a section
() shall be to a section in this Plan unless otherwise
indicated.
References in this Plan to a section of the Code, ERISA or
any other
federal law shall also refer to the regulations issued
under such
section. Unless an alternative option is specified in
the Adoption
Agreement, the option identified as the "Standard
Option" will
control.
The Employer intends that this Plan and the related Trust
Agreement
and Adoption Agreement which are part of this Plan
satisfy the
requirements for tax exempt status under Code 401(a),
Code 501(a)
and related Code sections and that the provisions of this
Plan, the
Trust Agreement and the Adoption Agreement be
construed and
interpreted in accordance with the requirements of the
Code and the
regulations under the Code.
Further, except as expressly stated otherwise, no
provision of this
Plan or the related Trust Agreement or Adoption Agreement
is intended
to nor shall grant any rights to Participants or
Beneficiaries or any
interest in the Fund in addition to those minimum rights
or interests
required to be provided under ERISA and the Code and the
regulations
under ERISA and the Code.
Nothing in this Plan or the related Trust Agreement
or Adoption
Agreement shall be construed to prohibit the
adoption or the
maintenance of this Plan or the Trust Agreement as an
individually
designed plan or as a trust agreement which is part of an
individually
designed plan, but in such event, the Employer may not
rely on the
opinion letter issued to the Prototype Sponsor and the
Prototype
Sponsor shall have absolutely no responsibility for such
individually
designed plan.
Finally, in the event of any conflict between the terms of
this Plan
and the terms of the Trust Agreement or the Adoption
Agreement, the
terms of this Plan shall control.
1.4 TRA 86 Amendments. If this Plan is adopted as an
amendment to a
Pre-Existing Plan in order to satisfy the requirements of
TRA 86, the
retroactive effective date of any provision required under
TRA 86 is
intended solely to comply with the Code and is not
intended to grant
any substantive rights under ERISA to the extent that such
provision
is different from the Pre-Existing Plan as in effect
between the
applicable effective date of TRA 86 and the effective
date in the
final regulations (transition years).
SECTION 2. DEFINITIONS
The capitalized terms in this Plan and the related
Adoption Agreement
and Trust Agreement shall have the meanings shown opposite
those terms
in this 2 and in 3 for purposes of this Plan.
2.1 Account - means the bookkeeping account maintained
under this
Plan to show as of any Valuation Date a Participant's
interest in the
Fund attributable to the contributions made by or on
behalf of such
Participant and the Fund Earnings on such
contributions, and an
Account shall cease to exist when exhausted through
forfeiture or
distributions made in accordance with this Plan.
2.2 Active Participant - means for purposes of eligibility
to receive
an allocation of the Employer Contribution or Forfeitures
for each
Plan Year, each Participant who is an Eligible Employee at
any time
during the Plan Year and who satisfies the following
conditions:
2.2(a) Standard Option.
2.2(a)(1) Standardized Plans. If this Plan is
adopted as a
standardized Plan, such Participant (i) is employed as
an Eligible
Employee (or on an authorized leave of absence as
an Eligible
Employee) on the last day of such Plan Year, (ii)
terminated
employment as an Eligible Employee during such Plan Year on
or after
Normal Retirement Age or Early Retirement Age or by reason
of death or
Disability, or (iii) such Participant is not employed on
the last day
of such Plan Year but completed more than 500 Hours of
Service during
such Plan Year (or the equivalent period described in
2.2(d) if the
Elapsed Time method is specified in the Adoption
Agreement).
Notwithstanding the foregoing, if the Hours of Service
method is
specified in the Adoption Agreement for a Plan Year
beginning before
the Final Compliance Date, 2.2(a)(1)(iii) shall not
apply and a
Participant who satisfies the requirements of 2.2(a)(1)(i)
shall not
be eligible to receive an allocation of the Employer
Contribution or
Forfeitures for such Plan Year unless such
Participant also is
credited with at least 1,000 Hours of Service in such Plan
Year.
2.2(a)(2) If this Plan is adopted as a
nonstandardized Plan,
such Participant (i) is employed as an Eligible Employee
(or on an
authorized leave of absence as an Eligible Employee) on the
last day
of such Plan Year and, if the "Hours of Service" method
is specified
in the Adoption Agreement, is credited with at least
1,000 Hours of
Service in such Plan Year, or (ii) terminated
employment as an
Eligible Employee during such Plan Year on or after Normal
Retirement
Age or Early Retirement Age or by reason of death or
Disability.
2.2(b) Alternative. Such Participant satisfies the
alternative
conditions specified in the Adoption Agreement.
2.2(c) If this Plan is adopted as a nonstandardized
Plan and
fails to satisfy the minimum coverage and participation
requirements
of Code 401(a)(26) and 410(b) for any Plan Year
beginning on and
after the Final Compliance Date as a result of the
application of the
minimum hours or last day employment requirements in this
2.2, such
minimum participation and coverage requirements shall be
retroactively
amended by executing a new Adoption Agreement within the
applicable
retroactive correction period in the regulations or,
if no such
amendment is made, shall be satisfied as follows:
2.2(c)(1) If the Plan utilizes both the minimum hours
and last
day employment requirements:
(i) Step 1 - Each Participant who completes at least
1,000 Hours
of Service without regard to whether such Participant is
employed on
the last day of the Plan Year shall be deemed to be
an Active
Participant for such Plan Year.
(ii) Step 2 - If the minimum participation
and coverage
requirements are not satisfied after the application of
Step 1, then
each Participant who completes more than 500 Hours of
Service and who
is employed on the last day of the Plan Year shall be
deemed to be an
Active Participant for such Plan Year.
(iii) Step 3 - If the minimum participation
and coverage
requirements are not satisfied after the application of
Step 1 and
Step 2, then each Participant who is not employed on the
last day of
the Plan Year but who completed more than 500 Hours of
Service in such
Plan Year also shall be deemed to be an Active Participant.
(iv) Step 4 - If the minimum participation
and coverage
requirements are not satisfied after the application
of Steps 1
through 3, then each Participant who satisfies the
last day of
employment requirement also shall be deemed to be
an Active
Participant without regard to the number of Hours of
Service actually
completed by such Participant during such Plan Year.
2.2(c)(2) If the Plan utilizes only the last day
employment
requirement, each Participant who is not employed on the
last day of
the Plan Year but who completed more than 500 Hours of
Service in such
Plan Year (or the equivalent period described in
2.2(d) if the
"Elapsed Time" method is specified in the Adoption
Agreement) also
shall be deemed to be an Active Participant.
2.2(c)(3) If the Plan utilizes only the
minimum hours
requirement:
(i) Step 1 - Each Participant who completes more
than 500 Hours
of Service without regard to whether such Participant is
employed on
the last day of the Plan Year shall be deemed to be
an Active
Participant.
(ii) Step 2 - If the minimum participation
and coverage
requirements are not satisfied after the application of
Step 1, then
each Participant who is employed on the last day of the
Plan Year
shall be deemed to be an Active Participant.
2.2(d) Special Elapsed Time Equivalency Rule. If the
"Elapsed Time"
method is specified in the Adoption Agreement, a
Participant shall be
treated as completing more than 500 Hours of Service during
such Plan
Year for purposes of this 2.2 if, during such Plan
year, the
Participant completes more than
(A) Standard Option - 91 consecutive calendar
days of
employment, or
(B) Alternative - if so specified in the Adoption
Agreement, 3
consecutive calendar months of employment.
2.3 Adoption Agreement- means the agreement by which
the Employer
adopted this Plan.
2.4 Affiliate - means at any time (a) any parent,
subsidiary or
sister corporation which at such time is a member of a
controlled
group of corporations (as defined in Code 414(b)) with
the Employer,
(b) any trade or business, whether or not incorporated,
which at such
time is considered to be under common control (as
defined in Code
414(c)) with the Employer, (c) any person or organization
which at
such time is a member of an affiliated service group (as
defined in
Code 414(m)) with the Employer, and (d) any other
organization which
at such time is required to be aggregated with the Employer
under Code
414(o).
2.5 Allocation Date - means for a 401(k) Plan the
respective dates
specified in the Adoption Agreement as of which
Matching
Contributions, Qualified Matching Contributions and
Qualified
Nonelective Contributions, as applicable, are made.
2.6 Average Annual Compensation - means for a Target
Benefit Plan the
average of an Employee's Compensation for the consecutive
Plan Year
period specified in the Adoption Agreement during which
such average
is the highest, or if such Employee's entire period of
participation
in the Plan is less than the number of Plan Years so
specified, the
Employee's Average Annual Compensation shall be
determined by
averaging (on an annual basis) the Employee's Compensation
for his or
her actual period of participation. For purposes of
determining a
Participant's Average Annual Compensation for any Plan Year
beginning
after the Final Compliance Date, the annual Compensation
taken into
account for any prior Plan Year shall not exceed (a) for
Plan Years
beginning before January 1, 1990, $200,000 and (b) for
Plan Years
beginning on or after January 1, 1990, the annual
Compensation limit
described in 2.10(e) in effect for such prior Plan Year.
2.7 Beneficiary - means for each Participant the person or
persons so
designated in writing by the Participant on a properly
completed
Election Form. However, if no such designation is made, if
no person
so designated survives the Participant, or if after
checking the last
known mailing address the whereabouts of the person so
designated is
unknown and no death benefit claim is submitted to
the Plan
Administrator by such person within one year after the
Participant's
date of death, the Beneficiary shall be deemed to
be (a) the
Participant's surviving Spouse, or if there is no
surviving Spouse,
(b) the personal representative of such Participant in
his or her
fiduciary capacity, if any has qualified within one year
from the date
of the Participant's death, or if no personal
representative has so
qualified or remains so qualified, (c) any person
determined by a
court of competent jurisdiction to be the Participant's
Beneficiary
for this purpose. If a Beneficiary is not identified
and located
within 3 years of the Participant's date of death,
9.6, Missing
Person, shall control the distribution of the Participant's
Account.
2.8 Board - means (a) for any Employer which is a
corporation, the
Board of Directors of such Employer and (b) for any
Employer which is
not a corporation, the person or persons duly authorized
to act on
behalf of such Employer.
2.9 Code - means the Internal Revenue Code, as amended.
2.10 Compensation.
2.10(a) Common Law Employees. For an Employee who is
not a Self-
Employed Individual or a Leased Employee, the term
"Compensation"
means for any determination period
2.10(a)(1) Standard Option - the total compensation
which is
actually paid (in cash or other benefits) by the
Employer or any
Participating Affiliate to such Employee for such period
and which is
reportable to the Internal Revenue Service on Form W-2 as
wages within
the meaning of Code 3401(a) and all other payments of
compensation to
such Employee from the Employer or Participating
Affiliate (in the
course of its trade or business) for which a written
statement is
required to be furnished to the Employee under Code
6041(d), Code
6051(a)(3) and Code 6052. Such Compensation shall be
determined
without regard to any rules under Code 3401(a) that
limit the
remuneration included in wages based on the nature or
location of the
employment or the services performed (such as the
exception for
agricultural labor in Code 3401(a)(2)), or
2.10(a)(2) Alternative - if so specified in
the Adoption
Agreement, the total compensation which is actually paid
(in cash or
other benefits) by the Employer or any Participating
Affiliate to such
Employee for such period and which is
(i) considered as wages within the meaning of Code
3401(a) for
the purposes of federal income tax withholding at the
source but
determined without regard to any rules under Code 3401(a)
that limit
the remuneration included in wages based on the nature or
location of
the employment or the services performed (such as the
exception for
agricultural labor in Code 3401(a)(2)),
(ii) considered as compensation within the
meaning of Code
415(c)(3) as described in 7.2(a)(2)(ii)(B),
(iii) for a nonintegrated nonstandardized Plan
(other than a
Target Benefit Pension Plan), compensation identified on
the payroll
records of the Employer or Participating Affiliate as
regular or base
salary or wages (whether hourly, weekly, monthly,
annually or
otherwise) and, if so specified in the Adoption Agreement,
overtime,
bonuses, commissions, and/or other specific compensation,
or
(iv) compensation as described in 2.10(a)(1),
2.10(a)(2)(i) or
2.10(a)(2)(ii), reduced by all of the following items
(even if
includable in gross income): reimbursements or
other expense
allowances, fringe benefits (cash and noncash), moving
expenses,
deferred compensation and welfare benefits, or
2.10(b) Self-Employed. For an Employee who is a
Self-Employed
Individual, the term "Compensation" means the Employee's
Earned Income
for such period.
2.10(c) Leased Employees. All compensation paid by
a leasing
organization to a Leased Employee for personal services
rendered to
the Employer or a Participating Affiliate for such period
shall be
treated as Compensation to the extent required under Code
414(n).
2.10(d) Determination Period. For purposes of this
definition and
unless otherwise specified in this Plan or the Adoption
Agreement, the
phrase "determination period" means
2.10(d)(1) Standard Option - the Plan Year or
2.10(d)(2) Alternative - the calendar year or
other 12
consecutive month period ending with or within the Plan
Year specified
in the Adoption Agreement.
2.10(e) Limitation. No more than $200,000 (as
adjusted in
accordance with Code 401(a)(17)) shall be taken into
account under
this Plan for any determination period beginning on or
after January
1, 1989. The annual Compensation limit under this
2.10(e) for any
determination period shall be adjusted in accordance
with Code
401(a)(17) for the calendar year in which such
determination period
begins.
If the determination period is less than 12 months as a
result of a
short Plan Year, the annual Compensation limit under
this 2.10(e)
shall equal the annual limit for such determination period
multiplied
by a fraction, the numerator of which is the number of
full months in
such period and the denominator of which is 12.
For purposes of this Compensation limit, the family
aggregation
rules of Code 414(q)(6) shall be applied by aggregating
only the
Participant's spouse and lineal descendants who have not
reached age
19 before the end of such determination period. If the
limit is
exceeded for any determination period as a result of the
application
of the family aggregation rule, the limit shall be
prorated among the
individuals affected by this limit in proportion to
each such
individual's Compensation for such determination period as
determined
under this 2.10 before the application of this 2.10(e).
However, if
this Plan is adopted as an integrated plan, the
preceding sentence
shall not apply for purposes of determining the
portion of
Compensation which does not exceed the Integration Level.
2.10(f) Salary Reductions. Any amount which is
contributed by the
Employer or any Participating Affiliate pursuant to a
salary reduction
agreement which is not currently includable in an
Employee's gross
income under Code 125, 402(e)(3), 402(h) or 403(b)
2.10(f)(1) Standard Option - shall be included in an
Employee's
Compensation, or
2.10(f)(2) Alternative - if so specified in
the Adoption
Agreement, shall not be included in an Employee's
Compensation.
2.10(g) Special Rules.
2.10(g)(1) If so specified in the Adoption
Agreement, an
Employee's Compensation shall not include Compensation
which is paid
to the Employee for periods ending before the Entry Date
on which the
Employee becomes a Participant.
2.10(g)(2) If this Plan is adopted as an
amendment and
restatement of a Pre-Existing Plan, this definition shall
be effective
for Plan Years beginning on or after January 1, 1989
unless a later
effective date is specified in the Adoption Agreement;
provided, the
$200,000 limitation of 2.10(e) shall not be effective
later than the
first day of the first Plan Year beginning on or after
January 1, 1989
and any such later effective date specified in the
Adoption Agreement
for the other provisions of this 2.10 shall not be later
than the
Final Compliance Date.
2.10(g)(3) If so specified in the Adoption
Agreement for a
nonstandardized Plan, a Participant's Compensation in
excess of the
dollar amount or percentage specified in the Adoption
Agreement shall
not be taken into account for purposes of determining the
amount or
allocation of any contributions made by or on
behalf of such
Participant under this Plan.
2.10(g)(4) If so specified in the Adoption
Agreement for a
nonstandardized Plan, the Compensation of a Participant
who is a
Highly Compensated Employee shall not include the specific
types of
Compensation specified in the Adoption Agreement.
2.11 Covered Compensation - means for each Participant
for each Plan
Year beginning on or after January 1, 1989, the
average (without
indexing) of the Taxable Wage Bases in effect under
the Social
Security Act for each calendar year during the 35-year
period ending
with the last day of the calendar year in which the
Participant
attains (or will attain) Social Security Retirement Age,
determined by
assuming that the Taxable Wage Base for all future years
shall be the
same as the Taxable Wage Base in effect as of the
beginning of such
Plan Year.
A Participant's Covered Compensation for a Plan Year
beginning before
the 35-year period ending with the last day of the
calendar year in
which the Participant attains Social Security Retirement
Age is the
Taxable Wage Base in effect as of the beginning of the
Plan Year. A
Participant's Covered Compensation for a Plan Year
beginning after
such 35-year period is the Participant's Covered
Compensation for the
Plan Year during which the 35-year period ends.
However, a Participant's Covered Compensation shall
automatically be
adjusted each Plan Year and any increase in a
Participant's Covered
Compensation shall not result in a decrease in the
Participant's
accrued benefit which would be impermissible under Code
411(b)(1)(G)
r 411(d)(6).
For purposes of this 2.11, Social Security Retirement Age
means (a)
age 65 in the case of a Participant who was born before
January 1,
1938, (b) age 66 for a Participant who was born after
December 31,
1937, but before January 1, 1955, and (c) age 67 for a
Participant who
was born after December 31, 1954.
2.12 Disability or Disabled - means an individual's
inability to
engage in any substantially gainful activity at the
individual's
customary level of compensation or competence and
responsibility as an
Employee due to any medically determinable physical
or mental
impairment or impairments which may be expected to result
in death or
to last for a continuous period of at least 12 months as
determined by
a qualified physician or other medical practitioner
selected by the
Plan Administrator for this purpose in accordance with
uniform and
nondiscriminatory standards.
2.13 Early Retirement Age - means
2.13(a) Standard Option - the Normal Retirement Age or
2.13(b) Alternative - the alternative Early
Retirement Age
specified in the Adoption Agreement.
2.14 Earned Income - means for any Self-Employed
Individual for any
period the net earnings from self-employment (as
defined in Code
1402(a)) for such period from the Employer or any
Participating
Affiliate for which the personal services of such
Employee are a
material income-producing factor, where such net
earnings are (a)
determined without regard to items not included in gross
income for
purposes of Chapter 1 of the Code and the
deductions properly
attributable to such items, (b) determined with
regard to the
deduction allowed to the Self-Employed Individual under
Code 164(f)
for taxable years beginning after December 31, 1989, and
(c) reduced
by the contributions made on behalf of such Employee to
any qualified
plan (as described in Code 401(a)) maintained by the
Employer or any
Participating Affiliate to the extent such
contributions are
deductible under Code 404.
2.15 Effective Date - means the effective date of the
Employer's
adoption or amendment of this Plan as specified in
the Adoption
Agreement. However, if this Plan is adopted as an
amendment and
restatement of a Pre-Existing Plan, certain provisions of
this Plan
may be effective retroactive to Plan Years beginning
before such
Effective Date or may be effective at a date later than
such Effective
Date as specified in this Plan document or in the Adoption
Agreement.
2.16 Election Form - means the form or forms
provided by or
acceptable to the Plan Administrator for making the
elections and
designations called for under this Plan and no such form
shall become
effective unless properly completed and timely delivered to
the Plan
Administrator in accordance with the terms of this Plan and
such rules
as the Plan Administrator shall adopt from time to time.
2.17 Elective Deferral - means the nonforfeitable
contribution made
to the Fund by the Employer or a Participating
Affiliate on a
Participant's behalf under 5.3(f).
2.18 Elective Deferral Account - means the subaccount
established as
part of a Participant's Account to record the
Participant's Elective
Deferrals and the Fund Earnings attributable to such
contributions.
2.19 Eligible Employee - means
2.19(a) Standard Option - each Employee of the
Employer or a
Participating Affiliate other than
2.19(a)(1) an Employee who is included in a unit of
employees
covered by a collective bargaining agreement between the
Employer and
employee representatives which agreement does not
provide for
participation in this Plan if retirement benefits under
this Plan were
the subject of good faith bargaining; provided, however,
that
(i) the term "employee representatives" shall not
include an
organization more than half of whose members are
employees who are
owners, officers or executives of the Employer, and
(ii) an Employee shall not be treated as
covered under a
collective bargaining agreement if more than 2% of the
Employees
covered under such agreement are "professionals" (as
defined in
1.410(b)-9(g) of the Federal Income Tax Regulations); and
2.19(a)(2) an Employee who is a nonresident alien
(within the
meaning of Code 7701(b)(1)(B) and who receives no
earned income
(within the meaning of Code 911(d)(2)) from the
Employer or any
Participating Affiliate which constitutes income from
sources within
the United States (within the meaning of Code 861(a)(3)).
2.19(b) Alternative - If this Plan is
adopted as a
nonstandardized Plan, the Employer may specify in
the Adoption
Agreement a category of Employees who shall not be treated
as Eligible
Employees under this Plan. However, the Plan must
satisfy on a
continuing basis the nondiscrimination rules under Code
401(a)(4),
the coverage rules under Code 410(b), and the minimum
participation
rules under Code 401(a)(26).
2.20 Employee - means each person who is treated as an
employee of
the Employer or an Affiliate which is required to be
aggregated with
the Employer under Code 414(b), 414(c), 414(m) or
414(o) including
(a) a common-law employee (whether full-time, part-
time, regular,
temporary or otherwise), (b) a Self-Employed Individual,
(c) an Owner-
Employee, (d) a Leased Employee and (e) each person who is
deemed to
be an employee under Code 414(o).
2.21 Employee Account - means the subaccount established
as part of a
Participant's Account to record (1) the Participant's
Employee
Contributions under this Plan, (2) the Participant's
nondeductible
employee contributions, if any, under a Pre-Existing Plan
or a plan
which is merged into this Plan under 14.5, and (3) the
Fund Earnings
attributable to such contributions. If a separate
account was not
maintained for contributions under other plans as described
in clause
(2) above, the account balance attributable to such
contributions
shall be the Participant's total account balance under
such other
plans multiplied by a fraction, the numerator of which is
the total
amount of the Participant's nondeductible employee
contributions (less
withdrawals) and the denominator of which is the sum of the
numerator
and the total contributions made by the Employer on
behalf of the
Participant (less withdrawals). For purposes of
calculating such
fraction, contributed amounts used to provide ancillary
benefits shall
be treated as contributions and only amounts actually
distributed to
the Participant (but not amounts which reflect the cost of
any death
benefits) shall be treated as withdrawals.
2.22 Employee Contribution - means any contribution made
by or on
behalf of a Participant to the Fund under 5.3(g) that is
includable
in the Participant's gross income for the year in which
made.
2.23 Employer - means the sole proprietorship,
partnership or
corporation identified as the Employer in the Adoption
Agreement and
any successor in interest to such organization.
2.24 Employer Account - means the subaccount established
as part of a
Participant's Account to record the Participant's
share of the
Employer Contributions and Forfeitures and the Fund
Earnings
attributable to such amounts.
2.25 Employer Contribution - means the contributions
made by the
Employer and by any Participating Affiliate to the Fund
under 5.1,
5.2, 5.3(e) or 5.4.
2.26 Entry Date - means
2.26(a) Standard Option - the first day of each Plan
Year and the
first day of the 7th month in each Plan Year or
2.26(b) Alternative - the alternative Entry Date
specified in the
Adoption Agreement.
2.27 ERISA - means the Employee Retirement Income
Security Act of
1974, as amended.
2.28 Family Members - means for any year, with respect to
a Highly
Compensated Employee who is a 5% owner or who is in
the group
consisting of the 10 Highly Compensated Employees paid
the greatest
Compensation during such year, (a) such individual's
spouse, (b) such
individual's lineal ascendants and lineal descendants
and (c) the
spouses of such lineal ascendants or descendants as
determined under
Code 414(q)(6).
2.29 Final Compliance Date - means the first day of the
first Plan
Year beginning after December 31, 1993 or such other
applicable
effective date of the final nondiscrimination and
other TRA 86
regulations.
2.30 Forfeiture - means the portion of an Account of a
Participant
which is deducted from such Account in accordance with
the terms of
this Plan.
2.31 401(k) Plan - means this Plan as adopted by entering
into the
Standardized 401(k) Plan Adoption Agreement or the
Nonstandardized
401(k) Plan Adoption Agreement.
2.32 Fund - means the trust fund created in accordance
with this
Plan and the Trust Agreement which is a part of this Plan.
2.33 Fund Earnings - means for each period ending on a
Valuation Date
the investment gains and losses (whether realized or
unrealized),
income and expenses (other than expenses allocable
directly to a
specific Account) of the Fund for such period as
determined based on
the fair market value of the assets of the Fund on such
Valuation
Date.
2.34 Highly Compensated Employee - means a highly
compensated
employee within the meaning of Code 414(q) (as
described in
7.4(a)(5)).
2.35 Integration Level - means the amount of Compensation
specified
in the Adoption Agreement at or below which the rate of
contributions
or benefits (expressed as a percentage of such
Compensation) provided
under the Plan is less than the rate of contributions
or benefits
(expressed as a percentage of such Compensation) provided
under the
Plan with respect to Compensation above such amount. The
Integration
Level for any Plan Year shall not exceed the Taxable
Wage Base in
effect at the beginning of such Plan Year.
2.36 Leased Employee - means for each Plan Year beginning
on or after
January 1, 1987 each person who is not a common-law
employee of the
Employer or an Affiliate, but who, pursuant to an
agreement between
the Employer or an Affiliate ("recipient") and any
other person
("leasing organization"), has performed services for the
recipient or
the recipient and a related person (as determined in
accordance with
Code 414(n)(6)) on a substantially full-time basis for a
period of at
least one year, which services are of a type historically
performed by
employees in the business field of the recipient or related
person for
whom such services are being performed. However, subject
to the rules
set forth in the regulations under Code 414(n), such
person shall not
be treated as a Leased Employee if (a) the total
number of such
persons does not constitute more than 20% of the total
nonhighly
compensated work force of the recipient and (b) such person
is covered
by a money purchase pension plan which is maintained by
the leasing
organization and which provides for (1) a
nonintegrated employer
contribution rate of at least 10% of compensation (as
defined in Code
415(c)(3) but including amounts contributed pursuant to
a salary
reduction agreement which are excludable from the
individual's gross
income under Code 125, 402(e)(3), 402(h) or 403(b)),
(2) immediate
participation and (3) full and immediate vesting.
2.37 Matching Account - means the subaccount established
as part of a
Participant's Account to record the Matching Contributions
made on the
Participant's behalf under this Plan and the Fund
Earnings
attributable to such contributions.
2.38 Matching Contribution - means the contribution
made by the
Employer and by any Participating Affiliate to the Fund
under 5.3(b)
by reason of a Participant's Elective Deferrals or
Employee
Contributions.
2.39 Maximum Disparity Rate - means
2.39(a) Standard Option - if the Integration Level is
equal to the
Taxable Wage Base, the greater of 5.7% or the portion of
the tax rate
under Code 3111(a) which is attributable to old-age
insurance as in
effect on the first day of such Plan Year, and
2.39(b) Alternative - if the Integration Level is less
than the
Taxable Wage Base, the applicable percentage determined in
accordance
with the following table, where
X = the greater of $10,000 or 20% of the Taxable Wage
Base
TWB = the Taxable Wage Base
If the Integration Level
Is More ThanBut Not More Than Applicable Percentage
$0 X 5.7 %
X 80% of TWB 4.3 %
80% of TWB 100% of TWB 5.4 %
or, if the portion of the tax rate under Code 3111(a)
which is
attributable to old-age insurance as in effect on the
first day of
such Plan Year is greater than 5.7 %, the applicable
percentage in the
table above shall be such portion of the tax rate,
proportionately
reduced in the same manner as the 5.7% amount in the table
above.
2.40 Money Purchase Pension Plan - means this Plan as
adopted by
entering into the Standardized Money Purchase Pension
Plan Adoption
Agreement or the Nonstandardized Money Purchase Pension
Plan Adoption
Agreement.
2.41 Net Profits -
2.41(a) Standard Option. The term "Net Profits" means
2.41(a)(1) for an Employer or Participating Affiliate
other than a
non-profit entity, the current or accumulated earnings for
the taxable
year for which the Employer contribution is made as
determined before
federal and state taxes and contributions to this Plan or
any other
qualified plan, or
2.41(a)(2) for an Employer or Participating Affiliate
which is a
non-profit entity, the current or accumulated excess of
receipts over
disbursements for the fiscal year for which the Employer
contribution
is made.
2.41(b) Alternative. The Employer may specify in an
alternative
definition of Net Profits in the Adoption Agreement.
2.42 Nonhighly Compensated Employee - means each
Employee who is
neither a Highly Compensated Employee nor a Family Member.
2.43 Normal Retirement Age -
2.43(a) General. The term "Normal Retirement Age" means
2.43(a)(1) Standard Option - age 65 or
2.43(a)(2) Alternative - the alternative Normal
Retirement Age
specified in the Adoption Agreement.
2.43(b) Special Rules
2.43(b)(1) Mandatory Retirement Age. If,
consistent with
applicable age discrimination law, the Employer enforces a
mandatory
retirement age, the Normal Retirement Age shall be the
earlier of (1)
the date the Participant reaches such mandatory retirement
age or (2)
the date the Participant reaches age 65 or, if an
alternative is
specified in the Adoption Agreement, the date the
Participant reaches
Normal Retirement Age as specified in the Adoption
Agreement.
2.43(b)(2) Transitional Rule. If
(i) the normal retirement age under the terms of
the Pre-
Existing Plan as in effect for Plan Years beginning before
January 1,
1988 was determined with reference to an anniversary of
the date on
which a Participant commenced participation in
such plan
("participation commencement date"),
(ii) such anniversary was later than the 5th
anniversary of the
participation commencement date,
(iii) the Normal Retirement Age specified in
the Adoption
Agreement is determined with reference to an
anniversary of the
participation commencement date, and
(iv) this transitional rule is specified in
the Adoption
Agreement,
then the anniversary for any Participant whose
participation
commencement date occurred in a Plan Year beginning before
January 1,
1988 shall be the earlier of (A) the anniversary under the
terms of
the Pre-Existing Plan, or (B) the 5th anniversary of the
first day of
the first Plan Year beginning after December 31, 1987.
2.44 Owner-Employee - means each Self-Employed Individual
who is (a)
a sole proprietor of the Employer or a Participating
Affiliate or (b)
a partner owning more than 10% of either the capital
or profits
interest of the Employer or a Participating Affiliate.
2.45 Paired Plans - means (a) a combination of
two or more
standardized defined contribution Plans under this
Smith Barney
Prototype Defined Contribution Plan (Plan Document #05)
or (b) a
combination of one or more such standardized defined
contribution
Plans with a standardized defined benefit plan under the
Smith Barney
Prototype Defined Benefit Plan (Plan Document #06).
However, such
Plans shall be treated as Paired Plans only if (1) such
Paired Plans
have the same Plan Year, and (2) no more than one
such plan is
integrated with social security.
2.46 Participant - means (a) an Eligible Employee who has
satisfied
the Participation Requirement specified in the Adoption
Agreement and
has become a Participant in accordance with 4, and (b) any
individual
for whom an Account continues to exist under the Plan.
2.47 Participating Affiliate - means (a) if this
Plan is a
standardized Plan, each Affiliate of the Employer or (b) if
this Plan
is a nonstandardized Plan, each Affiliate which
participates in this
Plan, as set forth in 14.1(c) of the Plan; provided, an
Affiliate
automatically shall cease to be a Participating Affiliate
if, and at
the time, it ceases to be an Affiliate as set forth in
14.6(a).
2.48 Participation Requirement - means
2.48(a) Standard Option - attainment of age 21 and
completion of a
waiting period equal to one Year of Service or
2.48(b) Alternative - the alternative minimum age
and waiting
period requirement specified in the Adoption Agreement.
2.49 Plan - means this Smith Barney Prototype Defined
Contribution
Plan, as adopted by the Employer in the form of a Profit
Sharing Plan,
a 401(k) Plan, a Money Purchase Pension Plan or a
Target Benefit
Pension Plan, and as amended from time to time in
accordance with
14.2.
2.50 Plan Administrator - means
2.50(a) Standard Option - the Employer or
2.50(b) Alternative - the person or persons designated
in writing
by the Employer as the Plan Administrator for this Plan.
2.51 Plan Year - means the 12 consecutive month period or
the 52/53
week period which ends on the date specified in
the Adoption
Agreement; provided, however, if this Plan is adopted as a
new Plan,
the first Plan Year shall be the period beginning on the
Effective
Date and ending on the date specified in Adoption
Agreement.
2.52 Pre-Existing Plan - means the Employer's
prior defined
contribution plan and the related trust agreement or
other funding
arrangement which is described in the Adoption Agreement
and which is
amended and restated in the form of this Plan.
2.53 Profit Sharing Plan - means this Plan as adopted
by entering
into the Standardized Profit Sharing Plan Adoption
Agreement or the
Nonstandardized Profit Sharing Plan Adoption Agreement.
2.54 Prototype Sponsor - means Smith Barney Inc. and any
successor to
such corporation.
2.55 Qualified Matching Contribution - means the
contribution made by
the Employer and by any Participating Affiliate to the
Fund under
5.3(c) by reason of a Participant's Elective Deferrals
or Employee
Contributions.
2.56 Qualified Matching Account - means the subaccount
established as
part of a Participant's Account to record the
Qualified Matching
Contributions made on the Participant's behalf under this
Plan and the
Fund Earnings attributable to such contributions.
2.57 Qualified Nonelective Contribution - means the
contribution
(other than Matching Contributions, Qualified Matching
Contributions
and Employer Contributions) made by the Employer
and by any
Participating Affiliate to the Fund under 5.3(d).
2.58 Qualified Nonelective Account - means the subaccount
established
as part of a Participant's Account to record the Qualified
Nonelective
Contributions made on the Participant's behalf under this
Plan and the
Fund Earnings attributable to such contributions.
2.59 Rollover Account - means the subaccount established
as part of a
Participant's Account to record the Participant's
Rollover
Contributions and the Fund Earnings attributable
to such
contributions.
2.60 Rollover Contribution - means (a) a contribution of
an amount,
or more than one amount, which satisfies the
applicable rollover
requirements under Code 402 or Code 408 made by a
Participant to the
Fund under 5.5 and (b) effective January 1, 1993,
an eligible
rollover distribution which is directly transferred to the
Fund on or
after such date pursuant to a Participant's election
under Code
401(a)(31).
2.61 Self-Employed Individual - means an individual who
is self-
employed and who receives Earned Income from the
Employer or a
Participating Affiliate or who would have received such
Earned Income
but for the fact that the Employer or the Participating
Affiliate did
not have Net Profits.
2.62 Spouse - means the person who is lawfully
married to the
Participant on the date the Participant's Account
becomes payable
under this Plan or, if a Participant dies before such date,
the person
who was lawfully married to such Participant on the
Participant's date
of death. However, a former spouse shall be treated as the
Spouse and
a current spouse shall not be treated as the Spouse to
the extent
provided under a qualified domestic relations order as
described in
Code 414(p).
2.63 Target Benefit Pension Plan - means this Plan as
adopted by
entering into the Standardized Target Benefit Pension
Plan Adoption
Agreement or the Nonstandardized Target Benefit Pension
Plan Adoption
Agreement.
2.64 Taxable Wage Base - means for any Plan Year the
contribution and
benefit base in effect under 230 of the Social Security
Act at the
beginning of such Plan Year.
2.65 TRA 86 - means the Tax Reform Act of 1986 ("Act")
and any other
legislation and related regulations, notices or other
guidance for
which amendments are required to be made at the
same time as
amendments for such Act.
2.66 Trust Agreement - means the trust agreement between
the Employer
and the Trustee which is established as part of this Plan
and which is
set forth in the attached Smith Barney Prototype Defined
Contribution
Plan Trust Agreement or, if so specified in the Adoption
Agreement for
a 401(k) Plan, the Smith Barney Prototype Defined
Contribution Plan
Alternative Trust Agreement for 401(k) Plans.
2.67 Trustee - means the person or persons specified in
the Adoption
Agreement who serve as the trustee for the Fund under
the Trust
Agreement and any successor to such person or persons.
2.68 Valuation Date - means (a) the last day of each Plan
Year and
(b) each other date, if any, agreed upon in advance by
the Employer
and the Trustee, provided the selection of such other
date does not
result in discrimination in favor of Highly Compensated
Employees
which would be prohibited under Code 401(a).
SECTION 3. SERVICE DEFINITIONS AND RULES
The definitions and rules in this 3 shall apply for
purposes of
measuring an Employee's service (a) for participation
purposes - to
determine when the Employee has satisfied the
Participation
Requirement and (b) for vesting purposes - to
determine the
nonforfeitable interest in his or her Account.
3.1 Hour of Service Method (Standard Option). The
definitions and
rules in this 3.1 shall apply unless the "Elapsed Time"
method of
crediting service is specified in the Adoption Agreement.
3.1(a) Break in Service.
3.1(a)(1) General. The term "Break in Service"
means each
Computation Period during which an Employee fails to
complete more
than 500 Hours of Service.
3.1(a)(2) Maternity/Paternity Rule. Solely for
purposes of
determining whether an Employee has a Break in Service,
an Employee
who is absent from work for "maternity or paternity
reasons" and who
timely furnishes proof of the reason for such absence (in
accordance
with such nondiscriminatory rules as may be established by
the Plan
Administrator and communicated to Employees) shall be
credited with
each Hour of Service for which the Employee would
otherwise have been
credited but for such absence, or if such Hours of Service
cannot be
determined, with 8 Hours of Service for each day of
such absence.
However, the total number of Hours of Service so
credited to such
Employee shall not exceed 501 Hours of Service. The Hours
of Service
so credited shall be credited to the Computation Period in
which such
absence begins if such credit is necessary to prevent a
Break in
Service in such Computation Period or, if such credit is
unnecessary,
in the immediately following Computation Period. For
purposes of this
special maternity/paternity rule, an absence for
"maternity or
paternity reasons" means an absence (i) by reason of the
pregnancy of
the Employee, (ii) by reason of the birth of a child of
the Employee,
(iii) by reason of the placement of a child with the
Employee in
connection with the adoption of such child by such
Employee, or (iv)
for purposes of caring for such child for a period
beginning
immediately following such birth or placement.
3.1(b) Computation Period.
3.1(b)(1) The term "Computation Period" for
purposes of
determining Years of Service and Breaks in Service
means the
applicable period described in this 3.1(b).
3.1(b)(2) Vesting. The relevant Computation Period
for measuring
Years of Service and Breaks in Service for vesting purposes
shall be
(i) Standard Option - the Plan Year or
(ii) Alternative - if so specified in the Adoption
Agreement,
(A) the 12 consecutive month period which begins on the
date the
Employee first performs an Hour of Service ("hire date")
and ends on
the date immediately preceding the first anniversary of
such hire date
and (B) each 12 consecutive month period thereafter
beginning on each
anniversary of such hire date and ending on the date
immediately
preceding the next anniversary of such date.
3.1(b)(3) Participation. The initial Computation
Period for
measuring Years of Service and Breaks in Service for
participation
purposes shall be the 12 consecutive month period which
begins on the
first day an Employee first performs an Hour of Service as
an Employee
("hire date") and ends on the date immediately preceding
the first
anniversary of such date. Each subsequent Computation
Period shall be
(i) Standard Option - each Plan Year, beginning
with the Plan
Year which begins before the first anniversary of the
Employee's hire
date (regardless of whether the Employee is credited with
1,000 Hours
of Service in the Employee's initial Computation Period).
An Employee
shall be credited with two Years of Service for
participation purposes
if the Employee completes 1,000 or more Hours of Service
in both the
initial Computation Period and the first Plan Year which
begins within
such initial Computation Period, or
(ii) Alternative - if so specified in the Adoption
Agreement,
the 12 consecutive month period which begins on each
anniversary of an
Employee's hire date and ends on the date immediately
preceding the
next anniversary of the Employee's hire date.
For participation purposes, an Employee shall be
credited with a
Year of Service
(A) Standard Option - on the last day of the
Computation Period
in which the Employee is credited with at least 1,000 Hours
of Service
(or such lesser number of hours specified in the Adoption
Agreement)
or
(B) Alternative - on the first date on which the
Employee is
credited with at least 1,000 Hours of Service (or such
lesser number
of hours specified in the Adoption Agreement) provided
the Employee
completes such specified number of Hours of Service in one
Computation
Period.
Notwithstanding the foregoing, if the Participation
Requirement
includes a partial Year of Service, no minimum number of
Hours of
Service shall be required for such partial year and an
Employee shall
be credited with such partial Year of Service on the date
on which
such partial period of service is completed.
3.1(b)(4) Change in Computation Period. If an
amendment results
in a change in the Computation Period, the first
Computation Period
established under such amendment shall begin before the
last day of
the preceding Computation Period and each Employee to whom
both such
Computation Periods apply and who completes 1,000 or more
Hours of
Service in both such Computation Periods shall be credited
with one
Year of Service for each such Computation Period.
3.1(c) Hour of Service.
3.1(c)(1) General. The term "Hour of Service" means
(i) each hour for which an Employee is paid, or
entitled to
payment, by the Employer or an Affiliate for the
performance of duties
as an Employee, which hours shall be credited to the
Employee for the
relevant Computation Period in which such duties are
performed;
(ii) each hour for which an Employee is paid, or
entitled to
payment, by the Employer or an Affiliate 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; provided (A) no more
than 501 hours
shall be credited under this clause (ii) for any single
continuous
period during which no duties are performed (whether or
not such
period covers more than one relevant Computation Period)
and (B) hours
under this clause (ii) shall be calculated and credited
pursuant to
2530.200b-2 of the Department of Labor Regulations
which are
incorporated as part of this Plan by this reference; and
(iii) each hour for which back pay, irrespective of
mitigation
of damages, is either awarded or agreed to by the
Employer or an
Affiliate; provided (A) no credit shall be given for an
hour described
in this clause (iii) if credit also is given for such
hour under
clause (i) or clause (ii), and (B) an hour described in
this clause
(iii) shall be credited to the Employee for the relevant
Computation
Period or Computation Periods to which the award or
agreement pertains
rather than to the Computation Period in which the award,
agreement or
payment is made.
3.1(c)(2) Determination. The Employer shall
determine an
Employee's Hours of Service
(i) Standard Option - by actually counting
hours and
maintaining records which reflect the actual hours worked,
or
(ii) Alternative - if so specified in the Adoption
Agreement,
by crediting each such Employee with
(A) 10 Hours of Service for each day,
(B) 45 Hours of Service for each week,
(C) 95 Hours of Service for each semi-
monthly payroll
period, or
(D) 190 Hours of Service for each month
during which the Employee otherwise would be
credited with at
least one Hour of Service.
3.1(d) Year of Service. The term "Year of Service"
means each
Computation Period during which an Employee completes at
least
3.1(d)(1) Standard Option - 1,000 Hours of Service or
3.1(d)(2) Alternative - such lesser number of Hours
of Service
specified in the Adoption Agreement.
Notwithstanding the foregoing, if the Participation
Requirement
includes a partial Year of Service, no minimum number of
Hours of
Service shall be required for such partial year.
3.1(e) Change in Service Calculation Method. If an
amendment
changes the method of crediting service from the "Elapsed
Time" method
to the "Hours of Service" method, each Employee who was
credited with
service under the "Elapsed Time" method shall be credited
with service
3.1(e)(1) for the Employee's employment before the
Computation
Period in which such amendment is adopted, as determined on
the basis
that one Year of Service credited to the Employee under
the "Elapsed
Time" method for such employment shall equal one Year of
Service under
this 3.1,
3.1(e)(2) for the Employee's employment during the
Computation
Period in which such amendment is adopted, for a number of
Hours of
Service determined by uniformly applying one of the
equivalencies set
forth in 3.1(c)(2)(ii) to any fractional part of a year
credited to
the Employee under the "Elapsed Time" method as of the
effective date
of the amendment, and
3.1(e)(3) for the Employee's employment on and
after the
effective date of the amendment, as determined under the
rules in this
3.1.
3.2 Elapsed Time Method (Alternative). If the "Elapsed
Time" method
of crediting service is specified in the Adoption
Agreement, the
definitions and rules in this 3.2 shall apply in
lieu of the
definitions and rules in 3.1.
3.2(a) Break in Service.
3.2(a)(1) General. The term "Break in Service" means a
Period of
Severance of at least 12 consecutive months.
3.2(a)(2) Maternity/Paternity Rule. If an Employee is
absent from
service for "maternity or paternity reasons" and the
Employee timely
furnishes proof of the reason for such absence (in
accordance with
such nondiscriminatory rules as may be established by
the Plan
Administrator and communicated to Employees), the 12
consecutive month
period beginning on the first anniversary of the first
date of such
absence shall not constitute a Break in Service. Such 12
consecutive
month period shall be neither a Period of Severance nor a
period of
Service. For purposes of this special maternity/paternity
rule, an
absence for "maternity or paternity reasons" means an
absence (i) by
reason of the pregnancy of the Employee, (ii) by reason of
the birth
of a child of the Employee, (iii) by reason of the
placement of a
child with the Employee in connection with the adoption of
such child
by the Employee, or (iv) for purposes of caring for such
child for a
period beginning immediately following such birth or
placement.
3.2(b) Hour of Service. The term "Hour of Service"
means each hour
for which an Employee is paid, or entitled to payment, by
the Employer
or an Affiliate for the performance of duties as an
Employee during
any period of employment.
3.2(c) Period of Severance. The term "Period of
Severance" means a
continuous period of time during which an Employee is not
employed by
the Employer or an Affiliate beginning on the date
the Employee
retires, quits or is discharged, or if earlier, the
12 month
anniversary of the date on which the Employee was
otherwise first
absent from service.
3.2(d) Period of Service.
3.2(d)(1) General. For participation purposes and
for vesting
purposes, the term "Period of Service" means an Employee's
employment
completed as an Employee of the Employer and any Affiliate
beginning
on such Employee's first day of employment or reemployment
and ending
on the date a Break in Service begins. An Employee's
first day of
employment or reemployment shall be the first day
the Employee
performs an Hour of Service. A Period of Service also
shall include
any Period of Severance of less than 12 consecutive months.
3.2(d)(2) Aggregation. An Employee's employment
completed in all
Periods of Service shall be aggregated (to the extent
that such
service is not disregarded under 3.7 or 3.8) and the
number of days
in each Period of Service in excess of a whole year of
employment (or,
if there is no whole year of employment in any such period,
the number
of days in such period) shall be aggregated into
additional whole
years of employment on the assumption that 365 days equals
one whole
year of employment.
3.2(e) Year of Service. The term "Year of Service"
means each 12
consecutive month period of employment completed in any
Period of
Service beginning on the date an Employee first completes
an Hour of
Service ("hire date") and ending on the date immediately
preceding the
anniversary of such hire date. Subsequent Years of Service
shall begin
on each anniversary of the Employee's hire date and end
on the date
immediately preceding the next anniversary of such hire
date.
3.2(f) Change in Service Calculation Method. If an
amendment
changes the method of crediting service from the "Hour
of Service"
method to the "Elapsed Time" method, each Employee who had
any service
credit under the "Hour of Service" method shall be
credited with
service
3.2(f)(1) for the Employee's employment before the
Computation
Period in which such amendment is adopted, as determined on
the basis
that one Year of Service credited to the Employee under
the "Hour of
Service" method for such employment shall equal one Year
of Service
under this 3.2,
3.2(f)(2) for the Employee's employment during the
Computation
Period in which such amendment is adopted, as determined
under the
rules in this 3.2 or, if greater, as determined for such
period under
the "Hour of Service" method as converted to Years of
Service under
the assumption that 365 days equals one Year of Service,
and
3.2(f)(3) for the Employee's employment after the last
day of the
Computation Period in which such amendment is adopted, as
determined
under the rules in this 3.2.
3.3 Service Before Effective Date. For participation
purposes all
periods of employment with the Employer or an Affiliate
completed
before the Employer adopted this Plan or a predecessor
plan ("pre-
effective date employment") shall be included (to the
extent such
service is not disregarded under 3.7). For vesting
purposes all
periods of pre-effective date employment shall be included
unless such
service is disregarded under 3.7 or 3.8.
Notwithstanding the
foregoing, service credit for vesting purposes
automatically shall be
granted for pre-effective date employment to the extent
required by
Code 411(a) for periods during which the Employer or an
Affiliate
maintained a predecessor plan.
3.4 Service with Predecessor Employer. All periods of
employment with
a predecessor employer or employers shall be included in
calculating
an Employee's service to the extent required by Code
414(a) if the
Employer or an Affiliate maintains a plan of such
predecessor
employer. However, if the Employer or an Affiliate does not
maintain a
plan of such predecessor employer, periods of employment
with such
predecessor employer shall be included in calculating an
Employee's
service
3.4(a) Standard Option - only to the extent
required under
regulations under Code 414(a) or
3.4(b) Alternative - only if so specified in
the Adoption
Agreement.
3.5 Leased Employees. A Leased Employee shall be
credited with
service as an Employee of the Employer or an Affiliate in
accordance
with Code 414(n) or 414(o).
3.6 Service with Affiliates. An Employee shall be
credited with all
service with any Affiliate and any other entity which is
required to
be aggregated with the Employer under Code 414(o).
3.7 Special Break in Service Rules.
3.7(a) Standard Option. Except as provided in 3.7(c)
and 8.2, an
Employee who has a Break in Service shall be credited after
such Break
in Service for both participation and vesting purposes
with all Years
of Service completed before such Break in Service.
3.7(b) Alternative. In addition to the exceptions in
3.7(c) and
8.2, the Employer may specify in the Adoption Agreement
that certain
service completed before a Break in Service may be
disregarded under
one or more of the rules set forth in this 3.7(b).
3.7(b)(1) One Year Hold-Out Rule. If the "One Year
Hold-Out Rule"
is specified in the Adoption Agreement for a
nonstandardized Plan, an
Employee who has a Break in Service (two Breaks in
Service if the
Alternative Maternity/Paternity Rule applies) shall not
be credited
after such Break in Service for participation purposes
or vesting
purposes with any Year of Service completed before such
Break in
Service until the Employee completes a Year of Service
after such
Break in Service.
In applying this rule for participation purposes,
such Year of
Service shall be measured by the Computation Period which
begins on an
Employee's "reemployment commencement date" and, if
necessary,
subsequent Computation Periods beginning
(i) with the Plan Year which includes the first
anniversary of
the "reemployment commencement date" if the standard
Computation
Period in 3.1(b)(3)(i) is specified in the Adoption
Agreement, or
(ii) on anniversaries of the "reemployment
commencement date" if
the alternative Computation Period in 3.1(b)(3)(ii) is
specified in
the Adoption Agreement.
The "reemployment commencement date" shall be the
first day on
which the Employee is credited with an Hour of
Service for the
performance of duties after the first Computation Period in
which the
Employee incurs a Break in Service. If an Employee
who was a
Participant before his or her Break in Service completes
a Year of
Service in accordance with this provision, such
Employee's
participation shall be reinstated as of his or her
reemployment
commencement date.
3.7(b)(2) Pre-Participation Rule. If the "Pre-
Participation Rule"
is specified in the Adoption Agreement, an Employee who has
a Break in
Service (two Breaks in Service if the Alternative
Maternity/Paternity
Rule applies) before the Employee satisfies the
Participation
Requirement shall not be credited for participation
purposes with any
Year of Service completed before such Break in Service.
However, this
rule shall only apply if the Participation Requirement for
the Plan
requires more than one Year of Service and the
vesting schedule
specified in the Adoption Agreement provides for full and
immediate
vesting.
3.7(b)(3) Rule of Parity. If the "Rule of Parity" is
specified
in the Adoption Agreement, the following rules shall apply:
(i) General. If an Employee does not have any
nonforfeitable
interest in the portion of the Employee's Account
which is
attributable to Employer contributions, the Employee's
Years of
Service before a period of consecutive Breaks in Service
shall not be
taken into account in computing service for participation
or vesting
purposes if the number of consecutive Breaks in Service in
such period
equals or exceeds the greater of 5 (6 if the
Alternative
Maternity/Paternity Rule applies) or the aggregate number
of Years of
Service completed before such Breaks in Service ("pre-break
service").
Such pre-break service shall not include any pre-
break service
disregarded under the preceding sentence by reason of prior
Breaks in
Service.
(ii) Participation. If an Employee's Years of
Service are
disregarded under this rule of parity, the Employee shall
be treated
as a new Employee for participation purposes. If the
Employee's Years
of Service are not disregarded under this rule, the
Employee shall
continue to participate in the Plan, or, if the Employee
separated
from service, shall participate immediately upon the
Employee's
reemployment.
(iii) Vesting. If a Participant's Years of
Service are
disregarded under this rule of parity, the Participant's
pre-break
Years of Service shall be disregarded for purposes of
determining the
Participant's nonforfeitable interest in the Participant's
post-break
Employer Account. If a Participant's pre-break Years of
Service are
not disregarded under this rule of parity, the
Participant's pre-break
Years of Service shall be counted for purposes of
determining the
Participant's nonforfeitable interest in the Participant's
post-break
Employer Account.
3.7(b)(4) Alternative Maternity/Paternity Rule.
If the
"Alternative Maternity/Paternity Rule" is specified in
the Adoption
Agreement, the special Maternity/Paternity rule set
forth in
3.1(a)(2) shall not apply and the minimum period of
consecutive
Breaks in Service required to disregard any service or to
deprive any
Employee of any right under this Plan shall be increased
by one as
specified in the parentheticals in this 3.7 and in 8.2.
3.7(c) Vesting on Reemployment After Break in
Service. If a
Participant has 5 or more consecutive Breaks in Service
(6 or more
consecutive Breaks in Service if the Alternative
Maternity/Paternity
Rule applies), all Years of Service completed after such
Breaks in
Service shall be disregarded for purposes of
determining the
Participant's nonforfeitable interest in the Participant's
Employer
Account and Matching Account that accrued before such
Breaks in
Service. Accordingly, as set forth in 8.2, the Employer
shall not be
required to restore a Forfeiture upon such reemployment.
Unless the
Adoption Agreement specifies the Rule of Parity,
both the
Participant's pre-break service and post-break service
shall count for
purposes of determining the nonforfeitable interest
in the
Participant's post-break Employer Account and Matching
Account. If the
Adoption Agreement specifies the Rule of Parity and the
Participant's
pre-break Years of Service are disregarded under that rule,
then the
Participant's pre-break Years of Service shall not count
for purposes
of determining the nonforfeitable interest in the
Participant's post-
break Employer Account and Matching Account. As provided
in 8.2,
separate accounts shall be maintained for the
Participant's pre-break
and post-break Employer Account and Matching Account and
such accounts
shall share in Fund Earnings.
If a Participant does not have 5 consecutive Breaks in
Service (6 or
more consecutive Breaks in Service if the
Alternative
Maternity/Paternity Rule applies), both the Participant's
pre-break
and post-break Years of Service shall count in
determining the
nonforfeitable interest in both the pre-break and post-
break Employer
Account and Matching Account balance. However, unless
the Adoption
Agreement specifies the "Alternative to the Buy Back
Rule" (as
described in 8.2(b)), a Participant's pre-break Employer
Account and
Matching Account balance shall be zero unless the
Participant repays
any distribution as provided in 8.2(a).
3.8 Service Exclusions for Vesting Purposes.
3.8(a) Standard Option - An Employee shall be credited
with all
Years of Service for vesting purposes (to the extent such
service is
not disregarded under 3.7 and 8.2).
3.8(b) Alternative - The Employer may specify in
the Adoption
Agreement service which is expressly excluded for vesting
purposes.
SECTION 4. PARTICIPATION
4.1 General Rule. Each Eligible Employee shall become a
Participant
in this Plan on the Entry Date which coincides with or
immediately
follows the date on which the Eligible Employee
satisfies the
Participation Requirement (provided he or she is an
Eligible Employee
on such Entry Date).
4.2 Special Rules.
4.2(a) Pre-Existing Plan. Any Employee who was a
participant in the
Pre-Existing Plan on the date immediately preceding the
Effective Date
or who would have become a participant in the Pre-Existing
Plan on the
Effective Date shall become a Participant under this
Plan on such
Effective Date. However, no contributions shall be made
by or on
behalf of such Participant unless the Participant is
otherwise
entitled to a contribution under 5.
4.2(b) Reemployment Before Satisfying Participation
Requirement. If
an Employee separates from service prior to
satisfying the
Participation Requirement and is thereafter reemployed, all
employment
completed by such Employee prior to such separation
shall be
aggregated with such Employee's employment
completed after
reemployment for purposes of satisfying the Participation
Requirement
unless such prior employment is excluded under the rules
set forth in
3.
4.2(c) Reemployment After Satisfying Participation
Requirement. If
an Employee satisfies the Participation Requirement before
he or she
separates from service and the Employee thereafter is
reemployed, the
Employee shall become a Participant on the later of (1) the
first day
he or she completes an Hour of Service as an Eligible
Employee upon
reemployment or (2) the first Entry Date following the date
on which
he or she satisfies the Participation Requirement.
However, any such
Employee whose prior service is disregarded under 3 shall
be treated
as a new Employee for participation purposes.
4.2(d) Status Change. If the status of an Eligible
Employee for
whom no Account is maintained changes to that of an
Employee (other
than an Eligible Employee) and such person's status
thereafter changes
back to that of an Eligible Employee, such person shall
become a
Participant on the later of (1) the date the status
changes back to
that of an Eligible Employee or (2) the first Entry
Date which
coincides with or immediately follows the date on which
he or she
satisfies the Participation Requirement.
4.3 Participant Information. Each Participant shall file
with the
Plan Administrator such personal information and data as
the Plan
Administrator deems necessary for the orderly
administration of this
Plan.
4.4 No Employment Rights. This Plan is not a contract of
employment
and participation in this Plan shall not give any Employee
or former
Employee the right to be retained in the employ of the
Employer or any
Affiliate or, upon termination of such employment, to
have any
interest or right in the Fund other than as expressly
provided in this
Plan.
SECTION 5. CONTRIBUTIONS
5.1 Profit Sharing Plan. If this Plan is adopted as a
Profit Sharing
Plan, the Employer Contribution made by the Employer
and each
Participating Affiliate for each Plan Year shall equal such
amount, if
any, as the Board determines in its discretion that the
Employer and
each Participating Affiliate shall contribute for such
year. Employer
Contributions under this 5.1 shall be made
5.1(a) Standard Option - from Net Profits or
5.1(b) Alternative - if so specified in the Adoption
Agreement,
without regard to Net Profits. Notwithstanding any such
election, the
Employer intends that this Plan shall be a "profit-sharing
plan" for
purposes of the Code and ERISA.
5.2 Money Purchase Pension Plan. If this Plan is adopted
as a Money
Purchase Pension Plan, the Employer Contribution made by
the Employer
and each Participating Affiliate for each Plan Year shall
be an amount
equal to the sum of the contribution for each Active
Participant as
determined under the formula specified in the Adoption
Agreement. The
Forfeitures for each Plan Year shall be
5.2(a) Standard Option - applied to reduce the
Employer
Contribution for such Plan Year or
5.2(b) Alternative - if so specified in the Adoption
Agreement,
allocated to the Employer Account of each Active
Participant in
accordance with 6.3(b). Notwithstanding any such
election, the
Employer intends that this Plan shall be a "money
purchase pension
plan" for purposes of the Code and ERISA.
5.3 401(k) Plan.
5.3(a) General. If this Plan is adopted as a 401(k)
Plan, the
contributions made by the Employer and each Participating
Affiliate
shall be determined in accordance with the elections
made by the
Employer in the Adoption Agreement and the rules set
forth in this
5.3. Contributions made under this 5.3 other than
Elective Deferrals
and Employee Contributions shall be made
5.3(a)(1) Standard Option - from Net Profits or
5.3(a)(2) Alternative - if so specified in the Adoption
Agreement,
without regard to Net Profits.
Elective Deferrals and Employee Contributions shall be
made without
regard to Net Profits. Notwithstanding any such election,
the Employer
intends that this Plan shall be a "profit-sharing plan"
for purposes
of the Code and ERISA.
5.3(b) Matching Contributions. If the Employer
specifies in the
Adoption Agreement that Matching Contributions shall be
made to the
Plan, the Employer and each Participating Affiliate
shall make a
Matching Contribution for each eligible Participant
based on the
Employee Contributions and Elective Deferrals made by or on
behalf of
such eligible Participant in such amount and as of each
Allocation
Date as specified in the Adoption Agreement.
Notwithstanding the
foregoing,
5.3(b)(1) for Plan Years beginning on or after
the Final
Compliance Date, no Matching Contribution shall be made on
account of
a Participant's Elective Deferrals or Employee
Contributions which are
Excess Elective Deferrals under 7.3, Excess Contributions
under 7.4
or Excess Aggregate Contributions under 7.5, and
5.3(b)(2) for Plan Years beginning before the Final
Compliance
Date, no Matching Contribution shall be made on account of
such excess
amounts unless specified in the formula for Matching
Contributions set
forth in the Adoption Agreement.
5.3(c) Qualified Matching Contributions. If the
Employer specifies
in the Adoption Agreement that Qualified Matching
Contributions shall
be made to the Plan, the Employer and each Participating
Affiliate
shall make a Qualified Matching Contribution for
each eligible
Participant based on the Employee Contributions and
Elective Deferrals
made by or on behalf of such eligible Participant in such
amount and
as of each Allocation Date as specified in the Adoption
Agreement.
Qualified Matching Contributions shall be subject to the
following
special rules:
5.3(c)(1) the Participant may not elect to
receive such
contributions in cash until distributed from the Plan;
5.3(c)(2) such contributions shall be completely
nonforfeitable
when made;
5.3(c)(3) such contributions shall be subject to
the same
distribution and withdrawal restrictions applicable to
Elective
Deferrals set forth in 9.2(b);
5.3(c)(4), for Plan Years beginning on and after
the Final
Compliance Date, no Qualified Matching Contribution shall
be made on
account of a Participant's Elective Deferrals or
Employee
Contributions which are Excess Elective Deferrals under
7.3, Excess
Contributions under 7.4 or Excess Aggregate Contributions
under 7.5;
and
5.3(c)(5) for Plan Years beginning before the Final
Compliance
Date, no Qualified Matching Contribution shall be made on
account of
such excess amounts unless specified in the formula for
Qualified
Matching Contributions set forth in the Adoption Agreement.
5.3(d) Qualified Nonelective Contribution. If
the Employer
specifies in the Adoption Agreement that Qualified
Nonelective
Contributions shall be made to the Plan, the Employer
and each
Participating Affiliate shall make Qualified Nonelective
Contributions
for each eligible Participant in such amount and as of each
Allocation
Date specified in the Adoption Agreement.
In addition, in lieu of distributing Excess
Contributions as
provided in 7.4(d) or Excess Aggregate Contributions as
provided in
7.5(d), the Employer and each Participating Affiliate may
contribute
on behalf of each Participant who is a Nonhighly
Compensated Employee
on the last day of each Plan Year such amount, if any, as
the Employer
and each Participating Affiliate determine in their
discretion to
contribute for such Plan Year to satisfy the ADP limit of
7.4(b) or
the ACP limit of 7.5(b), or both, pursuant to the
regulations under
Code 401(k) and Code 401(m).
Qualified Nonelective Contributions shall be
subject to the
following special rules:
5.3(d)(1) the Participant may not elect to
receive such
contributions in cash until distributed from the Plan;
5.3(d)(2) such contributions shall be completely
nonforfeitable
when made; and
5.3(d)(3) such contributions shall be subject to
the same
distribution and withdrawal restrictions applicable to
Elective
Deferrals set forth in 9.2(b).
5.3(e) Discretionary Employer Contribution. If
the Employer
specifies in the Adoption Agreement that
discretionary Employer
Contributions shall be made, the Employer Contribution
made by the
Employer and each Participating Affiliate for each Plan
Year shall
equal such amount, if any, as the Board determines in its
discretion
that the Employer and each Participating Affiliate shall
contribute
for such year.
5.3(f) Elective Deferrals. If the Employer
specifies in the
Adoption Agreement that Elective Deferrals may be
made, each
Participant who is an Eligible Employee may elect pursuant
to a cash
or deferred election that the Employer and each
Participating
Affiliate make Elective Deferrals to the Plan on the
Participant's
behalf in lieu of cash compensation for each pay period
ending on any
date on or after he or she becomes a Participant and on
which he or
she is an Eligible Employee in such amounts as
specified in the
Adoption Agreement. All Elective Deferrals shall be made
exclusively
through payroll withholding and shall be transferred by
the Employer
or Participating Affiliate to the Trustee as soon as
practicable after
the date such Elective Deferrals are withheld.
5.3(g) Employee Contributions. If the Employer
specifies in the
Adoption Agreement that Employee Contributions may be
made, each
Participant who is an Eligible Employee may elect to
make Employee
Contributions to the Plan for each pay period ending on any
date on or
after he or she becomes a Participant and on which he or
she is an
Eligible Employee in such amounts as specified in
the Adoption
Agreement. All Employee Contributions shall be made
exclusively
through payroll withholding and shall be transferred by
the Employer
or Participating Affiliate to the Trustee as soon as
practicable after
the date such Employee Contributions are withheld.
5.3(h) Election Rules and Limitations.
5.3(h)(1) General. The Plan Administrator from time to
time shall
establish and shall communicate in writing to
Participants who are
Eligible Employees such reasonable nondiscriminatory
deadlines, rules
and procedures for making the elections described in this
5.3 as the
Plan Administrator deems appropriate under the
circumstances for the
proper administration of this Plan. A Participant's
election shall be
made on an Election Form and no election shall be
effective unless
such Election Form is properly completed and timely
filed in
accordance with such established deadlines, rules and
procedures. The
Plan Administrator shall have the right at any time
unilaterally to
reduce the amount or percentage of Elective Deferrals
or Employee
Contributions elected under this 5.3 if the Plan
Administrator
determines that such reduction is necessary to satisfy the
limitations
under 7 of the Plan.
5.3(h)(2) Commencement of Election. A
Participant's initial
election to make Elective Deferrals or Employee
Contributions under
this 5.3 for any period of employment may be effective as
early as
the Entry Date on which he or she becomes a Participant in
the Plan.
If a Participant does not make a proper election to
make Elective
Deferrals or Employee Contributions as of such Entry
Date, the
Participant may thereafter make an election
(i) Standard Option - effective on any date or
(ii) Alternative - effective only as of the dates
specified in
the Adoption Agreement.
A Participant's election shall remain in effect until
revised or
terminated in accordance with this 5.3(h).
5.3(h)(3) Revision of Election. An election, once
effective, can
thereafter be revised by a Participant
(i) Standard Option - effective on any date or
(ii) Alternative - effective only as of the dates
specified in
the Adoption Agreement.
5.3(h)(4) Termination of Election. A Participant
shall have the
right to completely terminate an election under this 5.3
at any time,
and any such termination shall become effective as of the
first day of
the first pay period following the date he or she
timely files a
properly completed Election Form terminating such
election. Any
Participant whose status as an Eligible Employee terminates
shall be
deemed to have completely terminated his or her
election, if any,
under this 5.3 as of the date the Participant's status
as such so
terminates.
5.3(h)(5) Resumption after Termination. A
Participant whose
election terminates may thereafter elect to resume
contributions under
this 5.3
(i) Standard Option - effective as of any date, or
(ii) Alternative - effective only as of the dates
specified in
the Adoption Agreement.
5.3(h)(6) Effective Dates of Elections. A
Participant's initial,
revised or resumed election shall be effective only if he
or she is an
Eligible Employee on the effective date of such elections
set forth in
this 5.3(h). Elective Deferrals and Employee
Contributions made
pursuant to a Participant's elections shall be
withheld from
Compensation which otherwise would be paid on or after the
effective
date of such election and while he or she is an Eligible
Employee.
Under no circumstances shall a Participant's
Elective Deferral
election apply to defer Compensation which has been
paid to the
Participant or which he or she is currently eligible to
receive (in
cash or otherwise) at his or her discretion.
5.3(i) Application of Forfeitures. The Forfeitures
attributable to
Matching Contributions and Employer Contributions shall be
5.3(i)(1) Standard Option - applied to reduce
the Matching
Contributions, Qualified Matching Contributions and
Qualified
Nonelective Contributions, if any, in
accordance with
6.3(c)(2)(ii)(A) or
5.3(i)(2) Alternative - if so specified in the Adoption
Agreement,
(i) allocated to the Employer Account or Matching
Account, as
applicable, of each Active Participant in
accordance with
6.3(c)(2)(ii)(B)(I), or
(ii) for a nonstandardized Plan, allocated in
accordance with
the formula specified in the Adoption Agreement.
5.4 Target Benefit Pension Plan.
5.4(a) General. If this Plan is adopted as a Target
Benefit Pension
Plan, the Employer Contribution made by the Employer
and each
Participating Affiliate for each Plan Year shall be an
amount equal to
the sum of the contributions required to fund
each Active
Participant's "Target Benefit" specified in the Adoption
Agreement.
The Forfeitures for each Plan Year shall be applied to
reduce the
Employer Contribution for such Plan Year. Such
contribution shall be
determined as of the last day of such Plan Year under the
individual
level premium funding method, using the interest rate and
mortality
table specified in the Adoption Agreement, the
Participant's age on
his or her last birthday and the assumption of a
constant rate of
future Compensation, in accordance with the following:
5.4(a)(1) Step 1. If the Participant has not reached
the Plan's
Normal Retirement Age, calculate the present value of
the "Target
Benefit" specified in the Adoption Agreement by
multiplying the
"Target Benefit" by the product of (1) the applicable
factor from
Table I(a) or (b), whichever is appropriate, in Exhibit
A to the
Adoption Agreement and (2) the applicable factor from Table
III(a) or
(b), whichever is appropriate, in Exhibit A to the Adoption
Agreement.
If the Participant is at or beyond the Plan's Normal
Retirement Age,
calculate the present value of the "Target Benefit"
specified in the
Adoption Agreement by multiplying the "Target
Benefit" by the
applicable factor from Table IV(a) or (b), whichever is
appropriate,
in Exhibit A to the Adoption Agreement.
5.4(a)(2) Step 2. Calculate the excess, if any, of
the amount
determined in Step 1 over the theoretical reserve.
5.4(a)(3) Step 3. Amortize the result in Step 2 by
multiplying it
by the applicable factor from Table II in Exhibit A to
the Adoption
Agreement. For the Plan Year in which the Participant
attains Normal
Retirement Age and for subsequent Plan Years, the
applicable factor is
1.0.
5.4(b) Theoretical Reserve. For purposes of this
5.4, the
theoretical reserve is determined as follows:
5.4(b)(1) A Participant's theoretical reserve as of
the last day
of the first Plan Year in which the Participant
participates in the
Plan, and as of the last day of the first Plan Year after
any Plan
Year in which the Plan either did not satisfy the safe
harbor in
1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations
or was not
a Prior Safe Harbor Plan, is zero. In all other cases, in
the first
Plan Year in which this theoretical reserve provision is
adopted or
made effective, if later, as specified in the Adoption
Agreement
("year 1"), the initial theoretical reserve is determined
as follows:
(i) Calculate as of the last day of the Plan Year
immediately
preceding year 1 the present value of the "Target Benefit",
using the
actuarial assumptions, the provisions of the Plan,
and the
Participant's Average Annual Compensation as of such date;
provided,
however, for a Participant who is beyond Normal Retirement
Age in year
1, the straight life annuity factor used for such
determination shall
be the factor applicable for such Normal Retirement Age.
(ii) Calculate as of the last day of the Plan Year
immediately
preceding year 1 the present value of future Employer
Contributions,
i.e., the contributions due each Plan Year using the
actuarial
assumptions, the provisions of the Plan (disregarding those
provisions
of the Plan providing for the limitations of Code 415 or
the minimum
contributions under Code 416), and the Participant's
Average Annual
Compensation as of such date, beginning with year 1 through
the end of
the Plan Year in which the Participant attains Normal
Retirement Age.
(iii) Subtract the amount determined in clause
(ii) from the
amount determined in clause (i).
5.4(b)(2) Accumulate the initial theoretical
reserve in
5.4(b)(1) and the Employer Contribution (as limited by
Code 415, but
without regard to any required minimum contributions under
Code 416)
for each Plan Year beginning in year 1 up through the last
day of the
current Plan Year (excluding contributions, if any,
made for the
current Plan Year) using the Plan's interest assumption in
effect for
each such year. In any Plan Year following the Plan Year in
which the
Participant attains Normal Retirement Age, the
accumulation is
calculated assuming an interest rate of 0%.
5.4(b)(3) The calculations in this 5.4(b) shall be
made as of
the last day of each Plan Year, on the basis of the
Participant's age
on his or her last birthday and the interest rate in
effect on the
last day of the prior Plan Year.
5.4(c) Past Service Credits. If the Plan is
adopted as a
standardized Plan, upon initial adoption of this Plan or
upon a Plan
amendment which is effective on or after the Final
Compliance Date, no
more than 5 years of credit shall be granted for service
completed
before the effective date of such adoption or amendment,
and any such
past service credit shall be granted on a uniform
basis to all
Participants in the Plan on such effective date.
5.4(d) TRA 86 Amendment. A Participant's Account
balance shall not
be reduced as a result of an amendment to this Plan or a
Pre-Existing
Plan to satisfy the requirements of TRA 86. To the
extent that
contributions actually made on a Participant's behalf for
Plan Years
beginning after December 31, 1988 exceed the contributions
that would
have been required under the formula as effective for such
years as a
result of the amendment of this Plan or a Pre-Existing Plan
to satisfy
TRA 86, such excess shall be applied to offset
contributions required
to such Participant's Account for Plan Years beginning
after the date
such TRA 86 amendment is adopted or, if later, the date
such TRA 86
amendment is effective consistent with ERISA 204(h).
5.4(e) Special Definitions and Rules. The special
definitions and
rules in this 5.4(e) shall apply for purposes of
determining the
Employer Contributions under a Target Benefit Pension Plan.
5.4(e)(1) Cumulative Disparity Limit. For a Plan
with a Unit
Benefit Formula, a Participant's Cumulative Disparity
Limit is equal
to 35 minus (1) the number of the Participant's Years of
Participation
under this Plan during which this Plan did not satisfy the
safe harbor
for target benefit plans in 1.401(a)(4)-8(b)(3) of the
Federal Income
Tax Regulations or was not a Prior Safe Harbor Plan,
and (2) the
number of years during which the Participant participated
in one or
more qualified plans or simplified employee pension
plans ever
maintained by the Employer (other than years counted in
clause (1) or
counted toward a Participant's total Years of
Projected
Participation). The Cumulative Disparity Limit shall be
determined
taking into account only those Years of Participation in
this Plan
beginning after December 31, 1988 when this Plan had an
integrated
benefit formula and those years of participation in
such other
qualified plans and simplified employee pension plans
beginning after
December 31, 1988 during which the Participant actually
received an
allocation under an integrated defined contribution plan
(other than a
target benefit pension plan), during which the
Participant was
eligible to receive a benefit under an integrated
defined benefit
pension plan or an integrated target benefit pension plan),
or during
which the Participant received an allocation or accrued
a benefit
under a plan which imputed permitted disparity pursuant to
1.401(a)-7
of the Federal Income Tax Regulations.
5.4(e)(2) Cumulative Disparity Reduction. For a Plan
with a Fixed
Benefit Formula, the Excess Benefit Percentage will further
be reduced
as set forth in this 5.4(e)(2) for a Participant with
more than 35
"cumulative disparity years." A Participant's "cumulative
disparity
years" consist of the sum of (1) the Participant's total
Years of
Projected Participation, (2) the Participant's Years of
Participation
during which this Plan did not satisfy the safe harbor
for target
benefit plans in regulations 1.401(a)(4)-8(b)(3) of
the Federal
Income Tax Regulations or was not a Prior Safe Harbor
Plan, and (3)
the number of years during which the Participant
participated in one
or more qualified plans or simplified employee pension
plans ever
maintained by the Employer (other than years in clause
(1) or (2)
above); provided that the cumulative disparity years
shall be
determined taking into account only those Years of
Participation in
this Plan beginning after December 31, 1988 when this
Plan had an
integrated benefit formula and those years of
participation in such
other qualified plans and simplified employee pension
plans beginning
after December 31, 1988 during which the Participant
actually received
an allocation under an integrated defined contribution
plan (other
than a target benefit pension plan), during which the
Participant was
eligible to receive a benefit under an integrated
defined benefit
pension plan (or an integrated target benefit pension
plan), or during
which the Participant received an allocation or accrued
a benefit
under a plan which imputed permitted disparity pursuant to
1.401(a)-7
of the Federal Income Tax Regulations.
If this Cumulative Disparity Reduction applies, the
Excess Benefit
Percentage will be reduced as follows:
(A) Subtract the Participant's Base Benefit
Percentage from the
Participant's Excess Benefit Percentage (after
modification as
required in the Adoption Agreement for less than 35 Years
of Projected
Participation).
(B) Multiply the results determined in (A) by a
fraction (not
less than 0), the numerator of which is 35 minus the sum
of the years
in clauses (2) and (3) of this 5.4(e)(2), and the
denominator of
which is 35.
(C) The Participant's Excess Benefit Percentage is
equal to the
sum of the result in (B) and the Participant's
Base Benefit
Percentage, as otherwise modified in the Adoption
Agreement.
5.4(e)(3) Current Stated Benefit. Each
Participant's Current
Stated Benefit will be the product of (1) the amount
derived from the
formula specified in the Adoption Agreement, and (2) a
fraction, the
numerator of which is the Participant's number of
Years of
Participation from the latest Fresh-Start Date (if any)
through and
including the later of the year in which the
Participant attains
Normal Retirement Age or the current Plan Year, and the
denominator of
which is the Participant's total Years of Projected
Participation. If
this Plan has not had a Fresh-Start Date, such fraction
will equal 1.0
for all Participants. In any event, for those Participants
who first
participated in the Plan after the latest Fresh-Start
Date, such
fraction will equal 1.0. For purposes of determining the
numerator of
the fraction described in clause (2), only those current
and prior
years during which a Participant was eligible to
receive a
contribution under the Plan will be taken into account.
5.4(e)(4) Fresh-Start Date. Fresh-Start Date means
the last day
of a Plan Year preceding a Plan Year for which provisions
that would
affect the amount of the Current Stated Benefit are
amended. If
applicable, the latest Fresh-Start Date of the Plan
shall be
designated in the Adoption Agreement.
5.4(e)(5) Frozen Accrued Stated Benefit. A
Participant's Frozen
Accrued Stated Benefit is determined as of the Plan's
latest Fresh-
Start Date as if the Participant terminated employment
with the
Employer as of that date, without regard to any amendment
made to the
Plan after that date except as permitted under regulations.
A Participant's Frozen Accrued Stated Benefit is
equal to the
amount of the Current Stated Benefit in effect on the
latest Fresh-
Start Date that a Participant has accrued as of that
date, assuming
that such Current Stated Benefit accrues ratably from
the year in
which the Participant first participated in this Plan (or,
if later,
the immediately preceding Fresh-Start Date under this
Plan) through
and including the Plan Year in which the Participant
attains Normal
Retirement Age.
The amount of the Current Stated Benefit in effect on
the latest
Fresh-Start Date that a Participant is assumed to have
ratably accrued
is determined by multiplying the Plan's Current Stated
Benefit in
effect on that date by a fraction, the numerator of
which is the
number of Years of Participation from the later of the
Participant's
first Year of Participation in this Plan or the
immediately preceding
Fresh-Start Date (if any) through and including the year
that contains
the latest Fresh-Start Date, and the denominator of
which is the
number of Years of Participation from the later of the
Participant's
first Year of Participation in this Plan or the
immediately preceding
Fresh-Start Date (if any) through and including the later
of the year
in which the Participant attains Normal Retirement Age or
the current
Plan Year. For purposes of this paragraph, only those
Years of
Participation during which a Participant was eligible to
receive a
contribution under the Plan will be taken into account.
If this Plan has had a preceding Fresh-Start
Date, each
Participant's Frozen Accrued Stated Benefit as of the
latest Fresh-
Start Date will equal the sum of the amount of the
Current Stated
Benefit in effect on the latest Fresh-Start Date that a
Participant is
assumed to have ratably accrued as of that date under the
preceding
paragraph, and the Frozen Accrued Stated Benefit determined
as of the
preceding Fresh-Start Date(s).
If (1) the Current Stated Benefit formula in effect on
the latest
Fresh-Start Date was not expressed as a straight life
annuity for all
Participants, and/or (2) the Normal Retirement Age for any
Participant
on the latest Fresh-Start Date was greater than the Normal
Retirement
Age for that Participant under the Current Stated Benefit
formula in
effect after the latest Fresh-Start Date, the Frozen
Accrued Stated
Benefit will be converted to an actuarially equivalent
straight life
annuity commencing at the Participant's Normal Retirement
Age under
the Current Stated Benefit formula in effect after the
latest Fresh-
Start Date, using the actuarial assumptions in effect
under the
Current Stated Benefit formula in effect on the latest
Fresh-Start
Date.
Notwithstanding the above, if in the immediately preceding
Plan Year
this Plan did not satisfy the safe harbor for target
benefit plans in
1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations
or was not
a Prior Safe Harbor Plan, the Frozen Accrued Stated
Benefit for any
Participant in the Plan, determined for the next Plan
Year during
which 1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations is
satisfied until the year following the next Fresh-Start
Date, if any,
will be zero.
5.4(e)(6) Maximum Excess Allowance. The Maximum
Excess Allowance
is equal to the lesser of the Base Benefit Percentage or
(1) for a Plan with a Unit Benefit Formula, the
Applicable
Factor determined from Table A or Table B in Exhibit B to
the Adoption
Agreement, and
(2) for a Plan with a Fixed Benefit Formula, 35
times the
Applicable Factor determined from Table A or Table B in
Exhibit B to
the Adoption Agreement.
5.4(e)(7) Overall Permitted Disparity Limit. If for
any Plan Year
this Plan benefits any Participant who also benefits
under another
qualified plan or simplified employee pension plan
maintained by the
Employer that provides for permitted disparity (or imputes
permitted
disparity), the Current Stated Benefit for all Participants
under this
Plan will be equal to the Excess Benefit Percentage set
forth in the
Adoption Agreement multiplied times
(1) for a Plan with a Unit Benefit Formula, the
Participant's
total Average Annual Compensation times the Participant's
total Years
of Projected Participation under the Plan up to the
maximum total
Years of Projected Participation specified in the Adoption
Agreement,
and
(2) for a Plan with a Fixed Benefit Formula, the
Participant's
total Average Annual Compensation (prorated for years less
than 35).
If this paragraph is applicable, this Plan will
have a Fresh-
Start Date on the last day of the Plan Year preceding the
Plan Year in
which this paragraph is first applicable. In addition,
if in any
subsequent Plan Year this Plan no longer benefits any
Participant who
also benefits under another plan of the Employer, this
Plan will have
a Fresh-Start Date on the last day of the Plan Year
preceding the Plan
Year in which this paragraph is no longer applicable.
5.4(e)(8) Prior Safe Harbor Plan. Prior Safe Harbor
Plan means a
Plan adopted and in effect on September 19, 1991, that
satisfied the
applicable nondiscrimination requirements for target
benefit plans on
that date and in all prior periods (taking into account no
amendments
to the Plan after September 19, 1991, other than
amendments necessary
to satisfy Code 401(1)).
5.4(e)(9) Year of Participation - means each Year of
Service (as
determined in the same manner as a Year of Service
for vesting
purposes) completed after the Participant first becomes a
Participant
in this Plan or the Pre-Existing Plan.
5.4(e)(10) Years of Projected Participation. For
purposes of
determining a Participant's Current Stated Benefit, a
Participant's
total Years of Projected Participation under the Plan is
the sum of
the Participant's total number of Years of Participation
under this
Plan for the years this Plan consecutively satisfies the
safe harbor
for target benefit plans in 1.401(a)(4)-8(b)(3) of the
Federal Income
Tax Regulations or was a Prior Safe Harbor Plan, if
applicable,
projected through the later of the end of the Plan Year in
which the
Participant attains Normal Retirement Age or the end of
the current
Plan Year. For purposes of determining a Participant's
total Years of
Projected Participation, only those current and prior
years during
which a Participant was eligible to receive a contribution
under the
Plan will be taken into account.
5.5 Rollover Contributions.
5.5(a) Standard Option - An Eligible Employee may
contribute on his
or her own behalf (or elect a direct transfer of)
a Rollover
Contribution to the Fund, provided (1) such contribution
shall be made
(or transferred) in cash or in a form which is
acceptable to the
Trustee, (2) such contribution shall be made in accordance
with such
rules as the Plan Administrator and the Trustee deem
appropriate under
the circumstances, and (3) if so specified in the Adoption
Agreement,
no Rollover Contribution may be made prior to the Entry
Date on which
the Eligible Employee becomes a Participant in this Plan.
5.5(b) Alternative - The Employer may specify in
the Adoption
Agreement that no Rollover Contributions may be made.
5.6 No Employee or Matching Contributions. Unless
this Plan is
adopted as a 401(k) Plan which permits Employee
Contributions, no
nondeductible employee contributions or matching
contributions (as
defined in Code 401(m)) shall be made to this Plan after
the Plan
Year in which this Plan is adopted by the Employer. Any
nondeductible
employee contributions and matching contributions made
under a Pre-
Existing Plan or under this Plan (in accordance with the
preceding
sentence) for Plan Years beginning after December 31, 1986
shall be
subject to the nondiscrimination limitations under Code
401(m) as set
forth in 7.5.
5.7 No Deductible Voluntary Employee Contributions. No
voluntary
deductible employee contributions shall be made to this
Plan for a
taxable year beginning after December 31, 1986. Any
voluntary
deductible employee contributions made under a Pre-Existing
Plan prior
to such date shall be maintained in a separate account
under this
Plan. Such account shall be nonforfeitable at all times
and shall
share in the Fund Earnings in the same manner as described
in 6.2. No
part of such account shall be used to purchase life
insurance. Subject
to 10, Joint and Survivor Annuity Requirements (if
applicable), a
Participant may withdraw any part of the Participant's
voluntary
deductible employee contribution account by making
a written
application to the Plan Administrator.
5.8 General Rules Applicable to All Contributions.
5.8(a) Limitations on Contributions. The contributions
made under
this 5 and the allocation of those contributions under
6 shall be
subject to the limitations set forth in the Adoption
Agreement, this
5 and 7.
5.8(b) Code 415. The contributions for any Plan Year
shall not
(based on the Employer's understanding of the facts at the
time the
contribution is made) exceed the total amount allocable for
such year
among the Accounts of all Participants in light of the
restrictions in
Code 415 as set forth in 7.2. If a suspense account as
described in
7.2(b) is in existence at any time during a particular
Limitation
Year (1) no Employer Contribution shall be made for such
Limitation
Year if (based on the Employer's understanding of the
facts at the
time the contribution is made) the allocation of the
amount in such
suspense account would be precluded by Code 415 for such
Limitation
Year and (2) if this Plan is adopted as a Money Purchase
Pension Plan
or a Target Benefit Pension Plan, the Employer
Contribution required
under this 5 shall be reduced by the amount in such
suspense account.
5.8(c) Code 416. If this Plan is a Top-Heavy Plan (as
defined in
'12) for any Plan Year, the minimum allocation required
under Code
416 shall be made in accordance with 12.
5.8(d) Leased Employees. Contributions or benefits
which are
provided by a leasing organization on behalf of a
Participant who is a
Leased Employee and which are attributable to services
performed by
such Participant for the Employer or a Participating
Affiliate shall
be credited against the contribution, if any, due to be
allocated to
such Participant under this Plan in accordance with Code
414(n).
5.8(e) Owner-Employees.
5.8(e)(1) General. If this Plan provides
contributions or
benefits for one or more Owner-Employees who control the
Employer or a
Participating Affiliate, then
(i) if such Owner-Employee, or Owner-Employees, also
control one
or more other trades or businesses,
(A) this Plan and the plans established for such
other trades
or businesses shall, when viewed as a single plan,
satisfy the
applicable requirements of Code 401(a) and Code
401(d) for the
employees of the Employer or the Participating Affiliate
and such
other trades or businesses, and
(B) the employees of such other trades or
businesses shall be
included in a plan which satisfies the applicable
requirements of Code
401(a) and Code 401(d) and which provides contributions
and benefits
which are at least as favorable as those provided under
this Plan for
such Owner-Employees, or
(ii) if such Owner-Employee is covered as an
owner-employee
(within the meaning of Code 401(c)(3)) under the plans of
two or more
other trades or businesses which such Owner-Employee does
not control,
then the contributions or benefits provided under this Plan
must be at
least as favorable as those provided for such Owner-
Employee under the
most favorable plan of such other trade or business.
5.8(e)(2) Control. For purposes of this 5.8(e),
an Owner-
Employee, or two or more such Owner-Employees, shall be
considered to
control a trade or business if such Owner-Employee, or
such Owner-
Employees together,
(i) own the entire interest in an unincorporated
trade or
business, or
(ii) in the case of a partnership, own more than
50% of either
the capital interest or the profits interest in such
partnership. Such
Owner-Employee, or such Owner-Employees, shall be treated
as owning
any interest in a partnership which is owned, directly or
indirectly,
by a partnership which is controlled by such Owner-
Employee, or such
Owner-Employees, within the meaning of clause (ii).
SECTION 6. ALLOCATIONS TO ACCOUNTS
6.1 Establishment and Maintenance of Accounts. An Account
shall be
established and maintained for each Participant under the
Plan and the
Plan Administrator shall establish reasonable and
nondiscretionary
procedures under which (a) any Forfeitures,
insurance premium
payments, loans, withdrawals, distributions and other
charges properly
allocable to such Account shall be debited from such
Account and (b)
any insurance contract dividends, insurance contract
surrender
proceeds, loan repayments and other amounts properly
allocable to such
Account (other than amounts described in 6.2 and 6.3)
shall be
credited to such Account.
6.2 Allocation of Fund Earnings.
6.2(a) General. As of each Valuation Date the fair
market value of
the Fund and the Fund Earnings for the period which
ends on such
Valuation Date shall be determined. Such Fund Earnings
shall be
allocated (and posted) among all Accounts in the proportion
that the
balance in each such Account (determined in accordance
with 6.2(b))
bears to the total balance in all such Accounts in order
that each
Account shall proportionately benefit from any
earnings or
appreciation in the value of the Fund assets in which such
Account is
invested or proportionately suffer any losses or
depreciation in the
value of the Fund assets in which such Account is invested.
Subject to
13, each Participant shall have a ratable interest in all
assets of
the Fund.
6.2(b) Allocation Procedures. The Plan
Administrator shall
establish nondiscretionary allocation procedures for
purposes of the
allocation of Fund Earnings under 6.2(a), which procedures
shall be
set forth in writing with the records of this Plan. If so
specified in
such procedures, the balance in each Account shall be
determined after
adjusting for all or a portion of the contributions and
other amounts
credited to or debited from such Account since the
preceding Valuation
Date. Further, if so provided in such allocation
procedures, Fund
Earnings shall not be allocated to any Forfeiture or to the
balance in
any suspense account described in 7.2(b).
6.3 Allocation of Contributions and Forfeitures.
Subject to the
limitations in 7, the Forfeitures (and any amount deemed
to be a
Forfeiture under the terms of this Plan) and the
contributions shall
be allocated (and posted) in accordance with the following
rules:
6.3(a) Profit Sharing Plan.
6.3(a)(1) Nonintegrated. If this Plan is adopted as
a Profit
Sharing Plan and the nonintegrated allocation formula is
specified in
the Adoption Agreement, the Forfeitures and the Employer
Contribution
for each Plan Year shall be allocated (and posted) as of
the last day
of such Plan Year to the Employer Account of each Active
Participant
in the same ratio that each Active Participant's
Compensation for such
Plan Year bears to the total Compensation of all Active
Participants
for such Plan Year.
6.3(a)(2) Integrated. If this Plan is adopted as
an Profit
Sharing Plan and the integrated allocation formula is
specified in the
Adoption Agreement, the Forfeitures and the Employer
Contribution
shall be allocated (and posted) as of the last day of each
Plan Year
to the Employer Account of each Active Participant in
accordance with
the following:
(i) Step One - First, the lesser of (A) the sum of
the Employer
Contribution and Forfeitures for such Plan Year or (B) the
Integration
Amount for such Plan Year shall be allocated to the
Employer Account
of each Active Participant in the same ratio that the sum
of the total
Compensation and Excess Compensation of each Active
Participant for
such Plan Year bears to the sum of the total Compensation
and Excess
Compensation of all Active Participants for such Plan Year.
(ii) Step Two - Second, the remaining Employer
Contribution and
the Forfeitures, if any, for such Plan Year shall be
allocated to the
Employer Account of each Active Participant (whether or not
he or she
had Excess Compensation) in the same ratio that
each Active
Participant's total Compensation for such Plan Year bears
to the total
Compensation of all Active Participants for such Plan Year.
(iii) Special Definitions - For purpose of this
6.3(a)(2),
(A) "Integration Amount" means the product of (1)
the total
Compensation and the total Excess Compensation of
all Active
Participants and (2) the Integration Percentage
specified in the
Adoption Agreement, but in no event shall the Integration
Percentage
exceed the Maximum Disparity Rate for any Plan Year
beginning after
December 31, 1988.
(B) "Excess Compensation" means the amount, if
any, of a
Participant's Compensation for such Plan Year which
exceeds the
Integration Level for such Plan Year.
(iv) Top-Heavy. If this Plan is a Top-Heavy Plan
for any Plan
Year, the allocation formula in 12.3(h)(1) shall apply in
lieu of the
formula in this 6.3(a)(2) for such Plan Year.
6.3(b) Money Purchase Pension Plan. If this Plan is
adopted as a
Money Purchase Pension Plan, the Forfeitures and
the Employer
Contribution actually made under 5.2 (as adjusted, if
applicable, in
accordance with 12.3(h)(2) for a Top-Heavy Plan) shall be
allocated
(and posted) as of the last day of each Plan Year to
the Employer
Account of each Active Participant in accordance with
the formula
specified in the Adoption Agreement. If Forfeitures are
applied to
reduce the Employer Contribution and the Forfeitures
available under
8.2(e) for any Plan Year exceed the contribution
specified in the
Adoption Agreement for such Plan Year, such excess shall be
held in a
separate account and shall be applied in full as a
Forfeiture to
offset such contributions in the future until such
account is
exhausted under this 6.3(b). If Forfeitures are to be
allocated to
Active Participants, such Forfeitures shall be allocated
(and posted)
to the Employer Account of each Active Participant in the
same ratio
that such Active Participant's Compensation for such Plan
Year bears
to the total Compensation of all such Active Participants
for such
Plan Year.
6.3(c) 401(k) Plan. If this Plan is adopted as a
401(k) Plan,
Forfeitures and contributions made under 5.3 shall be
allocated (and
posted) in accordance with the following:
6.3(c)(1) Elective Deferrals and Employee
Contributions.
Elective Deferrals made on a Participant's behalf for
the period
ending on each Valuation Date shall be credited
to the
Participant's Elective Deferral Account as of such
Valuation Date
and the Employee Contributions made by a Participant
for such
period shall be credited to the Participant's Employee
Account as
of such Valuation Date.
6.3(c)(2) Matching Contributions and Qualified
Matching
Contributions.
(i) Allocation. Matching Contributions and
Qualified Matching
Contributions made on a Participant's behalf shall be
credited to the
Participant's Matching Account and Qualified Matching
Account,
respectively,
(A) Standard Option - as of the last day of each
Plan Year or
(B) Alternative - only as of each Allocation Date
specified in
the Adoption Agreement.
(ii) Forfeitures. Forfeitures attributable to
Matching Accounts
shall be allocated or applied in accordance with the
following rules;
provided, no Forfeitures attributable to Excess
Aggregate
Contributions under 7.5(d) shall be allocated to the
Account of any
Highly Compensated Employee:
(A) Forfeitures to Reduce Matching Contribution
(Standard
Option). Forfeitures attributable to Matching Accounts
shall be
applied to reduce the Matching Contributions for the
applicable
Allocation Date (as specified in 8.2 and the Adoption
Agreement). If
the Forfeitures exceed the Matching Contribution
specified in the
Adoption Agreement for any Allocation Date, such excess
shall be held
in a separate account and shall be applied in full as a
Forfeiture to
offset Matching Contributions as of the next Allocation
Date (and
succeeding Valuation Dates) until such account is exhausted
under this
6.3(c)(2).
(B) Forfeitures to be Allocated (Alternative). If
so specified
in the Adoption Agreement, Forfeitures attributable
to Matching
Accounts shall be allocated (and posted)
(I) as of the last day of such Plan Year to
the Matching
Account of each Active Participant in the same ratio that
such Active
Participant's Compensation for such Plan Year bears to
the total
Compensation of all such Active Participants for such Plan
Year, or
(II) in accordance with the formula specified in
the Adoption
Agreement for a nonstandardized Plan.
6.3(c)(3) Qualified Nonelective Contributions.
Qualified
Nonelective Contributions made on behalf of a Participant
shall be
credited to the Participant's Qualified Nonelective Account
(i) Standard Option - as of the last day of each Plan
Year or
(ii) Alternative - only as of each Allocation Date
specified in
the Adoption Agreement.
6.3(c)(4) Discretionary Employer Contribution.
(i) Allocation. As of the last day of each Plan
Year, the
Employer Contribution, if any, for such Plan Year shall be
allocated
(and posted) to the Employer Account of each Active
Participant
(A) Standard Option - in the nonintegrated method
described in
6.3(a)(1).
(B) Alternative - if so specified in the Adoption
Agreement,
in the integrated method described in 6.3(a)(2).
(ii) Forfeitures. Forfeitures attributable to
Employer Accounts
shall be allocated or applied in accordance with the
following:
(A) Standard Option. Forfeitures attributable
to Employer
Accounts shall be allocated (and posted) as of the last
day of each
Plan Year to the Employer Account of each Active
Participant in the
same manner as the Employer Contribution under
6.3(c)(4)(i).
(B) Alternative. If so specified in the Adoption
Agreement,
Forfeitures attributable to Employer Accounts shall be
(I) applied to reduce Matching Contributions,
Qualified Matching
Contributions and Qualified Nonelective Contributions
for the
applicable Allocation Date (as specified in 8.2 and
the Adoption
Agreement) and succeeding Allocation Dates, if necessary,
or
(II) allocated (and posted) in accordance with
the formula
specified in the Adoption Agreement for a nonstandardized
Plan.
6.3(d) Target Benefit Pension Plan. If this Plan is
adopted as a
Target Benefit Pension Plan, the Forfeitures and
the Employer
Contribution actually made under 5.4 for each Plan Year
shall be
allocated (and posted) as of the last day of each Plan
Year to the
Employer Account of each Active Participant as
specified in the
Adoption Agreement. The Forfeitures for each Plan Year
shall be
applied to reduce the Employer Contribution for such Plan
Year. If
Forfeitures for any Plan Year exceed the Employer
Contributions
determined under 5.4 for such Plan Year, such excess shall
be held in
a separate account and shall be applied in full to
offset Employer
Contributions in the future until such account is exhausted
under this
6.3(d).
6.3(e) Top Heavy Minimum Allocation. If this Plan is a
Top-Heavy
Plan (as defined in 12), the minimum allocation required
to be made
under this Plan under 12.3, if any, shall be allocated
(and posted)
as of the last day of the Plan Year (1) to the Employer
Account of
each Participant who is not an Active Participant but
for whom a
minimum allocation is required under 12.3 and (2) to
each Active
Participant for whom a minimum allocation is required to
be made in
this Plan under 12.3 to the extent such minimum
allocation is not
otherwise satisfied by the allocation under this 6.3. If
this Plan is
adopted as a Profit Sharing Plan, the minimum allocation
may be made
by reallocating the Employer Contribution and Forfeitures
allocated
under 6.3(a) in a manner which satisfies this
6.3(e) or by
contributing an additional amount which will be
allocated in
accordance with this 6.3(e). If this Plan is adopted
as a Money
Purchase Pension Plan, a Target Benefit Pension Plan or a
401(k) Plan,
an additional Employer Contribution shall be made to
satisfy this
6.3(e).
6.3(f) Rollover Contributions. Rollover Contributions
made by a
Participant during the period ending on each Valuation Date
shall be
credited to the Participant's Rollover Contribution Account
as of such
Valuation Date.
6.4 Allocation Report. The Plan Administrator shall
maintain records
of the allocations and adjustments made to Accounts under
this 6 and
shall at least annually prepare and forward to each such
Participant
and Beneficiary a statement which shows the new
balance in such
person's Account.
6.5 Allocation Corrections. If an error or omission is
discovered in
any Account, then as of the first Valuation Date in the
Plan Year in
which the error or omission is discovered, the Plan
Administrator
shall make (and post) an adjustment to such Account as
the Plan
Administrator deems necessary to remedy in an equitable
manner such
error or omission.
SECTION 7. STATUTORY LIMITATIONS ON ALLOCATIONS
7.1 Effective Date. Except as otherwise expressly
provided, this 7
shall be effective retroactive to Plan Years beginning on
or after
January 1, 1987.
7.2 Limitations on Annual Additions Under Code 415.
7.2(a) Special Definitions. For purposes of this 7.2,
the terms
defined in this 7.2(a) shall have the meanings shown
opposite such
terms.
7.2(a)(1) Annual Additions - means for each
Participant for any
Limitation Year
(i) the sum of the employer contributions,
forfeitures, and
nondeductible employee contributions creditable (without
regard to the
application of this 7.2) to the Participant's account
under this Plan
or under any other defined contribution plan (including a
Master or
Prototype Plan and any defined benefit plan which
provides for
employee contributions) maintained by the Employer for such
Limitation
Year; and for this purpose, any Excess Amount allocated
under 7.2(b),
any Excess Elective Deferrals under 7.3 (unless such
excess is
distributed by the deadline set forth in 7.3(d)),
any Excess
Contributions under 7.4 and any Excess Aggregate
Contributions under
7.5 shall be considered Annual Additions for such
Limitation Year;
(ii) amounts allocated on behalf of such Participant
after March
31, 1984 to an individual medical account (as
defined in Code
415(1)(2)) which is part of a pension or annuity plan
maintained by
the Employer; and
(iii) 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 Code
419A(d)(3))
under a welfare benefit fund (as described in Code 419(e))
maintained
by the Employer; and
(iv) allocations under a simplified employee pension
(as defined
in Code 408(k).
7.2(a)(2) Compensation - means for a Self-Employed
Individual,
such individual's Earned Income, and for each other
Employee
(i) Standard Option - compensation reportable on
Form W-2 as
defined in 2.10(a)(1), or
(ii) Alternative - if so specified in the Adoption
Agreement,
(A) compensation subject to withholding as
defined in
2.10(a)(2)(i), or
(B) the Employee's wages, salaries, fees for
professional
services and other amounts received (without regard to
whether or not
an amount is paid in cash) for personal services actually
rendered in
the course of employment with the Employer maintaining the
Plan to the
extent that the amounts are includable in gross income
during the
Limitation Year (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 and reimbursements or other expense
allowances under a
nonaccountable plan as described in 1.62-2(c) of the
Federal Income
Tax Regulations). Compensation shall not include the
following:
(I) Employer contributions to a plan of
deferred
compensation which are not includable in the
Participant's gross
income for the taxable year in which contributed,
or Employer
contributions under any simplified employee pension
plan, or any
distributions from a plan of deferred compensation;
(II) amounts realized from the exercise of a
non-qualified
stock option, or when restricted stock (or property)
held by the
Participant either becomes freely transferable or is no
longer subject
to a substantial risk of forfeiture;
(III) amounts realized from the sale, exchange
or other
disposition of stock acquired under a qualified stock
option; and
(IV) other amounts which receive special tax
benefits, or
contributions made by the Employer (whether or not under
a salary
reduction agreement) towards the purchase of an
annuity contract
described in Code 403(b) (whether or not the
contributions are
actually excludable from the gross income of the
Participant).
For purposes of applying the limitations of this
7.2, an
Employee's Compensation for Limitation Years beginning on
and after
the Final Compliance Date shall not include any
Compensation which is
accrued for such Limitation Year.
However, for purposes of applying the limitations of
this 7.2 to
a Participant in a defined contribution plan who is
permanently and
totally disabled (as defined in Code 22(e)(3)),
the term
"Compensation" shall mean the compensation such Participant
would have
received for the Limitation Year if the Participant had
been paid at
the Participant's rate of Compensation (as defined in this
7.2(a)(2))
paid immediately before becoming permanently and totally
disabled,
and, further, such imputed compensation for the disabled
Participant
may be taken into account only if the Participant is not
a Highly
Compensated Employee and contributions made on behalf
of such
Participant are nonforfeitable when made.
7.2(a)(3) Defined Benefit Fraction - means a
fraction, (i) the
numerator of which shall be the sum of the Participant's
Projected
Annual Benefits under all defined benefit plans
(whether or not
terminated) maintained by the Employer, and (ii) the
denominator of
which shall be the lesser of (A) 125% of the dollar
limitation
determined for the Limitation Year under Code 415(b) and
415(d) or
(B) 140% of the Participant's Highest Average
Compensation, including
any adjustments under Code 415(b). However, 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 and
which individually and in the aggregate satisfied the
requirements of
Code 415 for all Limitation Years beginning before
January 1, 1987,
the denominator of such fraction shall be not less than
125% of the
sum of the annual benefits under such plans which the
Participant had
accrued as of the end of the last Limitation Year
beginning before
January 1, 1987 disregarding any changes in the terms and
conditions
in the plan after May 5, 1986. Notwithstanding the
foregoing, "100%"
shall be substituted for "125%" in any Limitation Year for
which this
Plan is a Top-Heavy Plan (as defined in 12) unless
otherwise
specified in the Adoption Agreement.
7.2(a)(4) Defined Contribution Dollar Limitation -
means for each
Limitation Year the greater of (i) $30,000 or (ii) one-
fourth of the
defined benefit dollar limitation under Code 415(b)(1) as
in effect
for such Limitation Year.
7.2(a)(5) Defined Contribution Fraction - means a
fraction, (i)
the numerator of which shall (subject to the adjustment
rules set
forth below) be the sum of the Annual Additions
credited to the
Participant's accounts under all 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
described in Code 419(e)) and all individual medical
accounts (as
described in Code 415(l)(2)) maintained by the Employer
and (ii) the
denominator of which shall be the sum of the Maximum
Aggregate Amounts
for the current and all prior Limitation Years of service
with the
Employer (without regard to whether a defined contribution
plan was
maintained by the Employer). The numerator of such fraction
shall be
adjusted 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 contribution plans maintained by the Employer
which were
in existence on May 6, 1986 and the sum of this
fraction and the
Defined Benefit Fraction would otherwise exceed 1.0 under
the terms of
this Plan. The adjustment shall be made by taking an
amount equal to
the product of (A) the excess of the sum of the fractions
over 1.0,
times (B) the denominator of this fraction, and by
permanently
subtracting such product from the numerator of this
fraction. The
adjustment shall be 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
Code 415
limitation applicable to the first Limitation Year
beginning on or
after January 1, 1987. The Annual Addition for any
Limitation Year
beginning before January 1, 1987 shall not be recomputed to
treat all
employee contributions as an Annual Addition.
7.2(a)(6) Employer - means the Employer that adopts
this Plan and
all members of a controlled group of corporations (as
defined in Code
414(b) as modified by Code 415(h)), all commonly
controlled trades
or businesses (as defined in Code 414(c) as modified by
Code 415(h))
or affiliated service groups (as defined in Code 414(m))
of which the
adopting Employer is a part and any other entity
required to be
aggregated with the Employer pursuant to the regulations
under Code
414(o).
7.2(a)(7) Excess Amount - means the excess of a
Participant's
Annual Additions for the Limitation Year over the Maximum
Permissible
Amount.
7.2(a)(8) Highest Average Compensation - means the
Participant's
average Compensation for the three consecutive Plan
Years of
employment with the Employer (without regard to whether
such Plan
Years were before the Effective Date) that produces
the highest
average.
7.2(a)(9) Limitation Year - means
(i) Standard Option - the Plan Year or
(ii)Alternative - the alternative 12 consecutive
month period
specified in the Adoption Agreement.
All qualified plans maintained by the Employer must
use the same
Limitation Year. If the Limitation Year is amended to a
different 12
consecutive month period, the new Limitation Year must
begin on a date
within the Limitation Year in which the amendment is made.
7.2(a)(10) Master or Prototype Plan - means a plan
the form of
which is the subject of a favorable opinion letter from
the Internal
Revenue Service.
7.2(a)(11) Maximum Aggregate Amount - means for any
Limitation
Year the lesser of (i) 125% of the dollar limitation
determined under
Code 415(c)(1)(A) or (ii) 35% of the Participant's
Compensation for
such year. Notwithstanding the foregoing, "100%" shall be
substituted
for 125% in any Limitation year for which this Plan is a
Top-Heavy
Plan (as defined in 12) unless otherwise specified in
the Adoption
Agreement.
7.2(a)(12) Maximum Permissible Amount - means the
lesser of (i)
the Defined Contribution Dollar Limitation or (ii)
25% of a
Participant's Compensation for the Limitation Year;
provided,
(A) the compensation limitation referred to in clause
(ii) shall
not apply to any contribution for medical benefits (within
the meaning
of Code 401(h) or 419A(f)(2)) which is otherwise
treated as an
Annual Addition under Code 415(l)(l) or 419(A)(d)(2); and
(B) 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 shall not
exceed the
Defined Contribution Dollar Limitation multiplied by a
fraction, the
numerator of which shall be the number of months in
the short
Limitation Year and the denominator of which shall be 12.
7.2(a)(13) Projected Annual Benefit - means 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 a
Participant would be entitled under the terms of a
defined benefit
plan assuming:
(i) the Participant will continue employment
until normal
retirement age under the plan (or current age, if later),
and
(ii) the Participant's Compensation for the current
Limitation
Year and all other relevant factors used to determine
benefits under
the plan will remain constant for all future Limitation
Years.
7.2(b) Limitation If No Other Plans. If a Participant
does not
participate in, and has never participated in, another
qualified plan
maintained by the Employer or a welfare benefit fund (as
described in
Code 419(e)) or individual medical account (as
described in Code
415(l)(2)) maintained by the Employer which provides
an Annual
Addition as defined in 7.2(a)(1) or a simplified employee
pension (as
defined in Code 408(k)) maintained by the Employer, the
amount of
Annual Additions which actually may be credited to the
Account of any
Participant for any Limitation Year shall not exceed the
lesser of the
Maximum Permissible Amount or any other limitation set
forth in this
Plan. If the Employer Contribution that would otherwise be
credited to
the Participant's Account would cause the Annual
Additions for the
Limitation Year to exceed the Maximum Permissible Amount,
such amount
shall be reduced so that the Annual Additions actually
credited for
the Limitation Year shall equal the Maximum Permissible
Amount. If
pursuant to 7.2(f) or as a result of the allocation of
Forfeitures a
Participant's Annual Additions under this Plan would
result in an
Excess Amount, such Excess Amount shall be disposed of as
follows:
7.2(b)(1) Profit Sharing Plan. If this Plan is
adopted as a
Profit Sharing Plan,
(i) such Excess Amount shall be deemed a Forfeiture
which shall
be allocated and reallocated as provided in 6.3(a)
subject to the
restrictions of this 7.2 among the Employer Accounts of
the remaining
Active Participants until such amount has been
allocated in its
entirety; and
(ii) if the restrictions in this 7.2 apply before
such amount
has been reallocated in its entirety, as the final
allocation step
such unallocable Excess Amount shall be transferred to
a suspense
account.
7.2(b)(2) Money Purchase Pension Plan of Target
Benefit Pension
Plan. If this Plan is adopted as a Money Purchase
Pension Plan or
Target Benefit Pension Plan,
(i) Standard Option - such Excess Amount
shall be held
unallocated in a suspense account which shall be applied
to offset
future Employer Contributions for Active Participants in
the next
Limitation Year (and in each succeeding Limitation Year if
necessary).
(ii) Alternative - if so specified in the Adoption
Agreement,
(A) for any Participant who is an Active
Participant at the
end of the Limitation Year, such Excess Amount
shall be held
unallocated in a suspense account which shall be applied to
offset the
Employer Contribution for such Active Participant in
the next
Limitation Year (and in each succeeding Limitation Year if
necessary);
and
(B) for any Participant who is not an Active
Participant at
the end of such Limitation Year, such Excess Amount
shall be held
unallocated in a suspense account which shall be applied
to offset
future Employer Contributions for all remaining Active
Participants in
the next Limitation Year (and in each succeeding
Limitation Year if
necessary).
7.2(b)(3) 401(k) Plan. If this Plan is adopted as a
401(k) Plan,
any Elective Deferrals and Employee Contributions
made by the
Participant during the Limitation Year (and, to the
extent required
under regulations, gains attributable to such Employee
Contributions)
shall be refunded to the extent such refund would reduce
the Excess
Amount and, if an Excess Amount still exists after such
refund,
(i) any such Excess Amount which is
attributable to
discretionary Employer Contributions shall be disposed of
in the same
manner as an Excess Amount under a Profit Sharing Plan as
described in
7.2(b)(1), and
(ii) any such Excess Amount which is attributable to
a Matching
Contribution, Qualified Nonelective Contribution or
Qualified Matching
Contribution shall be held unallocated in a suspense
account which
shall be used to offset future Matching Contributions,
Qualified
Nonelective Contributions or Qualified Matching
Contributions in the
next Limitation Year (and in each succeeding
Limitation Year if
necessary).
7.2(b)(4) Suspense Account. A suspense account
established
pursuant to this 7.2(b) shall not be subject to any
allocation of
Fund Earnings under 6.2, and the balance of such account
shall be
returned to the Employer in the event this Plan is
terminated prior to
the date such account has been allocated in its
entirety as a
Forfeiture. In no event shall Excess Amounts be
distributed to
Participants or former Participants.
7.2(c) Limitation If Other Defined Contribution Master
or Prototype
Plan. This 7.2(c) applies if, in addition to this Plan, a
Participant
is covered under another defined contribution Master or
Prototype Plan
maintained by the Employer or a welfare benefit fund (as
described in
Code 419(e)) or an individual medical account (as
described in Code
415(l)(2)) maintained by the Employer which provides for
an Annual
Addition as defined in 7.2(a)(1) or a simplified employee
pension (as
defined in Code 408(k)) maintained by the Employer
during any
Limitation Year. The Annual Additions which may be
credited to a
Participant's Account under this Plan for any such
Limitation Year
shall not exceed the Maximum Permissible Amount reduced by
the Annual
Additions credited to a Participant's account under such
other defined
contribution Master or Prototype Plan and welfare benefit
funds for
the same Limitation Year.
7.2(c)(1) If for any Limitation Year (1) the
Employer also
maintains another defined contribution Paired Plan, (2)
the Employer
does not maintain any other defined contribution Master
or Prototype
Plan (other than such Paired Plan) and (3) a
Participant's Annual
Additions under such Paired Plans would result in an Excess
Amount for
such Limitation Year, the allocation adjustment required
to satisfy
the limitations of Code 415 shall be made under such
Plans in the
following order:
(i) Standard Option - first, under the Profit
Sharing Plan, if
any; second under the Money Purchase Pension Plan, if any;
third under
the Target Benefit Pension Plan, if any; and finally, under
the 401(k)
Plan, if any; or
(ii) Alternative - in the alternative order
specified in the
Adoption Agreement.
7.2(c)(2) If the Annual Additions with respect to any
Participant
under such other defined contribution Master or Prototype
Plan (other
than a defined contribution Paired Plan) and welfare
benefit funds
maintained by the Employer are less than the Maximum
Permissible
Amount and the Employer Contribution that would
otherwise be
contributed or allocated to the Participant's Account under
this Plan
would cause the Annual Additions for the Limitation Year
to exceed
this limitation, the amount contributed or allocated shall
be reduced
so that the Annual Additions under all such plans and
funds for the
Limitation Year shall equal the Maximum Permissible Amount.
7.2(c)(3) If the Annual Additions with respect to the
Participant
under such other defined contribution Master and Prototype
Plan (other
than a defined contribution Paired Plan) and welfare
benefit funds in
the aggregate are equal to or greater than the Maximum
Permissible
Amount, no amount shall be credited to the Participant's
Account under
this Plan for the Limitation Year.
7.2(c)(4) If pursuant to 7.2(f) or as a result of the
allocation
of Forfeitures a Participant's Annual Additions under this
Plan and
such other defined contribution Master or Prototype Plan
(other than a
Paired Plan) and welfare benefit funds would result in
an Excess
Amount for any Limitation Year,
(i) the Excess Amount shall be deemed to consist of
the Annual
Additions last allocated and the Annual Additions
attributable to a
welfare benefit fund or an individual medical account shall
be deemed
to have been allocated prior to all other Annual Additions,
and
(ii) if an Excess Amount was allocated to a
Participant on an
allocation date of this Plan which coincides with an
allocation date
of such other Master or Prototype Plan, then the
Excess Amount
attributed to this Plan shall be the product of
(A) the total Excess Amount allocated as of such
date, times
(B) a fraction, the numerator of which shall be
the Annual
Additions allocated to the Participant for the Limitation
Year as of
such date under this Plan and the denominator of which is
the total
Annual Additions allocated to the Participant for the
Limitation Year
as of such date under this and all such other defined
contribution
Master or Prototype Plans.
7.2(c)(5) Any Excess Amount attributed to this
Plan will be
disposed of in the manner described in 7.2(b).
7.2(d) Limitation If Other Defined Contribution
Plan. If any
Participant is covered under another qualified defined
contribution
plan maintained by the Employer which is not a Master or
Prototype
Plan, the Annual Additions which may be credited to the
Participant's
Account under this Plan for any Limitation Year shall be
limited
7.2(d)(1) Standard Option - as specified in 7.2(c) as
though the
other plan was a Master or Prototype Plan or
7.2(d)(2) Alternative - under the alternative method
specified in
the Adoption Agreement for limiting the Annual Additions
under this
Plan.
7.2(e) Limitation If Other Defined Benefit Plan. If
the Employer
maintains, or at any time maintained, a qualified defined
benefit plan
(other than a defined benefit Paired Plan) covering any
Participant in
this Plan, the sum of the Participant's Defined Benefit
Fraction and
Defined Contribution Fraction shall not exceed 1.0 in any
Limitation
Year. The Annual Additions which may be credited to any
Participant's
Account under this Plan for any Limitation Year shall be
limited as
specified in the Adoption Agreement. If the Employer
maintains a
defined benefit Paired Plan, any adjustments to
satisfy the
requirements of Code 415(e) shall be made only under
such defined
benefit Paired Plan.
7.2(f) Compensation for Determination of Maximum
Permissible Amount.
Prior to determining a 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, and, if
applicable, a reasonable estimation of the amount of
elective
deferrals (within the meaning of Code 402(g)(3)) that the
Participant
may make for the Limitation Year, uniformly
determined for all
similarly situated Participants. As soon as is
administratively
feasible after the end of the Limitation Year, the Maximum
Permissible
Amount for the Limitation Year shall be determined on the
basis of the
Participant's actual Compensation for the Limitation Year.
7.3 Individual Limitation on Elective Deferrals Under Code
402(g).
7.3(a) General. A Participant's Elective Deferrals under
this Plan
and all other qualified plans, contracts and arrangements
maintained
by the Employer or an Affiliate during any taxable
year of the
Participant shall not exceed the dollar limitation under
Code 402(g)
in effect at the beginning of such taxable year.
7.3(b) Elective Deferrals. For purposes of the dollar
limitation
under Code 402(g) and this 7.3, the term "Elective
Deferrals" shall
include all employer contributions made on behalf of a
Participant
pursuant to an election to defer under any qualified cash
or deferred
arrangement as described in Code 401(k), any
simplified employee
pension cash or deferred arrangement as described
in Code
402(h)(1)(B), any plan described under Code
501(c)(18), and any
salary reduction agreement for the purchase of an
annuity contract
under Code 403(b). However, the term shall not
include Elective
Deferrals which are properly distributed to the Participant
from this
Plan under 7.2 or such other plans or arrangements to
correct for
excess annual additions.
7.3(c) Excess Elective Deferrals. For purposes of this
7.3, the
term "Excess Elective Deferrals" means for each
Participant the
Elective Deferrals that are includable in gross income
under Code
402(g) to the extent the Participant's Elective
Deferrals for a
taxable year exceed the dollar limitations under Code
402(g) for such
taxable year.
7.3(d) Distribution of Excess Elective Deferrals.
Notwithstanding
any other provision of this Plan restricting the
timing of
distributions, Excess Elective Deferrals, plus any income
and minus
any loss allocable thereto, shall be distributed no later
than April
15 of any calendar year to Participants (1) whose
Excess Elective
Deferrals for the preceding taxable year were assigned to
this Plan
and (2) who claim (or are deemed to have claimed) such
allocable
Excess Elective Deferrals for such taxable year in
accordance with the
claims procedure set forth in 7.3(f).
7.3(e) Determination of Income or Loss. A corrective
distribution of
Excess Elective Deferrals under this 7.3 shall include the
income or
loss allocable to such Excess Elective Deferrals for the
Participant's
taxable year in which such excess occurred and, if so
specified in the
Adoption Agreement, for the period between the end of
such taxable
year and the date of distribution ("gap period"). The
income or loss
for such taxable year and gap period, if applicable,
shall be
determined in accordance with the regulations under Code
402(g). In
lieu of using the safe harbor method or the alternative
method in the
regulations for allocating such income or loss, the Plan
Administrator
may use any reasonable method for computing such income
or loss,
provided that such method does not violate Code
401(a)(4), is used
consistently for all Participants and for all corrective
distributions
under the Plan for the Plan Year, and is used by the
Plan for
allocating income or loss to Participant's Accounts.
7.3(f) Claims Procedure.
7.3(f)(1) General. A Participant may assign to this
Plan any
Excess Elective Deferral made during a taxable year by
filing a claim
with the Plan Administrator on or before
(i) Standard Option - March 1 or
(ii) Alternative - the alternative date for filing
such claims
specified in the Adoption Agreement.
Unless otherwise provided in administrative procedures
established
by the Plan Administrator, such claim shall be in
writing, shall
specify the dollar amount of the Participant's
Excess Elective
Deferrals assigned to this Plan for such taxable year, and
shall be
accompanied by the Participant's written statement that
such amounts,
if not distributed to such Participant, will exceed the
limit imposed
on the Participant by Code 402(g) for the taxable year in
which the
deferral occurred.
7.3(f)(2) Deemed Claim. A Participant automatically
shall be
deemed to have filed a claim under this 7.3(f) to the
extent that
such Excess Elective Deferrals occurred solely as a result
of Elective
Deferrals under this Plan and any other plans of the
Employer and the
Affiliates, unless the Employer specifies in the Adoption
Agreement
that such Excess Elective Deferrals shall be distributed
from one or
more of such other plans.
7.4 Limitations on Elective Deferrals for Highly
Compensated
Employees under Code 401(k).
7.4(a) Special Definitions. For purposes of this 7.4,
the terms
defined in this 7.4(a) shall have the meanings shown
opposite such
terms.
7.4(a)(1) Actual Deferral Percentage - means for each
Plan Year
for each Participant who is an Eligible Employee at any
time during
such Plan Year the ratio (expressed as a percentage and
determined in
accordance with 7.4(c)) of Employer Contributions made on
behalf of
such Participant for such Plan Year to such Participant's
Compensation
for such Plan Year. The Actual Deferral Percentage of a
Participant
who is an Eligible Employee, but does not make an
Elective Deferral
and does not receive an allocation of a Qualified
Nonelective
Contribution or a Qualified Matching Contribution, shall be
zero.
7.4(a)(2) ADP (or Average Actual Deferral
Percentage) - means
for each Plan Year separately for the group of
Participants who
are Highly Compensated Employees during such Plan
Year and for
the group of Participants who are Nonhighly
Compensated Employees
during such Plan Year, the average (expressed as a
percentage) of
the Actual Deferral Percentages of the Participants in
each such
group who are Eligible Employees at any time during
such Plan
Year.
7.4(a)(3) Employer Contributions - means for
purposes of
determining a Participant's Actual Deferral Percentage for
each Plan
Year, the sum of (i) the Elective Deferrals made
pursuant to the
Participant's deferral election, including Excess Elective
Deferrals
(as defined in 7.3(c)) of Highly Compensated Employees,
but excluding
Excess Elective Deferrals of Nonhighly Compensated
Employees that
arise solely from Elective Deferrals made under this Plan
or any other
plans of the Employer and the Affiliates, and
excluding Elective
Deferrals that are taken into account in the ACP test
described in
7.5(b) (provided the ADP test is satisfied both with
and without
exclusion of such Elective Deferrals), and (ii) at the
election of the
Employer, Qualified Nonelective Contributions and
Qualified Matching
Contributions.
7.4(a)(4) Excess Contributions - means for each Plan
Year for
each Highly Compensated Employee the excess of the
aggregate amount of
Employer Contributions actually taken into account in
computing the
Average Deferral Percentage of such Highly Compensated
Employee for
such Plan Year over the maximum amount of such
contributions permitted
for such Plan Year under the ADP limit as set forth
in 7.4(b)
(determined by reducing Elective Deferrals, Qualified
Nonelective
Contributions and Qualified Matching Contributions made on
behalf of
Highly Compensated Employees in order of their
Actual Deferral
Percentages, beginning with the highest of such
percentages).
7.4(a)(5) Highly Compensated Employee - means any
Employee who is
either a "highly compensated active employee" or a "highly
compensated
former employee" as described below.
(i) A "highly compensated active employee" means
any Employee
who performs services for the Employer or any Affiliate
during the
"determination year" and who, during the "look-back
year": (A)
received compensation from the Employer or any Affiliate in
excess of
$75,000 (as adjusted pursuant to Code 415(d)); (B)
received
compensation from the Employer or any Affiliate in excess
of $50,000
(as adjusted pursuant to Code 415(d)) and was a member of
the "top-
paid group" for such year; or (C) was an officer of the
Employer or
any Affiliate and received compensation during such
year that is
greater than 50% of the dollar limitation in effect
under Code
415(b)(1)(A). The term "highly compensated employee"
shall also
include: (I) an Employee who is both described in the
preceding
sentence if the term "determination year" is substituted
for the term
"look-back year" and is one of the 100 Employees who
received the most
compensation from the Employer or any Affiliate
during the
determination year; and (II) an Employee who is a 5% owner
at any time
during the look-back year or determination year. If no
officer has
satisfied the compensation requirement of clause (C)
above during
either a determination year or look-back year, the
highest paid
officer for each such year shall be treated as a Highly
Compensated
Employee.
(ii) A "highly compensated former employee" means
any Employee
who separated (or was deemed to have separated) from
service prior to
the determination year, performs no services for the
Employer or any
Affiliate 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.
(iii) For purposes of this definition, the
"determination year"
shall mean the Plan Year and the "look-back year" shall
mean the 12-
month period immediately preceding the determination year.
(iv) 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 ("top-ten Highly
Compensated
Employee"), then the Family Member and the 5% owner or top-
ten Highly
Compensated Employee shall be treated as a single Employee
receiving
compensation and Plan contributions or benefits equal to
the sum of
such compensation and contributions or benefits of the
Family Member
and the 5% owner or top-ten Highly Compensated Employee.
(v) The determination of who is a Highly
Compensated Employee,
including the determination of the number and identity of
Employees in
the top-paid group, the top 100 Employees, the number of
Employees
treated as officers and the compensation that is
considered, shall be
made in accordance with Code 414(q) including any
available
operational transition rules and any elections
provided in the
regulations under Code 414(q) and specified in the
Adoption
Agreement.
7.4(b) ADP Limit. The ADP for Highly Compensated
Employees for
any Plan Year shall not exceed
7.4(b)(1) the ADP for Nonhighly Compensated
Employees for such
Plan Year multiplied by 1.25, or
7.4(b)(2) the ADP for Nonhighly Compensated
Employees for such
Plan Year multiplied by 2, provided that the ADP
for Highly
Compensated Employees does not exceed the ADP for
Nonhighly
Compensated Employees by more than 2 percentage points.
7.4(c) Special Rules.
7.4(c)(1) Other Plans. The Actual Deferral
Percentage for any
Participant who is a Highly Compensated Employee for the
Plan Year and
who is eligible to participate in more than one cash
or deferred
arrangement maintained by the Employer or an Affiliate
shall be
determined by treating all such arrangements as a single
arrangement.
If a Highly Compensated Employee participates in two or
more cash or
deferred arrangements that have different plan years,
all such
arrangements ending with or within the same calendar year
shall be
treated as a single arrangement. Notwithstanding the
foregoing, plans
which are mandatorily disaggregated under regulations
under Code
401(k) shall be treated as separate.
7.4(c)(2) Aggregation. In the event that this Plan
satisfies the
requirements of Code 410(b) only if aggregated with one or
more other
plans, or if one or more other plans satisfy the
requirements of such
Code section only if aggregated with this Plan, then this
7.4 shall
be applied by determining the Actual Deferral Percentages
and ADP as
if all such plans were a single plan. For Plan Years
beginning on and
after the Final Compliance Date, such plans may be
aggregated only if
they have the same plan years and are not mandatorily
disaggregated
under regulations under Code 401(k).
7.4(c)(3) Family Members. For purposes of determining
the Actual
Deferral Percentage of a Participant who is a 5% owner or
one of the
10 most highly paid Highly Compensated Employees and
who is an
Eligible Employee at any time during the Plan Year,
the Employer
Contributions and Compensation of such Participant shall
include the
Employer Contributions and Compensation of his or her
Family Members,
and such Family Members shall be disregarded as separate
Participants
in determining the ADP both for Nonhighly Compensated
Employees and
for Highly Compensated Employees.
7.4(c)(4) Timing. For purposes of determining the
Actual Deferral
Percentages for any Plan Year, Elective Deferrals,
Qualified
Nonelective Contributions and Qualified Matching
Contributions shall
be considered made for such Plan Year only if such
contributions are
allocated as of a date within such Plan Year and are
actually paid to
the Fund by the last day of the 12 month period
immediately following
such Plan Year.
7.4(c)(5) Records. The Plan Administrator shall
maintain records
which are sufficient to demonstrate that the Plan complied
with the
ADP limits, including the extent to which Qualified
Nonelective
Contributions and Qualified Matching Contributions are
taken into
account to satisfy such ADP limits.
7.4(c)(6) Other Requirements. The determination and
treatment of
the Elective Deferrals and Actual Deferral
Percentage of any
Participant shall satisfy such other requirements as may be
prescribed
by the Secretary of the Treasury.
7.4(d) Distribution of Excess Contributions.
7.4(d)(1) General. Notwithstanding any other
provision of this
Plan restricting the timing of distributions, Excess
Contributions for
any Plan Year, plus any income and minus any loss
allocable thereto,
shall be distributed no later than the last day of the
immediately
following Plan Year to Participants on whose behalf
such Excess
Contributions were made. If such Excess Contributions are
distributed
more than 2_ months after the last day of the Plan Year in
which such
excess occurred, a 10% excise tax shall be imposed under
Code 4979 on
the Employer with respect to such excess. Such
distributions shall be
made to such Participants on the basis of the respective
portions of
the Excess Contributions attributable to each such
Participant. Excess
Contributions shall be allocated to Participants who are
subject to
the Family Member aggregation rules under Code
414(q)(6) in the
manner prescribed by the regulations under Code 401(k).
7.4(d)(2) Determination of Income or Loss. A
corrective
distribution of Excess Contributions under this 7.4 shall
include the
income or loss allocable to such Excess Contributions for
the Plan
Year in which such excess occurred and, if so
specified in the
Adoption Agreement, for the period between the end of such
Plan Year
and the date of distribution ("gap period"). The income
or loss for
such Plan Year and gap period, if applicable, shall be
determined in
accordance with the regulations under Code 401(k). In lieu
of using
the safe harbor method or the alternative method in the
regulations
for allocating such income or loss, the Plan Administrator
may use any
reasonable method for computing such income or loss,
provided that
such method does not violate Code 401(a)(4), is used
consistently for
all Participants and for all corrective distributions
under the Plan
for the Plan Year, and is used by the Plan for allocating
income or
loss to Participant's Accounts.
7.4(d)(3) Order for Determining Excess
Contributions. Excess
Contributions shall be determined after first
determining Excess
Elective Deferrals under 7.3. The Excess
Contributions which
would otherwise be distributed to the Participant
shall be
reduced, in accordance with regulations, by the
Excess Elective
Deferrals distributed to the Participant under 7.3.
7.4(d)(4) Accounting for Excess
Contributions. Excess
Contributions shall be distributed proportionately
from the
Participant's Elective Deferral Account and Qualified
Matching Account
in the same ratio that such Participant's Elective
Deferrals and
Qualified Matching Contributions for the Plan Year in
which such
Excess Contributions were made bears to the sum of the
Participant's
Elective Deferrals and Qualified Matching Contributions for
such Plan
Year. Excess Contributions shall be distributed from the
Participant's
Qualified Nonelective Account only to the extent that
such Excess
Contributions exceed the balance in the Participant's
Elective
Deferral Account and Qualified Matching Account.
Notwithstanding the
foregoing, Excess Contributions may be distributed from the
applicable
subaccounts in accordance with procedures established by
the Plan
Administrator provided such procedures do not result in
discrimination
in favor of Highly Compensated Employees which would be
prohibited
under Code 401(a)(4).
7.4(e) Recharacterization. If the Employer
specifies in the
Adoption Agreement that Excess Contributions may be
recharacterized, a
Participant may elect to treat Excess Contributions as
an amount
distributed to the Participant and then contributed as
an Employee
Contribution to the Plan. Any such Excess Contribution
which is so
recharacterized as an Employee Contribution
shall remain
nonforfeitable and shall thereafter be subject to
the same
distribution restrictions applicable to Elective
Deferrals under
9.2(b). Excess Contributions shall not be
recharacterized by a
Participant to the extent that such amounts, in combination
with other
Employee Contributions, would exceed any limits on
Employee
Contributions set forth in the Plan or in the Adoption
Agreement.
Any such recharacterization must occur no later than 2_
months after
the end of the Plan Year in which such Excess
Contribution occurred
and shall be deemed to occur no earlier than the date on
which the
last Highly Compensated Employee is informed in writing of
the amount
recharacterized and the consequences of such
recharacterization. Any
Excess Contributions which are so recharacterized shall be
taxable to
the Participant for the taxable year in which the
Participant would
have received such amount in cash but for the deferral
election.
7.5 Limitations on Employee Contributions and Matching
Contributions
under Code 401(m).
7.5(a) Special Definitions. For purposes of this 7.5,
the terms
defined in this 7.5(a) shall have the meanings shown
opposite such
terms.
7.5(a)(1) Aggregate Limit - means the sum of
(i) 125% of the greater (or lesser, if it would
result in a
larger Aggregate Limit) of
(A) the ADP for Nonhighly Compensated Employees
under the plan
subject to Code 401(k) for the plan year or
(B) the ACP for Nonhighly Compensated Employees
under the plan
subject to Code 401(m) for the plan year beginning with or
within the
plan year of the plan which is subject to Code 401(k) and
(ii) the lesser of
(A) 200% of such ADP or ACP or
(B) two plus the lesser (or greater, if it would
result in a
larger Aggregate Limit) of such ADP or ACP.
7.5(a)(2) ACP (or Average Contribution Percentage) -
means for
each Plan Year separately for the group of Participants who
are Highly
Compensated Employees during such Plan Year and for the
group of
Participants who are Nonhighly Compensated Employees during
such Plan
Year, the average (expressed as a percentage) of the
Contribution
Percentages of the Participants in each such group who
are Eligible
Employees at any time during such Plan Year.
7.5(a)(3) Contribution Percentage - means for each
Plan Year for
each Participant who is an Eligible Employee at any time
during such
Plan Year, the ratio (expressed as a percentage and
determined in
accordance with 7.5(c)) of such Participant's Contribution
Percentage
Amount for such Plan Year to such Participant's
Compensation for such
Plan Year. The Contribution Percentage of a
Participant who is
eligible to, but does not, make Employee Contributions
or Elective
Deferrals and who, as a result of such failure to
make such
contributions, does not receive an allocation of a
Matching
Contribution or Qualified Matching Contribution shall be
zero.
7.5(a)(4) Contribution Percentage Amount - means for
each Plan
Year for each Participant who is an Eligible Employee at
any time
during such Plan Year the sum of
(i) the Employee Contributions, Matching
Contributions and
Qualified Matching Contributions (to the extent not taken
into account
for purposes of the ADP test described in 7.4) made on
behalf of such
Participant for such Plan Year, other than Matching
Contributions
which are forfeited either to correct Excess Aggregate
Contributions
or because the contributions to which they relate are
Excess Elective
Deferrals, Excess Contributions or Excess Aggregate
Contributions,
(ii) the Forfeitures allocated to such Participant's
Account for
such Plan Year which are attributable to Matching
Contributions and
Excess Aggregate Contributions,
(iii) at the election of the Employer, the Qualified
Nonelective
Contributions made on behalf of such Participant for such
Plan Year
(to the extent not taken into account for purposes of the
ADP test
described in 7.4), and
(iv) at the election of the Employer, Elective
Deferrals
(provided the ADP limit described in 7.4 is met both
including and
excluding the Elective Deferrals that are used to meet the
ACP limit).
7.5(a)(5) Employee Contribution - means for
purposes of
determining a Participant's Contribution Percentage
Amount any
contributions made by the Participant which are included
in gross
income for the taxable year in which made and which are
maintained in
a separate account to which earnings and losses are
allocated.
7.5(a)(6) Excess Aggregate Contribution - means for
each Plan Year
for each Highly Compensated Employee the excess of the
aggregate
Contribution Percentage Amounts actually taken into
account in
computing the ACP of such Highly Compensated Employee for
such Plan
Year over the maximum Contribution Percentage Amounts
permitted for
such Plan Year under the ACP limit as set forth in 7.5(b)
(determined
by reducing contributions and Forfeitures on behalf
of Highly
Compensated Employees in order of their Contribution
Percentages,
beginning with the highest of such percentages).
7.5(a)(7) Matching Contribution - means for
purposes of
determining a Participant's Contribution Percentage
Amount any
Employer contribution made to this Plan or any
other defined
contribution plan on account of an Employee Contribution
or Elective
Deferral made by or on behalf of the Participant
under a plan
maintained by the Employer.
7.5(b) ACP Limit.The ACP for Participants who are Highly
Compensated
Employees for any Plan Year shall not exceed
7.5(b)(1) the ACP for Participants who are Nonhighly
Compensated
Employees for such Plan Year multiplied by 1.25, or
7.5(b)(2) the ACP for Participants who are Nonhighly
Compensated
Employees for such Plan Year multiplied by 2, provided
that the ACP
for Participants who are Highly Compensated Employees does
not exceed
the ACP for Participants who are Nonhighly Compensated
Employees by
more than 2 percentage points.
7.5(c) Special Rules.
7.5(c)(1) Multiple Use. For Plan Years beginning after
the Final
Compliance Date, if
(i) one or more Highly Compensated Employees
participates both
in a plan with a qualified cash or deferred arrangement
which is
subject to the ADP limitations under Code 401(k) as
described in 7.4
and in a plan which is subject to the ACP limitations
under Code
401(m) as described in this 7.5,
(ii) the sum of the ADP of the eligible Highly
Compensated
Employees in the plan subject to Code 401(k) and the
ACP of the
eligible Highly Compensated Employees in the plan
subject to Code
401(m) exceeds the Aggregate Limit, and
(iii) both the ADP and the ACP of the
eligible Highly
Compensated Employees in such plans exceed 125% of the
ADP or ACP
respectively of the eligible Nonhighly Compensated
Employees in such
plans,
then the Contribution Percentages of the Highly
Compensated
Employees who participate in both such plans shall
be reduced
(beginning with the highest of such percentages) so that
the Aggregate
Limit for such plans is not exceeded. Any such reduction
shall be
treated as an Excess Aggregate Contribution. The
determination of the
limitations under this special rule shall be made
after any
corrections required to meet the ADP limits and the ACP
limits and in
accordance with the regulations under Code 401(m).
7.5(c)(2) Other Plans. The Contribution
Percentage for any
Participant who is a Highly Compensated Employee for the
Plan Year and
who is eligible to participate in more than one plan
maintained by the
Employer or an Affiliate to which "employee contributions"
(within the
meaning of Code 401(m)) or "matching contributions" (as
described in
Code 401(m)(4)) are made shall be determined by treating
all such
plans as one plan. If a Highly Compensated Employee
participates in
two or more such plans that have different plan years, all
such plans
ending with or within the same calendar year shall be
treated as a
single plan. Notwithstanding the foregoing, plans
which are
mandatorily disaggregated under regulations under Code
401(m) shall
be treated as separate.
7.5(c)(3) Aggregation. In the event that this Plan
satisfies the
requirements of Code 410(b) only if aggregated with one or
more other
plans, or if one or more other plans satisfy the
requirements of such
Code sections only if aggregated with this Plan, then this
7.5 shall
be applied by determining the Contribution Percentages and
ACP as if
all such plans were a single plan. For Plan Years
beginning on and
after the Final Compliance Date, such plans may be
aggregated only if
they have the same plan years and they are not
mandatorily
disaggregated under regulations under Code 401(m).
7.5(c)(4) Family Members. For purposes of
determining the
Contribution Percentage of a Participant who is a 5% owner
or one of
the 10 most highly paid Highly Compensated Employees, the
Contribution
Percentage Amounts and Compensation of such Participant
shall include
the Contribution Percentage Amounts and Compensation of
his or her
Family Members, and such Family Members shall be
disregarded as
separate Participants in determining the ACP both for
Participants who
are Nonhighly Compensated Employees and for
Participants who are
Highly Compensated Employees.
7.5(c)(5) Timing. For purposes of determining the
ACP for any
Plan Year, Employee Contributions shall be considered made
in the Plan
Year in which they are actually contributed to the Fund
and Matching
Contributions (and, if applicable, Qualified Matching
Contributions
and Qualified Nonelective Contributions) shall be
considered made for
such Plan Year only if such contributions are allocated as
of a date
within such Plan Year and are actually paid to the Fund by
the last
day of the 12-month period immediately following such Plan
Year.
7.5(c)(6) Records. The Plan Administrator shall
maintain records
which are sufficient to demonstrate that the Plan complied
with the
ACP limits, including the extent to which Elective
Deferrals,
Qualified Nonelective Contributions and Qualified
Matching
Contributions are taken into account to satisfy such ACP
limits.
7.5(c)(7) Other Requirements. The determination and
treatment of
the Contribution Percentage of any Participant shall
satisfy such
other requirements as may be prescribed by the
Secretary of the
Treasury.
7.5(d) Distribution of Excess Aggregate Contributions.
7.5(d)(1) General. Notwithstanding any other
provision of this
Plan restricting the timing of distributions, Excess
Aggregate
Contributions for any Plan Year, plus any income and minus
any loss
allocable thereto, shall be forfeited (if otherwise
forfeitable under
the Plan) or distributed (if not forfeitable) from the
Accounts of
Participants on whose behalf such Excess Aggregate
Contributions were
made no later than the last day of the immediately
following Plan
Year. If such Excess Aggregate Contributions are
distributed more than
2 months after the last day of the Plan Year in which
such excess
occurred, a 10% excise tax shall be imposed under Code
4979 on the
Employer with respect to such excess. Excess Aggregate
Contributions
shall be allocated to Participants who are subject to
the Family
Member aggregation rules under Code 414(q)(6) in
the manner
prescribed by the regulations under Code 401(m).
7.5(d)(2) Determination of Income or Loss. A
corrective
distribution of Excess Aggregate Contributions under this
'7.5 shall
include the income or loss allocable to such Excess
Aggregate
Contributions for the Plan Year in which such excess
occurred and, if
so specified in the Adoption Agreement, for the period
between the end
of such Plan Year and the date of distribution ("gap
period"). The
income or loss for such Plan Year and gap period, if
applicable, shall
be determined in accordance with the regulations under
Code 401(m).
In lieu of using the safe harbor method or the alternative
method in
the regulations for allocating such income or loss,
the Plan
Administrator may use any reasonable method for computing
such income
or loss, provided that such method does not violate Code
401(a)(4),
is used consistently for all Participants and for all
corrective
distributions under the Plan for the Plan Year, and is
used by the
Plan for allocating income or loss to Participant's
Accounts.
7.5(d)(3) Order for Determining Excess Aggregate
Contributions.
Excess Aggregate Contributions shall be determined
after first
determining Excess Elective Deferrals under 7.3
and then
determining Excess Contributions under 7.4.
7.5(d)(4) Accounting for Excess Aggregate
Contributions. Excess
Aggregate Contributions shall be forfeited (if
otherwise
forfeitable) or distributed (if not forfeitable) to
the Highly
Compensated Employee from the Participant's
Employee Account,
Matching Account, Qualified Matching Account,
Qualified
Nonelective Account and Elective Deferral Account in
the same
ratio that the contributions made on the Participant's
behalf to
such account (to the extent such contributions are
used in the
ACP test) for the Plan Year in which such Excess
Aggregate
Contributions were made bears to the total of
all such
contributions. Notwithstanding the foregoing, Excess
Aggregate
Contributions may be distributed from the applicable
subaccounts
in accordance with procedures established by
the Plan
Administrator provided such procedures do not
result in
discrimination in favor of Highly Compensated
Employees which
would be prohibited under Code 401(a)(4).
7.5(d)(5) Allocation of Forfeitures. Amounts
forfeited by Highly
Compensated Employees under this 7.5 shall be allocated or
applied in
accordance with 6.3(c)(2); provided, no Forfeitures
arising under
this 7.5 shall be allocated to the Account of any Highly
Compensated
Employee.
SECTION 8. VESTING AND FORFEITURES
8.1 Determination of Nonforfeitable Percentage.
8.1(a) Fully Vested Accounts. Each Rollover
Account, Employee
Account, Elective Deferral Account, Qualified Matching
Account and
Qualified Nonelective Account shall be completely
nonforfeitable at
all times.
8.1(b) Death, Disability and Retirement. The Employer
Account and
Matching Account of each Participant who reaches Early
Retirement Age
or Normal Retirement Age while an Employee shall become
completely
nonforfeitable on such date. The Employer Account and
Matching Account
of each Participant who dies while an Employee or who
becomes Disabled
while an Employee
8.1(b)(1) Standard Option - shall become
completely
nonforfeitable on such date.
8.1(b)(2) Alternative - if so specified in the Adoption
Agreement,
shall be determined in accordance with the vesting
schedule under
8.1(c).
8.1(c) Other Separation From Service. Subject to
12.4, the
nonforfeitable percentage of the Employer Account and
Matching Account
of a Participant other than a Participant described in
8.1(b) shall
be based on the Participant's Years of Service and on the
following
vesting schedule:
8.1(c)(1) Standard Option - the full and
immediate vesting
schedule.
8.1(c)(2) Alternative - the alternative vesting
schedule
specified in the Adoption Agreement;
provided, however, if the Participation
Requirement (or the
requirement to receive an allocation of Employer
contributions under a
401(k) Plan) consists of a minimum period of service which
exceeds one
year, the full and immediate vesting schedule shall
automatically
apply notwithstanding any election to the contrary in
the Adoption
Agreement.
8.1(d) Employee Contribution Withdrawals. No Forfeiture
shall occur
solely as a result of a Participant's withdrawal
of Employee
Contributions.
8.2 Forfeiture and Special Reemployment Rules.
8.2(a) Buy Back Rule (Standard Option).
8.2(a)(1) Forfeiture. The forfeitable portion, if
any, of the
Employer Account and Matching Account of a Participant who
separates
from service shall become a Forfeiture on the earlier of
(i) the date as of which the Participant receives
(or is deemed
to receive under 8.2(c)) a distribution of the
Participant's entire
nonforfeitable Account balance derived from Employer
Contributions, or
(ii) the date he or she has 5 consecutive Breaks
in Service
(6 consecutive Breaks in Service if the
Alternative
Maternity/Paternity Rule applies).
If a Participant elects to have distributed less than
the entire
nonforfeitable balance of the Participant's Employer
Account and
Matching Account, the part of such accounts that shall be
treated as a
Forfeiture is the total forfeitable portion of such
Accounts
multiplied by a fraction, the numerator of which is the
amount of the
distribution from the Participant's Employer Account
or Matching
Account and the denominator of which shall be the total
nonforfeitable
balance of the Participant's Employer Account or Matching
Account at
the time of the distribution.
Any such Forfeiture shall be allocated or applied in
accordance
with 6 on the Valuation Date specified in 8.2(e).
8.2(a)(2) Reemployment. If a Participant receives a
distribution and
resumes employment covered under this Plan before the
Participant has
5 consecutive Breaks in Service (6 consecutive Breaks in
Service if
the Alternative Maternity/Paternity Rule applies), the
Employer shall
restore to the Participant's Employer Account and Matching
Account an
amount equal to the dollar amount of the Forfeitures
from such
accounts if the Participant repays to the Plan an amount
equal to the
dollar amount of the distributions from the
Participant's Employer
Account and Matching Account in accordance with this
8.2(a). Such
repayment must be made before the earlier of (a) 5 years
after the
first date on which the Participant is subsequently
reemployed by the
Employer or a Participating Affiliate or (b) the date the
Participant
incurs 5 consecutive Breaks in Service (6 consecutive
Breaks in
Service if the Alternative Maternity/Paternity Rule
applies) following
the date of the distribution.
If a Participant whose nonforfeitable Account balance
is zero is
deemed to receive a distribution under 8.2(c) and he or
she resumes
employment covered under this Plan before he or she has 5
consecutive
Breaks in Service (6 consecutive Breaks in Service if the
Alternative
Maternity/Paternity Rule applies), the forfeitable
portion of the
Participant's Employer Account and Matching
Account shall
automatically be restored by the Employer upon the
Participant's
reemployment.
Any amount restored by the Employer under this 8.2(a)
shall be
restored upon repayment from the sources specified in
8.2(d). Such
restored or repaid amount shall not be treated as an
Annual Addition
under 7.2 and shall be credited to the Participant's
Employer Account
and Matching Account in the same proportion as the
distribution was
made from such accounts.
8.2(b) Automatic Restoration (Alternative). This 8.2(b)
shall apply
if the Employer specifies the use of the "Alternative to
the Buy Back
Rule" in the Adoption Agreement.
8.2(b)(1) Forfeiture. The forfeitable portion, if
any, of the
Employer Account and Matching Account of a Participant who
separates
from service shall become a Forfeiture on the earlier of
(i) the date as of which payment of the nonforfeitable
percentage
of the Participant's Account derived from Employer
contributions
begins or is deemed to begin under 8.2(c) or
(ii) the date he or she has 5 consecutive Breaks in
Service (6
consecutive Breaks in Service if the Alternative
Maternity/Paternity
Rule applies)
and such Forfeiture shall be allocated or applied in
accordance
with 6 on the allocation date specified in 8.2(e) unless
he or she
is reemployed on or before such allocation date.
8.2(b)(2) Reemployment. If a Participant is reemployed
before the
Participant incurs 5 consecutive Breaks in Service (6
consecutive
Breaks in Service if the Alternative Maternity/Paternity
Rule applies)
but after the date of a Forfeiture under 8.2(b)(1),
the Employer
shall restore to such Participant as of the last day of the
Plan Year
in which he or she is reemployed an amount equal to the
dollar amount
of such Forfeiture.
Any amount restored by the Employer under this 8.2(b)
shall be
restored from the sources specified in 8.2(d). Such
restored amount
shall not be treated as an Annual Addition under 7.2 for
such Plan
Year. The restored amount, together with any remaining
balance of the
nonforfeitable portion of the Employer Account and
Matching Account
attributable to the Participant's service prior to
reemployment, shall
be maintained thereafter as separate special
subaccounts of the
Participant's Employer Account and Matching Account (until
such time
as it becomes completely nonforfeitable or again
becomes a
Forfeiture), and the dollar amount of the Participant's
nonforfeitable
percentage in each such special subaccount thereafter
shall be
determined in accordance with Formula A unless Formula B is
specified
in the Adoption Agreement:
(i) Formula A (Standard Option): X = P (AB + D) - D
(ii) Formula B (Alternative): X = P (AB + (R x D)) - (R
x D)
For purposes of these formulas:
X = The current dollar amount, if any, of the
nonforfeitable
percentage in the Participant's special subaccount;
P = The Participant's current nonforfeitable
percentage as
determined under 8.1;
AB = Such dollar amount, if any, as evidenced by the
last balance
posted to the Participant's special subaccount;
D = The dollar amount previously paid to the
Participant under 9
from the Participant's original Employer Account or
Matching Account,
as applicable; and
R = The ratio of AB to the dollar amount, if any,
posted to the
Participant's Employer Account or Matching Account, as
applicable,
immediately after the distribution.
8.2(c) Deemed Distribution. If the nonforfeitable
portion of a
Participant's Account balance derived from Employer
and Employee
contributions is zero, the Participant shall be
deemed to have
received a distribution of the nonforfeitable portion
of the
Participant's Account upon the Participant's separation
from service.
A Participant's nonforfeitable Account balance derived
from Employee
contributions shall not include accumulated deductible
employee
contributions within the meaning of Code 72(o)(5)(B) for
Plan Years
beginning prior to January 1, 1989.
8.2(d) Restoration Sources. Any amount restored under
this 8.2
shall be restored from the following sources in the
following order:
first, from Forfeitures occurring in the Plan Year in
which such
amounts are restored, if any; second, from Employer
Contributions for
such Plan Year, if any; third from Fund Earnings for such
Plan Year;
and finally, from additional Employer Contributions.
However, at the
election of the Employer, such amounts shall be restored
entirely from
additional Employer Contributions.
8.2(e) Date Forfeitures Applied or Allocated. Any
amounts which
become a Forfeiture under this 8.2 shall be allocated or
applied as
of the allocation date specified in 6 which
coincides with or
immediately follows the date such Forfeiture occurs, except
that the
Employer may specify in the Adoption Agreement that
Forfeitures which
are applied to reduce Employer Contributions, Matching
Contributions,
Qualified Matching Contributions or Qualified
Nonelective
Contributions shall be so applied as of the allocation date
for such
contributions which immediately follows the last day of the
Plan Year
in which such Forfeiture occurs.
8.2(f) In-service Distributions. The provisions of
this 8.2(f)
shall apply if the Plan permits in-service distribution
under 9.2.
If a distribution is made at a time when a
Participant has a
nonforfeitable right to less than 100% of his or her
Employer Account
or Matching Account and the Participant may
increase the
nonforfeitable percentage in such Account:
8.2(f)(1) A separate special subaccount of the
Participant's
Employer Account and Matching Account shall be established
to record
the Participant's interest in such accounts as of the
time of the
distribution; and
8.2(f)(2) At any relevant time the Participant's
nonforfeitable
portion of each such special subaccount shall be
determined in
accordance with the formula specified in 8.2(b).
SECTION 9. ACCOUNT DISTRIBUTION - GENERAL RULES
9.1 After Separation From Service. Subject to the rules
in this 9,
10, Benefit Payment Forms - Joint and Survivor Annuity
Requirements,
and 11, Minimum Distribution Requirements, the
nonforfeitable portion
of each Participant's Account (as determined in
accordance with 8)
shall not be payable to such Participant before he or she
separates
from service with the Employer and all Affiliates.
9.1(a) Timing. A Participant who has separated from
service with the
Employer and all Affiliates
9.1(a)(1) Standard Option - may request a
distribution of the
nonforfeitable portion of his or her Account as soon as
practicable
after such separation from service.
9.1(a)(2) Alternative - if so specified in
the Adoption
Agreement, may not request a distribution of the
nonforfeitable
portion of his or her Account until Normal Retirement
Age, Early
Retirement Age or Disability, whichever is earlier.
9.1(b) Reemployment. Except as required in 11, no
payment shall be
made under this 9.1 if the Participant who separates from
service is
reemployed as an Employee before payment is made. If a
Participant is
reemployed as an Employee after payment of the
nonforfeitable portion
of the Participant's Account has begun but before the
entire balance
attributable to such nonforfeitable portion has been paid
(or applied
to purchase an annuity), payments to the Participant from
such balance
shall be terminated on the date he or she is so
reemployed and no
further payments shall be made to the Participant until he
or she is
subsequently entitled to such payments in accordance with
the terms of
this Plan.
9.1(c) $3500 Cashout. The nonforfeitable portion of a
Participant's
Account shall be distributed in a single sum to such
Participant (or
to the Participant's Beneficiary in the event of the
Participant's
death) as soon as administratively practicable
following the
Participant's separation from service with the
Employer and all
Affiliates for any reason if the nonforfeitable
portion of such
Account is (and at the time of any prior distribution was)
$3500 or
less. Any such distributions made on or after January 1,
1993 shall be
made in accordance with any applicable rules regarding the
period for
providing notices under Code 402(f) and for making
direct rollover
elections under Code 401(a)(31).
9.1(d) Claim. Except as provided in this 9 and 11,
no payment
shall be made until a written claim for such payment is
filed with the
Plan Administrator on an Election Form. The Plan
Administrator shall
process each such claim in accordance with the claims
procedure
described in the summary plan description for this Plan.
If no such
claim is submitted and the Participant does not defer
payment pursuant
to 9.1(e), payment may be made as soon as the
benefit is not
immediately distributable (within the meaning of9.3) and
shall, in
any event, begin no later than 60 days following the end
of the Plan
Year in which
9.1(d)(1) the Participant separates from service as an
Employee,
9.1(d)(2) the Participant reaches age 65 or Normal
Retirement
Age, if earlier, or
9.1(d)(3) occurs the 10th anniversary of the year in
which the
Participant commenced participation in the Plan,
whichever occurs
last.
9.1(e) Election to Defer Payment. If a Participant has
separated
from service with the Employer and all Affiliates
and the
nonforfeitable portion of the Participant's Account is (or
at the time
of any prior distribution was) more than $3500, the
Participant may
defer distribution of that nonforfeitable portion, but in
no event
beyond
9.1(e)(1) Standard Option - the Participant's
Required Beginning
Date (as defined in 11).
9.1(e)(2) Alternative - if so specified in the Adoption
Agreement,
the later of the Participant's Normal Retirement Age or age
62.
The failure of a Participant and his or her Spouse, if
applicable,
to consent to a distribution or make a written request
to defer
payment while a benefit is immediately distributable
(within the
meaning of 9.3) shall be deemed to be an election
to defer
commencement of payment of any benefit under this 9 until
the benefit
is no longer immediately distributable or, if
9.1(e)(1) applies,
until the Required Beginning Date.
Nothing in this 9.1(e) shall prevent the Plan
Administrator from
paying in the normal form a benefit which is not
immediately
distributable without regard to whether the Participant and
his or her
Spouse consent to such distribution, unless the
Participant has
requested a deferral pursuant to 9.1(e)(2).
9.1(f) Early Retirement Age. If the Early Retirement
Age includes
both an age and service requirement, any Participant who
separates
from service before satisfying such age requirement, but
after the
Participant has satisfied the service requirement, may
request a
distribution of the nonforfeitable portion of his or her
Account upon
satisfaction of such age requirement.
9.1(g) Death. In the event of the Participant's
death, the
nonforfeitable portion of the Participant's Account shall
be payable
to the Participant's Beneficiary as soon as
administratively
practicable after the Participant's death.
9.2 Before Separation From Service. Subject to the rules
in this 9,
10, Joint and Survivor Annuity Requirements, and
11, Minimum
Distribution Requirements, the nonforfeitable
portion of a
Participant's Account may be paid to the Participant before
he or she
separates from service with the Employer and all
Affiliates if so
specified in the Adoption Agreement or by the Board in
accordance with
9.2(b)(2) or 9.2(e).
9.2(a) Money Purchase Pension Plan or Target Benefit
Pension Plan.
If this Plan is adopted as a Money Purchase Pension
Plan or a
Target Benefit Pension Plan,
9.2(a)(1) Standard Option - except as provided in
9.2(d) or (e),
no distributions shall be made before a Participant
separates from
service with the Employer and all Affiliates, or
9.2(a)(2) Alternative - if so specified in
the Adoption
Agreement, a Participant may request a distribution of
all or a
portion of the nonforfeitable portion of the Participant's
Account on
or after he or she reaches Normal Retirement Age without
regard to
whether he or she has separated from service.
9.2(b) 401(k) Plan.
9.2(b)(1) Distribution Restrictions. If this Plan is
adopted as a
401(k) Plan, then, except as provided in this 9.2(b), a
Participant's
Elective Deferral Account, Qualified Nonelective Account
and Qualified
Matching Account shall not be distributable to the
Participant or the
Participant's Beneficiary earlier than upon the
Participant's
separation from service with the Employer and all
Affiliates, death,
or Disability.
9.2(b)(2) Termination of Plan or Disposition of
Assets or
Subsidiary. Notwithstanding 9.2(b)(1) and subject to the
Participant
and spousal consent rules in 9.3 and 10, the Employer
may, by action
of its Board, make lump sum distributions (within the
meaning of Code
401(k)(10)(B)(ii)) of a Participant's Account,
including the
Participant's Elective Deferral Account, Qualified
Nonelective Account
and Qualified Matching Account in accordance with Code
401(k) by
reason of
(i) the termination of the Plan without the
establishment of
another defined contribution plan (other than an
employee stock
ownership plan as defined in Code 4975(e) or Code
409 or a
simplified employee pension as defined in Code 408(k));
(ii) the disposition by the Employer or a
Participating
Affiliate to an unrelated entity of substantially all of
the assets
(within the meaning of Code 409(d)(2)) used by the
Employer or such
Participating Affiliate in a trade or business of the
Employer or a
Participating Affiliate, if the transferor continues to
maintain this
Plan after such disposition, but such distributions shall
be made only
with respect to a Participant who continues employment with
the entity
acquiring such assets; or
(iii) the disposition by the Employer or a
Participating
Affiliate which is a corporation to an unrelated entity of
interest in
a subsidiary (within the meaning of Code
409(d)(3)), if the
transferor continues to maintain this Plan after such
disposition, but
such distributions shall be made only with respect to a
Participant
who continues employment with such former subsidiary.
9.2(b)(3) Hardship Distribution.
(i) General. If the Employer specifies in the
Adoption Agreement
that hardship distributions shall be permitted, a
Participant may
request a hardship distribution before he or she
separates from
service from the Participant's Elective Deferral Account
(and, if
applicable, from the nonforfeitable portion of the other
subaccounts
of such Account specified in the Adoption Agreement).
The Plan
Administrator shall grant such request if, and to the
extent that, the
Plan Administrator determines that such distribution is
"necessary" to
satisfy an "immediate and heavy financial need" of the
Participant as
determined in accordance with this 9.2(b)(3). Any such
request shall
be made in writing, shall set forth in detail the
nature of such
hardship and the amount of the distribution needed as a
result of such
hardship, and shall include adequate documentation of
the type of
financial need and the amount of the need. If the Plan
Administrator
grants such request, such application shall be processed
and such
distribution shall be made in a single sum as soon as
administratively
practicable.
(ii) Safe Harbor Test for Financial Need. An
"immediate and
heavy financial need" shall mean one or more of the
following, as
specified in the Adoption Agreement,
(A) expenses for medical care described in
Code 213(d)
incurred by the Participant or the Participant's spouse or
dependents
(as defined in Code 152) and amounts necessary for such
individuals
to obtain such care,
(B) the purchase of (but not the mortgage
payments for) a
principal residence of the Participant,
(C) the payment of tuition and related
educational fees for
the next 12 months of post-secondary education for the
Participant or
the Participant's spouse, children or dependents (as
defined in Code
152),
(D) the prevention of the eviction of the
Participant from the
Participant's principal residence or the foreclosure on
the mortgage
of the Participant's principal residence, or
(E) such other events as the Internal Revenue
Service deems to
constitute an "immediate and heavy financial need" under
Code 401(k).
(iii) Safe Harbor Test for Distribution Necessary
to Satisfy
Need. A distribution shall be deemed to be "necessary" to
satisfy an
immediate and heavy financial need only if all of the
following
requirements are satisfied:
(A) the distribution is not in excess of the
amount of such
need, including any amounts necessary to pay any federal,
state or
local income taxes or penalties reasonably anticipated to
result from
such withdrawal;
(B) the Participant has obtained all distributions
(other than
hardship distributions) and all nontaxable loans currently
available
under this Plan and all other plans maintained by the
Employer or an
Affiliate;
(C) the Participant's Elective Deferrals
and Employee
Contributions under this Plan and elective deferrals
and employee
contributions under all other plans maintained by the
Employer or an
Affiliate shall be suspended for the 12-month period
following the
date of receipt of such hardship distribution; and
(D) the Participant's Elective Deferrals under
this Plan and
elective deferrals under all other plans maintained by the
Employer or
an Affiliate for the Participant's taxable year
immediately following
the taxable year in which such hardship distribution was
made shall
not exceed the applicable dollar limitation under Code
402(g) for
such following taxable year less the amount of the
Participant's
Elective Deferrals under this Plan and elective deferrals
under all
such other plans for the taxable year in which
such hardship
distribution was made.
(iv) Account Limitations. For Plan Years
beginning after
December 31, 1988, no hardship distribution shall be made
under this
9.2(b)(3) to a Participant from
(A) the Participant's Qualified Nonelective
Account,
(B) the Participant's Qualified Matching Account,
or
(C) the Fund Earnings allocated to the
Participant's Elective
Deferral Account
except to the extent of amounts credited to such
Accounts as of
the end of the last Plan Year ending before July 1, 1989.
9.2(b)(4) Distributions on or after Age 59. If
the Employer
specifies in the Adoption Agreement that distributions
shall be
permitted on or after age 59, a Participant may
request a
distribution of all or a portion of the nonforfeitable
portion of the
subaccounts of the Participant's Account specified in
the Adoption
Agreement at any time on or after he or she reaches age
59. Any such
request shall be made in writing on an Election Form
and such
distribution shall be made in a single sum as soon as
practicable in
accordance with such reasonable nondiscretionary
procedures as the
Plan Administrator deems appropriate under the
circumstances for the
proper administration of the Plan.
9.2(b)(5) Employer Account and Matching Account. If
so specified
in the Adoption Agreement, a Participant may request in
accordance
with reasonable and nondiscriminatory procedures a
distribution of all
or a portion of the nonforfeitable portion of the
Participant's
Employer Account and Matching Account after a fixed number
of years,
the attainment of a stated age or upon the occurrence of
some prior
event as specified in the Adoption Agreement.
9.2(c) Profit Sharing Plan. If this Plan is adopted as
a Profit
Sharing Plan, then, if so specified in the Adoption
Agreement, a
Participant may request in accordance with
reasonable and
nondiscriminatory procedures a distribution of all or a
portion of the
nonforfeitable portion of the Participant's Account
after a fixed
number of years, the attainment of a stated age or upon the
occurrence
of some prior event as specified in the Adoption Agreement.
9.2(d) Withdrawals from Employee Account.
9.2(d)(1) Standard Option. A Participant may request a
withdrawal
of all or a portion of the Participant's Employee Account
at any time.
Any such request shall be made in writing on an Election
Form and such
withdrawal shall be made in a single sum as soon as
administratively
practicable in accordance with such reasonable
nondiscretionary
procedures as the Plan Administrator deems appropriate
under the
circumstances for the proper administration of this Plan.
9.2(d)(2) Alternative. The Employer may specify in
the Adoption
Agreement that withdrawals from Employee Accounts
shall not be
permitted before the nonforfeitable portion of a
Participant's Account
otherwise becomes distributable under this 9 or under
11 or may
specify other rules and conditions under which such
withdrawals may be
made.
Notwithstanding the foregoing, any portion of a
Participant's
Employee Account which is attributable to
recharacterized Excess
Contributions under 7.4(e) may only be withdrawn in
accordance with
the rules set forth in 9.2(b) applicable to an
Elective Deferral
Account.
9.2(e) Plan Termination. If this Plan is terminated
under 14.6 and
if the Board so specifies in its written action
effecting such
termination, distribution of the nonforfeitable
portion of each
Account shall be made as soon as administratively practical
after the
Plan is terminated subject to the rules in 9.2(b) and to
Code 411.
9.3 Consent.
9.3(a) General. If the nonforfeitable portion of a
Participant's
Account exceeds (or at the time of any prior distribution
exceeded)
$3500, and such Account is "immediately
distributable", the
Participant and the Participant's Spouse, if any, (or
where the
Participant has died, the surviving Spouse, if any) must
consent to
any distribution from such 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 (as defined
in 10.1).
The Plan Administrator shall notify the Participant
and the
Participant's Spouse of the right to defer any distribution
until the
Participant's 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 Code 417(a)(3) and
shall be
provided no less than 30 days and no more than 90 days
prior to the
Annuity Starting Date.
9.3(b) Exceptions. 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
Participant's
Account is immediately distributable. Furthermore, if
payment in the
form of a Qualified Joint and Survivor Annuity is not
required with
respect to the Participant pursuant to 10, only the
Participant need
consent to the distribution from an Account that is
immediately
distributable. The consent of the Participant and the
Participant's
Spouse shall not be required to the extent that a
distribution is
required to satisfy Code 401(a)(9), 401(k), 401(m),
402(g) or
415. In addition, upon termination of this Plan if the
Plan is not
required to offer an annuity option (purchased from a
commercial
provider), the nonforfeitable portion of the
Participant's Account
shall, without the Participant's consent, be
distributed to the
Participant unless the Employer or an Affiliate
maintains another
defined contribution plan (other than an employee stock
ownership plan
as defined in Code4975(e)(7)), in which event, the
Account of a
Participant who does not consent to an immediate
distribution shall be
transferred to such other plan.
9.3(c) Immediately Distributable. An Account is
"immediately
distributable" if any part of the Account could be
distributed to the
Participant (or the surviving Spouse) before the
Participant reaches
(or would have reached if not deceased) the later of Normal
Retirement
Age or age 62.
9.3(d) Accumulated Deductible Employee Contributions.
For purposes
of determining the applicability of the consent
requirements under
this 9.3 to distributions made before the first day of the
first Plan
Year beginning after December 31, 1988, the nonforfeitable
portion of
the Participant's Account shall not include amounts
attributable to
accumulated deductible employee contributions within the
meaning of
Code 72(o)(5)(B).
9.4 Form of Distribution. All distributions (including
distributions
before separation from service under 9.2 but excluding
corrective
distributions under 7) shall be made in the form specified
in 10.
9.5 Minimum Distributions. The Plan shall satisfy
the minimum
distribution requirements of Code 401(a)(9) as set forth
in 11.
9.6 Missing Person. In the event that an Account
becomes payable
under this Plan pursuant to 9.1(c), 9.1(d) or 9.1(e)
and the Plan
Administrator is unable to locate the Participant or
his or her
Beneficiary after sending written notice to the last
known mailing
address and to the United States Social Security
Administration, such
Participant or Beneficiary shall be presumed dead and
such Account
shall become a Forfeiture on the third anniversary of the
date such
Account first became payable under this Plan. However, the
amount of
such Forfeiture shall be paid to such missing
Participant or
Beneficiary in the event that such person files a claim
for such
benefit while this Plan remains in effect and
demonstrates to the
satisfaction of the Plan Administrator that such person
in fact is
such missing Participant or Beneficiary.
9.7 No Estoppel of Plan. No person is entitled to any
benefit under
this Plan except and to the extent expressly provided under
this Plan.
The fact that payments have been made from this Plan in
connection
with any claim for benefits under this Plan does not (1)
establish the
validity of the claim, (2) provide any right to have
such benefits
continue for any period of time, or (3) prevent this
Plan from
recovering the benefits paid to the extent that the Plan
Administrator
determines that there was no right to payment of the
benefits under
this Plan. Thus, if a benefit is paid under this Plan
and it is
thereafter determined by the Plan Administrator that
such benefit
should not have been paid (whether or not attributable to
an error by
the Participant, the Plan Administrator, the Employer or
any other
person), then the Plan Administrator may take such action
as the Plan
Administrator deems necessary or appropriate to remedy such
situation,
including without limitation by (1) deducting the
amount of any
overpayment theretofore made to or on behalf of such
Participant from
any succeeding payments to or on behalf of such Participant
under this
Plan or from any amounts due or owing to such
Participant by the
Employer or any Affiliate or under any other plan,
program or
arrangement benefiting the employees or former
employees of the
Employer or any Affiliate, or (2) otherwise
recovering such
overpayment from whoever has benefited from it.
If the Plan Administrator determines that an underpayment
of benefits
has been made, the Plan Administrator shall take such
action as it
deems necessary or appropriate to remedy such situation.
However, in
no event shall interest be paid on the amount of any
underpayment
other than the investment gains (or losses)
credited to the
Participant's Account pending payment.
9.8 Administration. All distributions shall be made in
accordance with
such uniform and nondiscriminatory administrative and
operational
procedures for Account distributions as the Plan
Administrator deems
appropriate under the circumstances for the proper
administration of
the Plan.
SECTION 10. BENEFIT PAYMENT FORMS - JOINT AND
SURVIVOR ANNUITY
REQUIREMENTS
10.1 Application and Special Definitions. This 10 shall
apply to a
Participant who is vested at the time of death or at the
time of a
distribution from the Participant's Account in any
portion of the
Participant's Account, whether such portion is
attributable to
Employer contributions, Employee contributions, or both.
For purposes
of this 10, the terms defined in this 10.1 shall have
the meanings
shown opposite such terms.
10.1(a) Annuity Starting Date - means the first day of
the first
period for which an amount is paid as an annuity or any
other form.
10.1(b) Earliest Retirement Age - means
10.1(b)(1) if distributions are permitted only upon
separation
from service, the earliest age at which the Participant
could separate
from service and receive a distribution;
10.1(b)(2) if distributions are permitted before
separation from
service, the earliest age at which such distribution could
be made; or
10.1(b)(3) if clauses (1) and (2) do not apply,
the Early
Retirement Age.
10.1(c) Election Period - means
10.1(c)(1) for a Qualified Preretirement Survivor
Annuity, the
period which begins on the earlier of (i) the first day of
the Plan
Year in which the Participant attains age 35 or (ii) the
date such
Participant separates from service and ends on the
date of the
Participant's death and
10.1(c)(2) for a Qualified Joint and Survivor Annuity
or a Life
Annuity, the 90 day period ending on the Annuity Starting
Date.
Notwithstanding the foregoing, a Participant who has not
yet reached
age 35 (and who will not reach age 35 as of the end of
the 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 reach 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 10.4.
Qualified
Preretirement Survivor Annuity coverage shall be
automatically
reinstated as of the first day of the Plan Year in
which the
Participant reaches age 35. Any new waiver on or after such
date shall
be subject to the full requirements of this 10.
10.1(d) Life Annuity - means a nontransferable
immediate annuity
payable for the life of the Participant, which is the
amount of
benefit which can be purchased with such Participant's
Vested Account
Balance as of the Annuity Starting Date.
10.1(e) Qualified Election - means a Participant's
election to waive
the Qualified Joint and Survivor Annuity or the
Qualified
Preretirement Survivor Annuity which election shall not be
effective
unless (1) the election designates a specific Beneficiary
(including
any class of Beneficiaries or any contingent
Beneficiaries) and, for
an election to waive a Qualified Joint and Survivor
Annuity, the
particular form of benefit payment, which designations
cannot be
changed without the Spouse's consent (or the Spouse
expressly permits
designations by the Participant without any further spousal
consent);
(2) such Participant's Spouse consents in writing to such
election on
an Election Form; (3) such consent acknowledges the
effect of such
election; and (4) such consent is witnessed by a
notary public;
provided,
(i) if the Participant establishes to the
satisfaction of a Plan
representative that such written consent may not be
obtained because
there is no Spouse or the Spouse cannot be located or
because of such
other circumstances as may be described in the regulations
under Code
417, a Participant's election shall be deemed to be a
Qualified
Election;
(ii) a Spouse's written consent under this 10.1(e)
shall be
irrevocable as to such Spouse and shall be binding only
as against
such Spouse;
(iii) no consent shall be valid unless the
Participant received
notice as provided in 10.4;
(iv) a consent that permits designations by the
Participant
without any further spousal consent must acknowledge that
the Spouse
has the right to limit consent to a specific
Beneficiary, and, if
applicable, a specific form of benefit payment, and that
the Spouse
voluntarily elects to relinquish either or both of such
rights; and
(v)a Participant may revoke (without the consent of
his or her
Spouse) an election to waive the Qualified Joint and
Survivor Annuity
or the Qualified Preretirement Survivor Annuity on an
Election Form at
any time prior to the date as of which the
Participant's Account
becomes payable under 9.
10.1(f) Qualified Joint and Survivor Annuity -
means a
nontransferable immediate annuity payable for the
life of the
Participant which is the amount of benefit which can be
purchased with
the Participant's Vested Account Balance on the Annuity
Starting Date
with a survivor annuity payable for the life of the
Participant's
surviving Spouse which is
10.1(f)(1) Standard Option - 50% or
10.1(f)(2) Alternative - such greater percentage (not
to exceed
100%) specified in the Adoption Agreement
of the amount of the annuity which is payable during the
joint lives
of the Participant and such Spouse.
10.1(g) Qualified Preretirement Survivor Annuity -
means a
nontransferable annuity payable for the life of the
surviving Spouse,
which is the amount of benefit which can be purchased with
10.1(g)(1) Standard Option - 100% of the
Participant's Vested
Account Balance as of the Annuity Starting Date or
10.1(g)(2) Alternative - such lesser percentage (not
less than
50%) specified in the Adoption Agreement of such
Participant's Vested
Account Balance (determined by allocating the portion of
such balance
which is attributable to employee contributions
proportionately to
such annuity and to the remainder of such balance).
10.1(h) Vested Account Balance - means the
nonforfeitable portion
of a Participant's Account derived from Employer
contributions and
Employee contributions (including Rollover
Contributions), whether
vested before or upon death, including the proceeds of
insurance
contracts, if any, on the Participant's life and
reduced, if
applicable, for outstanding loans in accordance with
13.3(d)(1)(iv).
10.2 Distribution to Participant. Unless a Participant
waives the
Qualified Joint and Survivor Annuity and elects an optional
method of
distribution (as described in 10.6) on an Election Form
pursuant to a
Qualified Election within the Election Period, any
distribution of
such Participant's Vested Account Balance shall be paid in
the form of
(a) a Qualified Joint and Survivor Annuity for each
such married
Participant and his or her Spouse or (b) a Life Annuity for
each such
unmarried Participant. A Participant may elect that such
annuity be
distributed upon attainment of the Earliest Retirement Age.
10.3 Distribution to Surviving Spouse. Unless a Participant
waives the
Qualified Preretirement Survivor Annuity and elects an
optional method
of distribution (as described in 10.6) on an Election
Form pursuant
to a Qualified Election within the Election Period, such
Participant's
Vested Account Balance shall, in the event of the
Participant's death
before the Participant's Annuity Starting Date, be applied
to purchase
a Qualified Preretirement Survivor Annuity for the
surviving Spouse.
If the Qualified Preretirement Survivor Annuity is less
than 100%, the
remaining portion of the Participant's Vested Account
Balance shall be
payable to the Participant's Beneficiary under 9. The
surviving
Spouse may elect that such Qualified Preretirement Survivor
Annuity be
distributed to such Spouse within a reasonable period
following the
death of the Participant. Notwithstanding the foregoing,
a surviving
Spouse entitled to a Qualified Preretirement Survivor
Annuity may
elect in writing after the Participant's death to
have the
Participant's Vested Account Balance distributed in an
optional form
of benefit in accordance with 10.6.
10.4 Notice Requirements.
10.4(a) Qualified Joint and Survivor Annuity and Life
Annuity. The
Plan Administrator shall no less than 30 days and no more
than 90 days
before the Annuity Starting Date provide each
Participant with a
written explanation of the Qualified Joint and Survivor
Annuity and
the Life Annuity, which explanation shall describe
10.4(a)(1) the terms and conditions of such annuity;
10.4(a)(2) the Participant's right to make a
Qualified Election
to waive such annuity and the effect of such election;
10.4(a)(3) the rights of the Participant's Spouse, if
any;
10.4(a)(4) the right to revoke such election and the
effect of
such a revocation; and
10.4(a)(5) the relative values of the various
optional forms of
benefits under the Plan.
10.4(b) Qualified Preretirement Survivor Annuity.
The Plan
Administrator shall provide to each Participant within the
"applicable
period" for such Participant a written explanation of the
Qualified
Preretirement Survivor Annuity which includes the type of
information
described in 10.4(a). The "applicable period" for a
Participant is
10.4(b)(1) the period beginning on the first day of
the Plan Year
in which such Participant attains age 32 and ending with
the close of
the Plan Year preceding the Plan Year in which the
Participant attains
age 35,
10.4(b)(2) a reasonable period ending after he or she
becomes a
Participant, or
10.4(b)(3) a reasonable period ending after this 10
applies to
such Participant,
whichever period ends last. However, if a Participant
separates from
service before he or she reaches age 35, such notice shall
be provided
within the two year period beginning one year before the
Participant's
separation from service and ending one year after such
separation and
if such Participant is subsequently reemployed, the
applicable period
for such Participant shall be redetermined under
10.4(b)(1) through
10.4(b)(3). For purposes of 10.4(b)(2) and
10.4(b)(3), a
"reasonable period" is the two year period which begins one
year prior
to the occurrence of the event and ends one year after the
occurrence
of the event.
10.5 Safe Harbor Rules.
10.5(a) Application. If so specified in the Adoption
Agreement, the
provisions in this 10.5 shall apply in lieu of 10.1
through 10.4 to
(1) a Participant in a Profit Sharing Plan or a 401(k)
Plan, and (2)
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 Code 72(o)(5)(B)) and
maintained on
behalf of a Participant in a Money Purchase Pension Plan
or Target
Benefit Pension Plan provided that the conditions
specified in
10.5(b) are satisfied.
10.5(b) Conditions. In order to fit within this safe
harbor (1) the
Participant does not or cannot elect payments in the form
of a Life
Annuity with respect to the Participant's Vested Account
Balance; (2)
on the death of a Participant, the Participant's
Vested Account
Balance shall be paid to the Participant's surviving
Spouse, or if
there is no surviving Spouse or if the surviving Spouse
has consented
in a manner conforming to a Qualified Election, to the
Participant's
Beneficiary; and (3) with respect to a Participant in a
Profit Sharing
Plan or a 401(k) Plan, the Plan is not a direct or indirect
transferee
of a defined benefit plan, money purchase pension plan,
target benefit
pension plan, stock bonus plan, or profit-sharing plan
which is
subject to the survivor annuity requirements of Code
401(a)(11) and
Code 417 ("Transferee Plan"), or the Plan
maintains separate
bookkeeping accounts for such Participant's Transferee
Plan benefits
and all other benefits of the Participant under the Plan
and gains,
losses, withdrawals, contributions, forfeitures, and other
credits or
charges are allocated on a reasonable and consistent basis
between the
Transferee Plan benefits (which are subject to the
survivor annuity
requirements in 10.1 through 10.4) and the other
Plan benefits
(which are subject to the safe harbor rule in this 10.5).
10.5(c) Surviving Spouse. The surviving Spouse may
elect to have
distribution of the Vested Account Balance commence within
the 90 day
period following the date of the Participant's death.
The Vested
Account Balance shall be adjusted for Fund Earnings
occurring after
the Participant's death in accordance with 6.2 in the
same manner
that Accounts are adjusted for other types of
distributions.
10.5(d) Waiver of Spousal Benefit. The Participant may
waive the
spousal death benefit described in this 10.5 at any time;
provided,
no such waiver shall be effective unless it satisfies the
conditions
described in 10.1(e) (other than the notification
requirement
referred to in such section) that would apply to the
Participant's
Qualified Election to waive the Qualified
Preretirement Survivor
Annuity.
10.5(e) Vested Account Balance. For purposes of this
10.5, Vested
Account Balance shall mean, (1) in the case of a
Money Purchase
Pension Plan or Target Benefit Pension Plan, the
Participant's
separate account balance attributable solely to accumulated
deductible
employee contributions within the meaning of Code
72(o)(5)(B) and (2)
in the case of a Profit Sharing Plan or 401(k) Plan, the
Participant's
Vested Account Balance as defined in 10.1(h), excluding
the portion
of such Vested Account Balance which is attributable to
Transferee
Plan benefits described in 10.5(b).
10.6 Optional Forms.
10.6(a)General. If a Participant properly and timely
waives the
Qualified Joint and Survivor Annuity as described in 10.2
or to the
extent the safe harbor rules of 10.5 apply to a
distribution, such
distribution shall be made in the form specified in this
10.6 as
selected by the Participant (or his or her Beneficiary in
the event of
the Participant's death).
10.6(b) Before Separation From Service. Any
distribution made
pursuant to 9.2 shall, subject to 10.2, be made in a
single sum.
10.6(c) After Separation From Service.
10.6(c)(1) Standard Option. The optional benefit form
available to
any Participant after separation from service with the
Employer and
all Affiliates or to his or her Beneficiary in the
event of the
Participant's death shall be a single sum.
10.6(c)(2) Alternative. If specified in the Adoption
Agreement,
the following optional benefit forms shall be
available to any
Participant (or to his or her Beneficiary in the
event of the
Participant's death):
(i) Single Sum - by payment in a single sum.
(ii) Installments - by payment in annual
installments (or more
frequent installments) over a specified period in
accordance with the
minimum distribution rules in 11.
(iii) Annuity - in the form of an annuity contract
under which
the amount of benefits shall be that which can be provided
by applying
the nonforfeitable portion of such Participant's
Account to the
applicable settlement option or annuity purchase rate
under such
contract; or
(iv) Other Forms - under one of the optional
forms of
distribution, if any, under the Pre-Existing Plan or a plan
described
in 14.5 which are required to be preserved under Code
411(d)(6).
Such optional forms shall be described in the Adoption
Agreement and,
unless otherwise specified in the Adoption Agreement, such
other forms
shall apply to the Participant's entire Account
balance.
Notwithstanding the foregoing, if the Plan Administrator
separately
accounts for benefits under a Pre-Existing Plan or a plan
described
under 14.5 or, if applicable, under 10.5, the optional
forms may be
limited to such separate accounts.
10.6(d) No Method Selected. If the safe harbor rules of
10.5 apply
to a distribution, but the Participant or the
Participant's Spouse or
Beneficiary fails to specify the method of distribution,
then any
distribution made to such Participant, Spouse or
Beneficiary shall be
made in a single sum.
10.6(e) Single Sum. A distribution made on
account of a
Participant's death or separation from service with the
Employer and
all Affiliates which is made in more than one payment
shall be deemed
to be a single sum distribution for purposes of this
Plan if the
additional payment or payments are necessary to reflect
allocations
completed following the Participant's death or
separation from
service.
10.6(f) In Kind Distributions. A distribution shall be
made in kind
only to the extent provided in the Adoption Agreement and
only to the
extent an "in kind" distribution is permissible under
ERISA.
10.7 Annuity Contracts. Any annuity contract distributed
by the Plan
to a Participant or a Beneficiary shall be
nontransferable and the
terms of such contract shall comply with the applicable
requirements
of this Plan and the Code.
10.8 Transitional Rules.
10.8(a) Any living Participant not receiving benefits on
August 23,
1984, who would otherwise not receive the benefits
prescribed by the
previous sections of this 10 must be given the
opportunity to elect
to have such sections apply (1) 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
(2) such
Participant had at least 10 years of vesting service when
he or she
separated from service.
10.8(b) Any living Participant not receiving benefits on
August 23,
1984, who was credited with at least one Hour of Service
under this
Plan or a predecessor plan on or after September 2, 1974,
and who is
not otherwise credited with any service in a Plan Year
beginning on or
after January 1, 1976, must be given the opportunity to
have his or
her benefits paid in accordance with 10.8(d).
10.8(c) The respective opportunities to elect (as
described in
10.8(a) and (b) above) must be afforded to the
appropriate
Participants during the period commencing on August 23,
1984, and
ending on the date benefits would otherwise commence
to such
Participants.
10.8(d) Any Participant who has elected pursuant to
10.8(b) and
any Participant who does not elect under 10.8(a) or who
meets the
requirements of 10.8(a) 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:
10.8(d)(1) If benefits in the form of a life
annuity become
payable to a married Participant who:
(i) begins to receive payments under the Plan on or
after Normal
Retirement Age; or
(ii) dies on or after Normal Retirement Age while
still working
for the Employer; or
(iii) begins to receive payments on or after the
"qualified
early retirement age"; or
(iv) separates from service on or after
attaining Normal
Retirement Age (or the "qualified early retirement age")
and after
satisfying the eligibility requirements for the payment
of benefits
under the Plan and thereafter dies before beginning to
receive such
benefits;
then such benefits shall be received under this Plan
in the form
of a Qualified Joint and Survivor Annuity, unless the
Participant has
elected otherwise during the election period. The election
period must
begin at least 6 months before the Participant attains
"qualified
early retirement age" and end not more than 90 days
before the
commencement of benefits. Any such election shall be in
writing and
may be changed by the Participant at any time.
10.8(d)(2) A Participant who is employed after
attaining the
qualified early retirement age shall be given the
opportunity to
elect, during the election period, to have a survivor
annuity payable
on death. The election period begins on the later of (i)
the 90th day
before the Participant attains the "qualified early
retirement age",
or (ii) the date on which participation begins, and ends
on the date
the Participant separates from service. Any such election
shall be in
writing and may be changed by the Participant at any
time. 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 the Participant's
death.
10.8(d)(3) For purposes of this 10.8(d),
"qualified early
retirement age" means the latest of:
(i) the earliest date under the Plan on which the
Participant
may elect to receive retirement benefits,
(ii) the first day of the 120th month beginning
before the
Participant reaches Normal Retirement Age, or
(iii) the date the Participant begins participation.
10.9 Direct Rollovers.
10.9(a) General. This 10.9 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 10, 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 by the
Plan to an
Eligible Retirement Plan specified by the Distributee in
a direct
rollover in accordance with Code 401(a)(31).
10.9(b) Definitions.
10.9(b)(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: any distribution that is
one of a
series of substantially equal periodic payments (not less
frequently
than annually) made for the life (or life
expectancy) of the
Distributee or the joint lives (or joint life
expectancies) of the
Distributee and the Distributee's designated beneficiary,
or for a
specified period of ten years or more; any distribution to
the extent
such distribution is required under Code 401(a)(9); and
the portion
of any distribution that is not includable in gross income
(determined
without regard to the exclusion for net unrealized
appreciation with
respect to employer securities).
10.9(b)(2) Eligible Retirement Plan. An Eligible
Retirement Plan
is an individual retirement account described in Code
408(a), an
individual retirement annuity described in Code 408(b),
an annuity
plan described in Code 403(a), or a qualified trust
described in Code
401(a), 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.
10.9(b)(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 Code 414(p), are
Distributees with
regard to the interest of the spouse or former spouse.
SECTION 11. MINIMUM DISTRIBUTION REQUIREMENTS
11.1 General. Subject to 10, Benefit Payment Forms -
Joint and
Survivor Annuity Requirements, the requirements of this
11 shall
apply to any distribution of a Participant's Account and
shall take
precedence over any inconsistent provisions of this
Plan. Unless
otherwise specified, the provisions of this 11 shall
apply to
calendar years beginning after December 31, 1984. All
distributions
required under this 11 shall be determined and made in
accordance
with the proposed regulations under Code 401(a)(9),
including the
minimum distribution incidental benefit requirement of
1.401(a)(9)-2
of the proposed regulations.
11.2 Special Definitions.
11.2(a) Applicable Calendar Year - means the first
Distribution
Calendar Year, and if life expectancy is being
recalculated, each
succeeding calendar year.
11.2(b) Applicable Life Expectancy - means 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.
11.2(c) Designated Beneficiary - means the
individual who is
designated as the Beneficiary under this Plan in accordance
with Code
401(a)(9) and the regulations under such Code section.
11.2(d) Distribution Calendar Year - means a calendar
year for which
a minimum distribution is required. For distributions
beginning before
the Participant's death, the first Distribution Calendar
Year shall be
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 shall be the calendar year in which
distributions are
required to begin pursuant to 11.6.
11.2(e) Life Expectancy - means the life expectancy (or
joint and
last survivor expectancy) as computed by use of the
expected return
multiples in Tables V and VI of 1.72-9 of the Federal
Income Tax
Regulations. Unless otherwise elected by the Participant
(or Spouse,
in the case of distributions described in 11.6(b)(2)) 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.
11.2(f) Participant's Benefit - means the nonforfeitable
portion of
a Participant's Account determined as of the last
Valuation Date in
the calendar year immediately preceding the Distribution
Calendar Year
("valuation calendar year") increased by the amount
of any
contributions or forfeitures allocated to the Account as of
dates in
the valuation calendar year after such Valuation Date and
decreased by
distributions made in the valuation calendar year after
such Valuation
Date. 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.
11.2(g) Required Beginning Date.
11.2(g)(1) General Rule. The Required Beginning
Date of a
Participant who reaches age 70 after December 31, 1987 is
the first
day of April of the calendar year following the calendar
year in which
the Participant reaches age 70.
11.2(g)(2) Age 70 Before 1988. The Required Beginning
Date of a
Participant who reaches age 70 before January 1, 1988
shall be,
(i) for a Participant who is not a 5% owner, the
first day of
April of the calendar year following the calendar year in
which occurs
the later of retirement or reaching age 70; or
(ii) for a Participant who is a 5% owner during
any year
beginning after December 31, 1979, the first day of April
following
the later of:
(A) the calendar year in which the Participant
reaches age
70, 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.
11.2(g)(3) Age 70 During 1988. The Required
Beginning Date of a
Participant who is not a 5% owner, who reaches age 70
during 1988 and
who has not retired before January 1, 1989 shall be April
1, 1990. The
Required Beginning Date of a Participant who is a 5%
owner or who
retired before January 1, 1989 and who reaches age 70
during 1988
shall be determined in accordance with 11.2(g)(1).
11.2(g)(4) 5% Owner. A Participant shall be treated as
a 5% owner
for purposes of this 11.2(g) if such Participant is a 5%
owner as
defined in Code416(i) (determined in accordance with
Code 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
individual attains age 66 or any subsequent Plan
Year. Once
distributions have begun to a 5% owner under this 11,
they must
continue to be distributed, even if the Participant ceases
to be a 5%
owner in a subsequent year.
11.3 Required Beginning Date. The entire nonforfeitable
interest of a
Participant must be distributed or begin to be distributed
no later
than the Participant's Required Beginning Date. Such
distribution
shall be made
11.3(a) in the form of a Qualified Joint and Survivor
Annuity as
described in 10.2, or
11.3(b) if the Qualified Joint and Survivor Annuity
is properly
waived or to the extent the safe harbor rules in 10.5
apply, in the
optional benefit form in 10.6 selected by the Participant.
Notwithstanding the foregoing, even if installment
distributions are
not otherwise available as an optional benefit form, a
Participant who
has not separated from service with the Employer and all
Affiliates as
of the Required Beginning Date (or as of the end of any
Distribution
Calendar Year thereafter) may elect to receive
the minimum
distribution amount for each such Distribution
Calendar Year as
described in 11.5.
11.4 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):
11.4(a) the life of the Participant,
11.4(b) the life of the Participant and a Designated
Beneficiary,
11.4(c) a period certain not extending beyond the life
expectancy
of the Participant, or
11.4(d) a period certain not extending beyond the
joint and last
survivor expectancy of the Participant and a Designated
Beneficiary.
11.5 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:
11.5(a) Individual Account.
11.5(a)(1) General. If a Participant's Benefit
is to be
distributed over (i) a period not extending beyond the life
expectancy
of the Participant or the joint life and last survivor
expectancy of
the Participant and the Participant's Designated
Beneficiary or (ii) a
period not extending beyond the life expectancy of the
Designated
Beneficiary, the amount required to be distributed for
each calendar
year, beginning with distributions for the first
Distribution Calendar
Year, must at least equal the quotient obtained by
dividing the
Participant's Benefit by the Applicable Life Expectancy.
11.5(a)(2) Incidental Death Benefit Rules.
(i) 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.
(ii) 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 (A) the Applicable Life Expectancy or (B) if the
Participant's
Spouse is not the Designated Beneficiary, the
applicable divisor
determined from the table set forth in Q&A-4 of
1.401(a)(9)-2 of the
proposed regulations. Distributions after the death of the
Participant
shall be distributed using the Applicable Life
Expectancy in
11.5(a)(1) as the relevant divisor without regard to
1.401(a)(9)-2
of the proposed regulations.
11.5(a)(3) Timing. 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 subsequent Distribution Calendar Years,
including the
minimum distribution for the Distribution Calendar Year in
which the
Participant's Required Beginning Date occurs, must be
made on or
before December 31 of that Distribution Calendar Year.
11.5(b) Annuity Contracts. If the Participant's
Benefit is
distributed in the form of an annuity purchased from an
insurance
company, distributions under such annuity shall be made in
accordance
with the requirements of Code 401(a)(9).
11.6 Death Distribution Provisions.
11.6(a) Distribution Beginning Before Death. If the
Participant dies
after distribution of his or her nonforfeitable interest
has begun,
the remaining portion of such nonforfeitable interest
shall continue
to be distributed at least as rapidly as under the
method of
distribution being used prior to the Participant's death.
11.6(b) Distribution Beginning After Death. If the
Participant dies
before distribution of his or her nonforfeitable
interest begins,
distribution of the Participant's entire nonforfeitable
interest shall
be completed by December 31 of the calendar year
containing the fifth
anniversary of the Participant's death except to the
extent that an
election is made to receive distributions in accordance
with (1) or
(2) below:
11.6(b)(1) if any portion of the Participant's
nonforfeitable
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 and shall
commence on or
before December 31 of the calendar year immediately
following the
calendar year in which the Participant died;
11.6(b)(2) if the Designated Beneficiary is the
Participant's
surviving Spouse, distributions may be made over the
period described
in clause (1) above but the required commencement date may
be deferred
until the later of (i) December 31 of the calendar year
immediately
following the calendar year in which the Participant
died or (ii)
December 31 of the calendar year in which the Participant
would have
reached age 70.
If the Participant has not made an election
pursuant to this
11.6(b) by the time of the Participant's death, the
Participant's
Designated Beneficiary must elect the method of
distribution no later
than the earlier of (A) December 31 of the calendar year
in which
distributions would be required to begin under this
11.6, or (B)
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.
11.6(c) Special Rules.
11.6(c)(1) For purposes of 11.6(b), if the surviving
Spouse dies
after the Participant, but before payments to such Spouse
begin, the
provisions of 11.6(b), with the exception of 11.6(b)(2),
shall be
applied as if the surviving Spouse were the Participant.
11.6(c)(2) For purposes of this 11.6, any amount paid
to a child
of the Participant shall 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.
11.6(c)(3) For the purposes of this 11.6,
distribution of a
Participant's interest shall be considered to begin
on the
Participant's Required Beginning Date (or, if 11.6(c)(1)
above is
applicable, the date distribution is required to
begin to the
surviving Spouse pursuant to 11.6(b)). 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
shall be the date distribution actually commences.
11.7 Special Pre-TEFRA Distribution Election.
11.7(a) General Rule. Subject to 10, Benefit Payment
Forms - Joint
and Survivor Annuity Requirements, the nonforfeitable
percentage of
the Account of any Participant (including a "5% owner" as
described in
11.2(g)(4)) who has in effect a Special Pre-TEFRA
Distribution
Election (as described in 11.7(b)) shall be paid
only to the
Participant, or in the case of the Participant's death,
only to his or
her beneficiary in accordance with the method of
distribution
specified in such election without regard to the
distribution rules
set forth in 11.1 through 11.6.
11.7(b) Special Pre-TEFRA Distribution Election. For
purposes of
this 11.7, a Special Pre-TEFRA Distribution Election
means a
designation in writing, signed by the Participant or
his or her
beneficiary, made before January 1, 1984 by a Participant
in this Plan
or a Participant in a Pre-Existing Plan who had accrued
a benefit
under such plan as of December 31, 1983 which designation
specifies
11.7(b)(1) a distribution method which was permissible
under Code
401(a)(9) as in effect prior to amendment by the Deficit
Reduction
Act of 1984,
11.7(b)(2) the time at which such distribution will
commence,
11.7(b)(3) the period over which such distribution
will be made,
and
11.7(b)(4) if such designation is to be
effective for a
beneficiary, the beneficiaries of the Participant in
order of
priority.
A distribution to be made upon the death of a
Participant shall not
be covered under this 11.7(b) unless the
information in the
designation with respect to such distribution
satisfies the
requirements of this 11.7(b).
11.7(c) Current Distributions. Any distribution which
began before
January 1, 1984 and continues after such date shall be
deemed to be
made pursuant to a Special Pre-TEFRA Distribution
Election if the
method of distribution was set forth in writing and
such method
satisfies the requirements of 11.7(b)(1) through (4).
11.7(d) Revocation. A Participant who made a Special
Pre-TEFRA
Distribution Election shall have the right to revoke such
election by
completing and filing a distribution Election Form
under 9.
Furthermore, any change (other than the mere substitution
or addition
of a beneficiary not originally designated in such election
which does
not directly or indirectly alter the period over which
distributions
are to be made) to a Special Pre-TEFRA Distribution
Election shall be
deemed to be a revocation of such election. Upon
revocation, any
subsequent distribution shall be made in accordance
with Code
401(a)(9). 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 Code
401(a)(9), but for the Special Pre-TEFRA Distribution
Election. For
calendar years beginning after December 31, 1988, such
distributions
must meet the minimum distribution incidental benefit
requirements in
1.401(a)(9)-2 of the proposed regulations. If an
amount is
transferred or rolled over from one plan to another plan,
the rules in
Q&A J-2 and Q&A J-3 of 1.401(a)(9)-1 of the proposed
regulations
shall apply.
SECTION 12. TOP-HEAVY PLAN RULES
12.1 Application. The rules set forth in this 12 shall
supersede any
provisions of this Plan or the Adoption Agreement
which are
inconsistent with these rules as of the first day of the
first Plan
Year beginning after December 31, 1983 during which the
Plan is or
becomes a Top-Heavy Plan and such rules shall continue to
supersede
such provisions for so long as the Plan is a Top-Heavy Plan
unless the
Code permits such rules to cease earlier or requires them
to remain in
effect for a longer period.
12.2 Special Definitions. For purposes of this 12, the
terms defined
in this 12.2 shall have the meanings shown opposite such
terms.
12.2(a) Determination Date - means
12.2(a)(1) for the first Plan Year of a Plan which is
adopted as
a new Plan under the Adoption Agreement, the last day of
such Plan
Year, and
12.2(a)(2) for any subsequent Plan Year, the last
day of the
immediately preceding Plan Year, and
12.2(a)(3) for any plan year of each other
qualified plan
maintained by the Employer or an Affiliate which is
part of a
Permissive Aggregation Group or a Required Aggregation
Group, the date
determined under this 12.2(a) as if the term "Plan Year"
means the
plan year for each such qualified plan.
12.2(b)Key Employee - means any Employee or former
Employee (and the
Beneficiaries of such Employee) (as determined in
accordance with Code
416(i)(1)) who at any time during the Plan Year or any
of the 4
immediately preceding Plan Years was
12.2(b)(1) an officer of the Employer or an
Affiliate whose
compensation for such Plan Year exceeds 50% of the dollar
limitation
under Code 415(b)(1)(A),
12.2(b)(2) an owner (or considered to be an owner
within the
meaning of Code 318) of one of the 10 largest
interests in the
Employer or an Affiliate whose compensation for such Plan
Year exceeds
the 100% of the dollar limitation under Code
415(c)(1)(A); provided
that the value of such Employee's ownership interest is
more than one-
half of one percent,
12.2(b)(3) a 5% owner of the Employer or an Affiliate,
or
12.2(b)(4) a 1% owner of the Employer or an
Affiliate whose
compensation for such Plan Year exceeds $150,000.
For purposes of this 12.2(b), an Employee's
compensation means
compensation within the meaning of Code 415(c)(3) (as
defined in
7.2(a)(2)) but including amounts contributed by the
Employer or an
Affiliate pursuant to a salary reduction agreement which
are excluded
from gross income under Code 125, 402(e)(3), 402(h) or
403(b).
12.2(c) Permissive Aggregation Group - means a Required
Aggregation
Group and any other qualified plan or plans (as
described in Code
401(a)) maintained by the Employer or an Affiliate
which, when
considered with the Required Aggregation Group, would
continue to
satisfy the requirements of Code 401(a)(4) and Code 410.
12.2(d) Required Aggregation Group - means (1) each
qualified plan
(as described in Code 401(a)) maintained by the
Employer or an
Affiliate in which at least one Key Employee
participates or
participated at any time during the 5 year period
ending on the
Determination Date (without regard to whether such
plan has
terminated) and (2) any other qualified plan
maintained by the
Employer or an Affiliate which enables any such plan to
satisfy the
requirements of Code 401(a)(4) or Code 410.
12.2(e) Top-Heavy Plan - means this Plan if, for any
Plan Year
beginning after December 31, 1983, either
12.2(e)(1) this Plan is not part of a Required
Aggregation Group
or a Permissive Aggregation Group and the Top-Heavy Ratio
for this
Plan exceeds 60%;
12.2(e)(2) this Plan is part of a Required
Aggregation Group but
not part of a Permissive Aggregation Group and the Top-
Heavy Ratio for
the Required Aggregation Group exceeds 60%; or
12.2(e)(3) this Plan is part of a Required
Aggregation Group and
part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the
Permissive Aggregation Group exceeds 60%.
12.2(f) Top-Heavy Ratio.
12.2(f)(1) If the Employer or an Affiliate maintains
one or more
defined contribution plans (including any simplified
employee pension
plan) and the Employer or an Affiliate has never
maintained a defined
benefit plan under which benefits have been accrued for a
Participant
in this Plan during the 5 year period ending on the
Determination
Date, "Top-Heavy Ratio" means for this Plan alone or for
the Required
Aggregation Group or Permissive Aggregation Group, as
appropriate, a
fraction, the numerator of which shall be the sum of
the account
balances of all Key Employees as of the Determination Date
under this
and all other such defined contribution plans and the
denominator of
which shall be the sum of the account balances of all
employees as of
the Determination Date under this and all other
such defined
contribution plans.
12.2(f)(2) If the Employer or an Affiliate maintains
one or more
defined contribution plans (including any simplified
employee pension
plan) and the Employer or an Affiliate maintains or
has ever
maintained one or more defined benefit plans under which
benefits have
been accrued for a Participant in this Plan during the 5
year period
ending on the Determination Date, "Top Heavy Ratio"
means for the
Required Aggregation Group or the Permissive Aggregation
Group, as
appropriate, a fraction, the numerator of which shall be
the sum of
the account balances for all Key Employees as of the
Determination
Date under this and all other such defined contribution
plans and the
sum of the present value of the accrued benefits for all
Key Employees
as of the Determination Date under all defined
benefit plans
maintained by the Employer or an Affiliate and the
denominator of
which shall be the sum of the account balances for all
employees as of
the Determination Date under this and all other
such defined
contribution plans and the sum of the present value of
the accrued
benefits for all employees as of the Determination Date
under all
defined benefit plans maintained by the Employer or an
Affiliate.
12.2(f)(3) The following rules shall apply for
purposes of
calculating the Top-Heavy Ratio:
(i) The value of any account balance and the
present value of
any accrued benefit shall be determined as of the most
recent Top-
Heavy Valuation Date that falls within, or ends with, the
12 month
period ending on the Determination Date (or, if plans are
aggregated,
the Determination Dates that fall within the same
calendar year),
except as provided under the regulations under Code 416
for the first
and second years of a defined benefit plan;
(ii) The value of any account balance and the
present value of
any accrued benefit shall include the value of any
distributions made
during the 5 year period ending on such Determination
Date and any
contributions due but as yet unpaid as of the Determination
Date which
are required to be taken into account on that date under
Code 416;
(iii) The present value of an accrued benefit under
a defined
benefit plan shall be determined in accordance with the
interest rate
and mortality assumptions specified in the Adoption
Agreement or, if
this Plan and such defined benefit plan are Paired Plans,
as specified
in the Adoption Agreement for such defined benefit Paired
Plan;
(iv) The account balance or accrued benefit of a
Participant who
is not a Key Employee for the current Plan Year but who
was a Key
Employee in a prior Plan Year or who has not performed
an Hour of
Service for the Employer or any Affiliate at any time
during the 5
year period ending on the Determination Date shall be
disregarded;
(v) Deductible employee contributions shall be
disregarded;
(vi) The calculation of the Top-Heavy Ratio and the
extent to
which contributions, distributions, rollovers, and
transfers are taken
into account shall be determined in accordance with Code
416; and
(vii) If the Employer maintains more than one
defined benefit
plan, the accrued benefit of a Participant other than a
Key Employee
shall be determined under the method, if any, that
uniformly applies
for accrual purposes under all such defined benefit plans
maintained
by the Employer or an Affiliate, or if there is no such
method, as if
such benefit accrued not more rapidly than the slowest
accrual rate
permitted under the fractional rule of Code 411(b)(1)(C).
12.2(g) Top-Heavy Valuation Date - means for this Plan,
the last day
of each Plan Year and for each other qualified plan
maintained by the
Employer or an Affiliate,
12.2(g)(1) Standard Option - the most recent valuation
date for
such plan or
12.2(g)(2) Alternative - the valuation date
specified in the
Adoption Agreement.
12.3 Minimum Allocation.
12.3(a) General. Except as otherwise provided in this
12.3, for any
Plan Year in which this Plan is a Top-Heavy Plan,
the "minimum
allocation" for each Participant who is not a Key Employee
means an
allocation of Employer Contributions and Forfeitures
made in
accordance with 12.3(d) which shall not be less than the
lesser of
12.3(a)(1) 3% of such Participant's Compensation for
such Plan
Year or,
12.3(a)(2) if the Employer or an Affiliate has no
defined benefit
plan which uses this Plan to satisfy the
requirements of Code
401(a)(4) or Code 410, the largest percentage of
the Employer
Contributions and Forfeitures allocated on behalf of any
Key Employee
(expressed as a percentage of the first $200,000 of
Compensation) for
such Plan Year.
12.3(b) Defined Benefit Paired Plan. If this Plan is
adopted in
combination with a defined benefit Paired Plan, the
Employer and the
Participating Affiliates shall make a contribution under
this Plan
(or, if this Plan is adopted in combination with
another defined
contribution Paired Plan, under any combination
of defined
contribution Paired Plans) for each Participant who is
an Eligible
Employee at any time during such Plan Year who is also a
Participant
in the defined benefit Paired Plan equal to at least 5%
(or such
greater percentage as is specified in the adoption
agreement for the
defined benefit Paired Plan) of Compensation for such Plan
Year unless
the Employer elects under such defined benefit Paired Plan
to provide
the minimum benefit accrual under such defined benefit
Paired Plan.
If this 12.3(b) applies and the Employer has not elected
to provide
the minimum benefit accrual under the defined benefit
Paired Plan, the
minimum allocation required under this 12.3(b) for
Plan Years
beginning on and after the Final Compliance Date shall,
subject to the
ordering rules in 12.3(c), be made under this Plan without
regard to
whether the Participant also benefits under the defined
benefit Paired
Plan. Further, if this Plan and the defined benefit Paired
Plan do not
benefit the same participants for such Plan Year,
the minimum
allocation described in 12.3(a) shall, subject to the
ordering rules
in 12.3(c), be made under this Plan for each Participant
described in
12.3(d)(1) and the minimum benefit accrual shall be made
for each
participant in the defined Benefit Paired Plan in
accordance with the
terms of such Paired Plan.
12.3(c) Defined Contribution Paired Plan. If this Plan is
adopted in
combination with one or more defined contribution Paired
Plans, the
minimum allocation required under this 12.3, if any,
shall be made
under such Paired Plans in the following order:
12.3(c)(1) Standard Option - First, under the
Money Purchase
Pension Plan, if any; second, under the Target Benefit
Pension Plan,
if any; third, under the Profit Sharing Plan, if any;
and finally,
under the 401(k) Plan, if any.
12.3(c)(2) Alternative - in the order specified in
the Adoption
Agreement.
12.3(d) Participants Entitled to Allocation. The minimum
allocation
required for any Plan Year under this 12.3
12.3(d)(1) shall be made for each Participant who is
not a Key
Employee and who is employed as an Eligible Employee
(or on an
authorized leave of absence as an Eligible Employee) on the
last day
of such Plan Year, without regard to the number of Hours
of Service
actually completed by such Participant in such Plan Year;
and
12.3(d)(2) shall not apply to any Participant (i) who
is covered
under any other plan or plans maintained by the
Employer or an
Affiliate and the Employer has specified in the Adoption
Agreement
that the minimum allocation or the minimum benefit required
under Code
416 for any Plan Year for which this Plan is a Top-Heavy
Plan shall
be made under such other plan or plans or (ii) to the
extent such
Participant receives such minimum allocation or minimum
benefit under
this Plan or any other plans maintained by the
Employer or an
Affiliate.
Notwithstanding 12.3(d)(2), if this Plan is
adopted as a
nonstandardized Plan that intends to satisfy the safe
harbor in the
Code 401(a)(4) regulations, the minimum allocation
required under
12.3 for Plan Years beginning on and after the Final
Compliance Date
must be made for each Participant described in
12.3(d)(1) without
regard to whether the Participant also benefits under
another plan,
but only to the extent that such minimum allocation is
not otherwise
received under this Plan.
12.3(e) Nonforfeitability. The minimum allocation
required under
this 12.3 (to the extent required to be nonforfeitable
under Code
416(b)) shall not be forfeited under Code
411(a)(3)(B) or Code
411(a)(3)(D).
12.3(f) Compensation. For purposes of computing
the minimum
allocation under this 12.3, the term "Compensation"
shall mean
Compensation within the meaning of Code 415(c)(3) as
described in
7.2(a)(2).
12.3(g) Multiple Plans. If the Employer or an
Affiliate also
maintains another plan, the Employer shall specify in
the Adoption
Agreement how the minimum allocation, if any, required
under Code 416
will be satisfied and, if the Employer or an Affiliate
maintains or
has maintained a defined benefit plan, the method of
satisfying Code
416(h).
12.3(h) Integrated Plans.
12.3(h)(1) Profit Sharing Plan. If this Plan is
adopted as an
integrated Profit Sharing Plan, the following allocation
formula shall
apply in lieu of the formula in 6.3(a)(2) for each Plan
Year in which
such Plan is a Top-Heavy Plan.
The Forfeitures and the Employer Contribution shall
be allocated
(and posted) as of the last day of such Plan Year to
the Employer
Account of each Active Participant and each other
Participant for whom
a minimum allocation is required to be made under this
12.3 in
accordance with the following:
Step One - First, the lesser of (A) the sum of
the Employer
Contribution and Forfeitures for such Plan Year or (B) the
product of
the Top-Heavy Percentage and the total Compensation of
all such
Participants shall be allocated in the same ratio that
each such
Participant's total Compensation for such Plan Year bears
to the total
Compensation of all such Participants for such Plan Year.
Step Two - Second, the lesser of (A) the
remaining Employer
Contribution and Forfeitures for such Plan Year or (B) the
product of
the Top-Heavy Percentage (or the Maximum Disparity Rate,
if less) and
the total Excess Compensation of all such Participants
shall be
allocated in the same ratio that each such
Participant's Excess
Compensation for such Plan Year bears to the total Excess
Compensation
of all such Participants for such Plan Year.
Step Three - Third, the lesser of (A) the
remaining Employer
Contribution and Forfeitures for such Plan Year or (B) the
Integration
Amount shall be allocated in the same ratio that the sum of
the total
Compensation and Excess Compensation of each such
Participant for such
Plan Year bears to the sum of the total Compensation
and Excess
Compensation of all such Participants for such Plan Year.
Step Four - Finally, the remaining Employer
Contribution and
Forfeitures for such Plan Year shall be allocated in the
same ratio
that each such Participant's total Compensation for such
Plan Year
bears to the total Compensation of all such Participants
for such Plan
Year.
12.3(h)(2)Money Purchase Pension Plan. If this Plan is
adopted as
an integrated Money Purchase Pension Plan, (i) the "Base
Contribution
Percentage" specified in the Adoption Agreement, if less
than the Top-
Heavy Percentage, shall be increased to equal the Top-Heavy
Percentage
and (ii) the Employer Contribution required under 5.2 (as
adjusted in
(i) above) shall be made for each Active Participant and
each other
Participant for whom an allocation is required to be made
under this
12.3.
12.3(h)(3) Special Definitions. For purposes of this
12.3(h),
(i) Excess Compensation" means the amount, if
any, of a
Participant's Compensation for such Plan Year which
exceeds the
Integration Level for such Plan Year.
(ii) Integration Amount" means the product of (1)
the total
Compensation and the total Excess Compensation of
all such
Participants and (2) the excess, if any, of the Integration
Percentage
specified in the Adoption Agreement over the Top-Heavy
Percentage.
(iii) Top-Heavy Percentage" means 3% or such greater
percentage
required under this 12.3 or specified in the Adoption
Agreement.
12.4 Vesting Schedule. For any Plan Year in which this
Plan is a Top-
Heavy Plan, the Top-Heavy vesting schedule specified in
the Adoption
Agreement automatically shall apply to all benefits under
the Plan
within the meaning of Code 411(a)(7) (other than benefits
which are
attributable to Employee Contributions or Rollover
Contributions or
other contributions which are nonforfeitable when made),
including
benefits accrued before the effective date of Code 416
and before
this Plan became a Top-Heavy Plan, unless the regular
vesting schedule
is at least as favorable as such Top-Heavy vesting
schedule. However,
the provisions of this 12.4 shall not apply to the Account
balance of
any Participant who does not complete an Hour of Service
after the
Plan first becomes a Top-Heavy Plan and such
Participant's Account
balance attributable to Employer contributions and
Forfeitures shall
be determined without regard to this 12.4. Further, no
change in the
vesting schedule as a result of a change in this Plan's
status to a
Top-Heavy Plan or to a plan which is not a Top-Heavy
Plan shall
deprive a Participant of the nonforfeitable
percentage of the
Participant's Account balance accrued to the date of the
change, and
any such change to the vesting schedule shall be
subject to the
provisions of 14.3(c).
12.5 401(k) Plan. Notwithstanding any contrary
provision, the
following rules shall apply if this Plan adopted as a
401(k) Plan:
12.5(a) Qualified Nonelective Contributions shall be
treated as
Employer contributions for purposes of satisfying
the minimum
allocation under 12.3.
12.5(b) Matching Contributions allocated to the Account
of a Key
Employee shall be treated as Employer contributions for
purposes of
determining the amount of the minimum allocation
required under
12.3. The Plan may use Matching Contributions allocated
on behalf
of a non-Key Employee to satisfy the minimum
allocation under
12.3; provided, however, that for Plan Years
beginning on and
after the Final Compliance Date, such contributions
shall not be
treated as Matching Contributions for purposes of
satisfying the
limitations of 7.4 and 7.5 but shall instead be
subject to the
general nondiscrimination rules of Code 401(a)(4).
12.5(c) Elective Deferrals allocated to the Account
of a Key
Employee shall be treated as Employer contributions for
purposes of
determining the amount of the minimum allocation
required under
12.3. However, for Plan Years beginning on and after
the Final
Compliance Date, Elective Deferrals allocated on behalf
of non-Key
Employees shall not be treated as Employer
contributions for
purposes of satisfying the minimum allocation required
under 12.3.
SECTION 13. INSURANCE, INDIVIDUALLY DIRECTED
INVESTMENTS AND
PARTICIPANT LOANS
13.1 Insurance Contracts.
13.1(a) Elections and Existing Life Insurance Contracts.
13.1(a)(1) Standard Option. No Participant shall have
the right to
elect to have the Trustee purchase an insurance contract on
his or her
life for his or her Account under this Plan; however,
any life
insurance contract purchased under the terms of a Pre-
Existing Plan,
which is acceptable to the Trustee, shall continue to be
held by the
Trustee for the benefit of the Participant subject to the
conditions
of this 13.1.
13.1(a)(2) Alternative. If so specified in the
Adoption Agreement
each Participant who is an Eligible Employee may elect
(subject to
this 13.1) to have the Trustee purchase an insurance
contract on his
or her life for his or her Account under the Plan by
completing and
filing an Election Form with the Plan Administrator.
13.1(b) Premiums. The aggregate annual premiums on
any life
insurance contracts held for a Participant's Account
under this
Plan shall be subject to the following limitations:
13.1(b)(1) Ordinary Life. If the life insurance
contracts are
ordinary whole life insurance contracts which are contracts
with both
nondecreasing death benefits and nonincreasing premiums,
such premiums
shall be less than one-half of the aggregate Employer
Contributions
plus Forfeitures credited to the Participant's Employer
Account and
Matching Account.
13.1(b)(2) Term and Universal Life. If the life
insurance
contracts are term life insurance contracts, universal
life insurance
contracts and any other life insurance contracts (other
than whole
life), then such premiums shall not exceed one-fourth of
the aggregate
Employer Contributions plus Forfeitures credited to the
Participant's
Employer Account and Matching Account.
13.1(b)(3) Combination. If the life insurance
contracts either
combine features of ordinary whole life and other life
insurance or
consist of ordinary whole life and other life insurance
contracts, the
sum of one-half of the ordinary whole life premiums plus
all other
life insurance premiums shall not exceed one-fourth of the
aggregate
Employer Contributions plus Forfeitures credited to the
Participant's
Employer Account and Matching Account.
13.1(c) Owner and Beneficiary. The Trustee shall apply
for and be
the owner of each life insurance contract held under
this Plan and
also shall be named as the beneficiary of each such life
insurance
contract. In the event of the Participant's death prior
to the date
as of which the Participant's Account becomes payable
under the
Plan, the Trustee, as beneficiary, shall pay the entire
proceeds of
such life insurance contracts to the Participant's
Account which
shall then be distributed to the surviving Spouse
or, if
applicable, to the Participant's Beneficiary in
accordance with
10. Under no circumstances shall the Fund retain any
part of the
proceeds of any life insurance contracts. In the
event of a
conflict between the terms of the Plan and the terms of
any life
insurance contracts held under this Plan, the Plan
provisions shall
control.
13.1(d) Allocations. Any dividends or credits earned
on a life
insurance contract held under this Plan shall be
allocated to the
Account of the Participant for whom the contract was
purchased and
may be applied to pay the annual premium on such life
insurance
contract. The amount of the annual premium on each such
insurance
contract shall be charged against the Account of
the insured
Participant. The value of any such insurance contract
shall be
deemed to be zero for the purposes of allocating
the Employer
Contribution, Forfeitures or the Fund Earnings for any
Plan Year as
provided in 6.
13.1(e) Distribution to Participant. Subject to 10,
Joint and
Survivor Annuity Requirements, the life insurance
contracts held as
part of a Participant's Account shall be distributed in
kind to the
Participant upon retirement or other termination of
employment as
an Employee for reasons other than death (1) if such
Account is
completely nonforfeitable or (2) if the cash surrender
value of
such contracts is equal to or less than the
nonforfeitable portion
of the Participant's Account. If neither one of these
conditions is
satisfied and the Participant does not elect to purchase
the life
insurance contracts under 13.1(f), the Trustee shall
surrender
such contracts, add the proceeds to the Participant's
Account and
distribute the nonforfeitable percentage of the
Participant's
Account in accordance with 10.
13.1(f) Termination of Insurance Election. A
Participant may
direct the Trustee to stop making premium payments
on a life
insurance contract held as part of the Participant's
Account and to
surrender such contract or to sell such contract to the
Participant
by completing and filing an Election Form with
the Plan
Administrator. If the Participant purchases the contract,
he or she
shall prepare and deliver to the Trustee all papers
needed to
properly effect that purchase and shall pay to the
Trustee an
amount equal to the cash surrender value of the
contract at the
time of the purchase. The amount paid either by the
Participant for
the purchase or by the insurance company in connection
with the
surrender of a contract shall be credited to the
Participant's
Account as of the date payment is made to the
Trustee. A
Participant automatically shall be deemed to have
directed the
Trustee to stop premium payments and to surrender a life
insurance
contract immediately before a premium due date if the
premium due
on that date would exceed the premium payment limits in
13.1(b).
13.2 Individually Directed Investments.
13.2(a) General.
13.2(a)(1) Standard Option. No Participant or a
Beneficiary may
direct the investment of such individual's Account.
13.2(a)(2) Alternative. If so specified in the
Adoption
Agreement, a Participant or a Beneficiary may elect
how such
individual's Account shall be invested between the
investment
alternatives available under the Plan from time to time.
The Plan
Administrator shall furnish to each Participant and
Beneficiary
sufficient information to make informed decisions with
regard to
investment alternatives and, if this Plan is intended to
satisfy ERISA
404(c), information which satisfies the requirements
of the
regulations under ERISA 404(c). An individual's investment
direction
shall apply
(i) Standard Option - to the individual's entire
Account or
(ii) Alternative - only to the portion of the
individual's
Account specified in the Adoption Agreement.
13.2(b) Election Rules. The Plan Administrator from
time to time
shall establish and shall communicate in writing
to such
individuals such reasonable restrictions and procedures
for making
individual investment elections as the Plan
Administrator deems
appropriate under the circumstances for the proper
administration
of this Plan. Such restrictions and procedures shall be
applied on
a uniform and nondiscriminatory basis to all
similarly situated
individuals and, if this Plan is intended to satisfy
ERISA 404(c),
shall be in accordance with the regulations under ERISA
404(c).
13.2(c) No Election. The Account of an individual
for whom no
investment election is in effect under this 13.2,
either because
such individual failed to make a proper election or
terminated an
election under this 13.2, shall be invested as
designated by the
Plan Administrator.
13.3 Participant Loans. This 13.3 shall apply only if
the Employer
specifies in the Adoption Agreement that loans shall be
permitted.
However, if loans are not permitted in the Adoption
Agreement, any
outstanding loans made under the terms of the Pre-Existing
Plan shall
be subject to this 13.3.
13.3(a) Administration and Procedures. The Plan
Administrator
shall establish objective nondiscriminatory written
procedures for
the administration of the loan program under this
13.3 (which
written procedures, together with any written
amendments to such
procedures, hereby are expressly incorporated by
reference as a
part of this Plan), including, but not limited to,
13.3(a)(1) the class of Participants and
Beneficiaries who are
eligible for a loan;
13.3(a)(2) the identity of the person or position
authorized to
administer the loan program;
13.3(a)(3) the procedures for applying for a loan;
13.3(a)(4) the basis on which loans will be approved
or denied;
13.3(a)(5) the limitations, if any, on the types and
amounts of
loans offered;
13.3(a)(6) the procedures for determining a
reasonable rate of
interest;
13.3(a)(7) the types of collateral which may be used
as security
for a loan; and
13.3(a)(8) the events constituting default and the
steps that
will be taken to preserve Plan assets in the event of such
default.
13.3(b) No Loans to Certain Owners and Family
Members. No loan
shall be made under this Plan to a Participant or
Beneficiary who
is
13.3(b)(1) an Owner-Employee,
13.3(b)(2) an employee or officer of an Employer or an
Affiliate
which is an electing small business corporation within the
meaning of
Code 1361 ("S Corporation") who owns (or is considered to
own within
the meaning of Code 318(a)(1)) on any day during any
taxable year of
such corporation for which it is an S Corporation more than
5% of the
outstanding stock of such corporation, or
13.3(b)(3) a member of the family (as defined in Code
267(c)(4))
of a Participant or Beneficiary described in clause (1) or
(2).
13.3(c) General Conditions. If loans are made
available after
October 18, 1989 to any Participant or Beneficiary who
is a "party
in interest" (as defined in ERISA 3(14)) with respect
to the Plan,
then loans shall be made available to all
Participants and
Beneficiaries who are parties in interest with respect to
the Plan.
All loans which are made under this Plan shall comply
with the
following requirements under Code 4975(d)(1) and ERISA
408(b)(1):
13.3(c)(1) such loans shall be made available to
Participants and
Beneficiaries who are eligible for a loan on a reasonably
equivalent
basis;
13.3(c)(2) such loans shall not be made available
to Highly
Compensated Employees in an amount greater than the
amount made
available to other Employees;
13.3(c)(3) such loans shall be made in accordance
with specific
provisions regarding such loans set forth in the Plan and
the written
procedures described in 13.3(a);
13.3(c)(4) such loans shall bear a reasonable rate of
interest;
and
13.3(c)(5) such loans shall be adequately secured.
13.3(d) Other Conditions. All loans made under this Plan
shall be
subject to the following conditions:
13.3(d)(1) If the loan is secured by any
portion of the
Participant's Account and 10.5 does not apply to any
portion of the
Participant's Account, the Participant's Spouse, if any,
must consent
in writing to the granting of such security interest
or to any
increase in the amount of security no earlier than the
beginning of
the 90 day period before such loan is made; provided
(i) such consent must be in writing before a notary
public and
must acknowledge the effect of such loan;
(ii) such consent shall be irrevocable and shall
be binding
against the person, if any, identified as the
Participant's
Spouse at the time of such consent and any
individual who may
subsequently become the Participant's Spouse;
(iii) a new consent shall be required in the
event of any
renegotiation, extension, renewal, or other revision
of such a
loan; and
(iv) if a valid spousal consent has been
obtained, then,
notwithstanding any other provision of this Plan,
the portion
of the Participant's vested Account balance used as
a security
interest held by the Plan by reason of a loan
outstanding to
the Participant shall be taken into account for
purposes of
determining (and may reduce) the amount of the
Account balance
payable at the time of death or distribution, but
only if the
reduction is used as repayment of the loan. If less
than 100%
of the Participant's vested Account balance
(determined without
regard to the preceding sentence) is payable to the
surviving
Spouse, then the vested Account balance shall be
adjusted by
first reducing the vested Account balance by the
amount of the
security used as repayment of the loan, and then
determining
the benefit payable to the surviving Spouse.
13.3(d)(2) The loan shall provide for the repayment
of principal
and interest in substantially level installments with
payments not
less frequently than quarterly over a period of 5 years or
less unless
such loan is classified as a "home loan" (as
described in Code
72(p));
13.3(d)(3) If the loan is secured by any
portion of the
Participant's Account, such Account balance shall not be
reduced as a
result of a default until a distributable event occurs
under the Plan;
and
13.3(d)(4) The Participant or Beneficiary shall
agree to such
other terms and conditions as are required under
the written
procedures described in 13.3(a).
13.3(e) Crediting of Loan Payments.
13.3(e)(1) Account Asset (Standard Option). The
loan to a
Participant whose loan request is granted under this 13.3
shall be
made from, and shall be an asset of, the Participant's
Account and all
principal and interest payments on such loan shall
be credited
exclusively to the Participant's Account.
13.3(e)(2) Fund Asset (Alternative). If the Employer
specifies in
the Adoption Agreement that loans shall be treated as an
asset of the
Fund or, if any loan which was made under a Pre-Existing
Plan was
treated as an asset of the Fund, such loans shall be
treated under
this Plan as a general Fund investment and an asset of the
Fund, and
all principal and interest payments on such loan shall
be credited
exclusively to the Fund as a general Fund investment.
13.3(f) Limitations on Amounts. The principal amount of
any loan
(when added to the outstanding principal balance of any
outstanding
loans made under this Plan or under any other plan
which is tax
exempt under Code 401 and which is maintained by the
Employer or
an Affiliate) to the Participant shall not exceed the
lesser of (1)
and (2) below:
13.3(f)(1) Dollar Limit - $50,000 reduced by the
excess, if any,
of
(i) the highest outstanding principal balance of
previous loans
to the Participant from the Plan (and any other plan
maintained
by the Employer or an Affiliate) during the one
year period
ending immediately before the date such current loan
is made,
over
(ii) the current outstanding principal balance of
such previous
loans on the date such current loan is made, or
13.3(f)(2) Account Limit -
(i) Standard Option - 50% of the nonforfeitable
interest in the
Participant's Account at the time the loan is made or
(ii) Alternative - if so specified in the Adoption
Agreement,
the greater of $10,000 or the amount
specified in
13.3(f)(2)(i), but in no event more than the
nonforfeitable
interest in the Participant's Account.
An assignment or pledge of any portion of the
Participant's
interest in the Plan and a loan, pledge or assignment
with respect
to any insurance contract purchased under the Plan shall
be treated
as a loan for purposes of the limitations in this
13.3(f).
13.3(g) Failure to Repay. If (1) the terms of the loan
provide that
it shall become due and payable in full if the
Participant's or
Beneficiary's obligation to repay the loan has been
discharged
through a bankruptcy or any other legal process or action
which did
not actually result in payment in full and (2) such
loan is not
actually repaid in full, such loan shall be cancelled on
the Fund's
books and records and the amount otherwise
distributable to such
Participant or Beneficiary under this Plan shall be
reduced by the
principal amount of the loan plus accrued but unpaid
interest due
as determined without regard to whether the loan
had been
discharged through a bankruptcy or any other legal
process or
action which did not actually result in payment in full.
The Plan
Administrator shall have the power to direct the
Trustee to take
such action as the Plan Administrator deems
necessary or
appropriate to stop the payment of an Account to or on
behalf of a
Participant who fails to repay a loan (without regard
to whether
the obligation to repay such loan had been discharged
through a
bankruptcy or any other legal process or action)
until the
Participant's Account has been reduced by the
principal plus
accrued but unpaid interest due (without regard to such
discharge)
on such loan or to distribute the note which evidences
such loan in
full satisfaction of that portion of such Account
which is
represented by the value of such note.
Notwithstanding the
foregoing, in the event of default, foreclosure on the
note and
execution of the Plan's security interest in the Account
shall not
occur until a distributable event occurs under this
Plan and
interest shall continue to accrue only to the extent
permissible
under applicable law.
13.3(h) Distributions. In the event the
Participant's Account
becomes distributable before the loan is repaid in full,
then the
vested Account balance shall be adjusted by first
reducing the
vested Account balance by the amount of the security
interest in
the Account and then determining the benefit payable.
Nothing shall
preclude the Trustee from cancelling the Plan's
security interest
in the Account and distributing the note in lieu of any
other Plan
assets in full satisfaction of that portion of the
Participant's
Account represented by the value of the outstanding
balance of the
loan or the amount which would have been outstanding
but for a
discharge in bankruptcy or through any other legal
process.
SECTION 14. ADOPTION, AMENDMENT, WITHDRAWAL AND
CONVERSION, MERGER,
ASSET TRANSFERS AND TERMINATION
14.1 Adoption.
14.1(a) General. Subject to the terms and conditions of
this Plan,
the Trust Agreement and the Adoption Agreement,
any sole
proprietorship, partnership or corporation may adopt
this Plan by
completing and executing the Adoption Agreement.
The Plan as
adopted by the Employer shall be effective for all
purposes (other
than as a "prototype plan") as of the Effective Date.
However, the
status of the Plan as a "prototype plan" shall be
conditioned upon
acceptance of the Adoption Agreement by the Prototype
Sponsor and,
upon such acceptance, such status as a "prototype plan"
shall be
effective retroactive to the Effective Date except as
provided in
14.4.
14.1(b) Pre-Existing Plan. If this Plan is adopted as an
amendment
and restatement of a Pre-Existing Plan, (1) the Trust
Agreement
shall be substituted for the trust or other funding
arrangement
under the Pre-Existing Plan, (2) the assets held under
such trust
or other funding arrangement shall become assets of the
Fund, (3)
an Account shall be established for each person
who is a
participant or beneficiary in the Pre-Existing Plan,
and (4) the
dollar value assigned to such participant's or
beneficiary's Pre-
Existing Plan account or accounts shall be
credited to such
person's Account under this Plan (or to one or more
subaccounts
under such Account). All optional forms of benefit
available under
the Pre-Existing Plan which must be preserved under Code
411(d)(6)
shall be available to the Participant under this
Plan. Further,
such optional forms shall be described in the Adoption
Agreement
and shall apply to the Participant's entire
Account balance.
Notwithstanding the foregoing, if the Employer so
specifies in the
Adoption Agreement and separately accounts for the
benefits
attributable to the Pre-Existing Plan as described in
14.5(c) or,
if applicable, 10.5, the optional forms which must be
preserved
may be limited to such separate accounts.
14.1(c) Participating Affiliates. If this Plan is
adopted as a
standardized Plan, each Affiliate shall automatically
become a
Participating Affiliate effective as of the later of the
Effective
Date or the date such entity first becomes an
Affiliate. If this
Plan is adopted as a nonstandardized Plan, an
Affiliate of the
Employer may adopt the Employer's Plan effective as of
any date on
or after the Effective Date. An Affiliate's
execution of the
Adoption Agreement (or a separate signature page to
the Adoption
Agreement) shall evidence the Participating Affiliate's
adoption of
the Plan and the effective date of such adoption. In
adopting this
Plan, each Participating Affiliate is deemed to have
authorized the
Employer to effect all actions under this Plan on
its behalf,
including but not limited to the powers reserved to
the Employer
under this14 and the power to enter into such
agreements with the
Trustee or others as may be necessary or appropriate
under the
Plan.
14.2 Amendment.
14.2(a) Prototype Sponsor. Subject to the restrictions
of 14.3,
the Prototype Sponsor shall have the right at any time
and from
time to time to amend this Plan in any respect
whatsoever in
writing. To the extent required under the procedures and
rules in
effect for master and prototype plans at the time of
any such
amendment, notice of such amendment shall be given to
the Employer
by the Prototype Sponsor as soon as practicable
under the
circumstances.
14.2(b) Employer. Subject to the restrictions of
14.3, the
Employer shall have no right to amend this Plan
except (1) by
entering into a new Adoption Agreement with the
Prototype Sponsor,
(2) by adding such language to the Adoption
Agreement as is
necessary to allow the Plan to continue to satisfy the
requirements
of Code 415 or Code 416 because of the required
aggregation of
multiple plans, (3) by adopting certain model amendments
published
by the Internal Revenue Service which specifically
provide that
such adoption would not cause the Plan to be
treated as an
individually designed plan, or (4) by withdrawing this
Plan as a
prototype and converting it into an individually
designed plan as
provided in 14.4.
14.3 Certain Amendment Restrictions.
14.3(a) General. No amendment to the Plan shall be
made which
would (1) deprive a Participant of the nonforfeitable
percentage of
his or her Account balance accrued to the later of the
effective
date of the amendment or the date the amendment is
adopted, or (2)
decrease a Participant's Account balance or eliminate
an optional
form of benefit except to the extent permissible
under Code
412(c)(8), 401(a)(4) and 411(d)(6) and the
regulations under
those sections.
14.3(b) Change in Service Calculation Method. If an
amendment
changes the method of calculating service, each
Employee who had
any service credit under such prior method shall be
credited with
any service for any computation period during which such
amendment
was effective in accordance with the rules in 3.
14.3(c) Change in Vesting Schedule. If an amendment
directly or
indirectly affects the computation of a
Participant's
nonforfeitable percentage of his or her Account or if
the Plan's
vesting schedule changes as a result of a change in
the Plan's
status as a Top-Heavy Plan (as described in
12.4), each
Participant with at least 3 years of service with the
Employer or
an Affiliate may elect, within a reasonable period
after the
adoption of the amendment, to have the nonforfeitable
percentage of
his or her Account computed under this Plan without
regard to such
amendment. In the case of a Participant who does not have
at least
one Hour of Service in any Plan Year beginning after
December 31,
1988, the preceding sentence shall be applied by
substituting 5
years of service for 3 years of service. The period
during which
the election may be made shall commence with the date
the amendment
is adopted and shall end on the later of
14.3(c)(1) 60 days after the amendment is adopted;
14.3(c)(2) 60 days after the amendment becomes
effective; or
14.3(c)(3) 60 days after the Participant is issued
written notice
of the amendment by the Plan Administrator.
Furthermore, if an amendment changes the Plan's vesting
schedule,
the nonforfeitable percentage (determined as of the
later of the
date the amendment is adopted or the date it becomes
effective) of
the employer-derived Account balance of each Employee
who is a
Participant as of such date shall not be less than the
percentage
computed under the Plan without regard to such amendment.
14.4 Withdrawal as a Prototype and Conversion to
Individually
Designed Plan.
14.4(a) Voluntary Conversion. The Employer may
voluntarily
withdraw this Plan as a "prototype plan" and convert
it to an
individually designed plan by written notice filed with
the Trustee
and the Prototype Sponsor. For purposes of this
14.4, such
withdrawal shall be effective with respect to the
Employer's plan
and the Trustee as of the effective date of such
withdrawal, but
such withdrawal shall not relieve the Employer
of any
responsibilities or liabilities to the Prototype Sponsor
until 60
days after the date the Prototype Sponsor receives
written notice
of such withdrawal unless the Prototype Sponsor agrees
in writing
to an earlier effective date for such withdrawal.
14.4(b) Involuntary Conversion.The Employer shall be
deemed to have
withdrawn this Plan as a "prototype plan" and converted
it to an
individually designed plan effective as of the earlier of
the date
14.4(b)(1) the Internal Revenue Service or a court
determines
that this Plan fails to meet the requirements of Code 401;
14.4(b)(2) the Trustee ceases to maintain a brokerage
account for
the Plan with the Prototype Sponsor or with an approved
subsidiary of
the Prototype Sponsor;
14.4(b)(3) the Prototype Sponsor notifies the Employer
in writing
that the Prototype Sponsor for reasons sufficient to the
Prototype
Sponsor has terminated its sponsorship of its prototype
plan program
or of this Plan for the Employer; or
14.4(b)(4) the Employer amends any provision of this
Plan or the
Adoption Agreement (other than in accordance with
14.2(b)(1) through
(3)) including an amendment because of a waiver of the
minimum funding
requirement under Code 412(d).
14.4(c) Effect of Withdrawal and Conversion. If
this Plan is
withdrawn as a prototype and converted to an
individually designed
Plan under this 14.4, the Employer as of the effective
date of such
withdrawal shall assume the right and responsibility to
amend the Plan
under 14.2(a) and thereafter only the Employer shall make
amendments
to this Plan; provided, (1) no such amendment shall
affect the
Trustee's rights or duties under this Plan without the
Trustee's prior
written consent and (2) any such amendment shall be
subject to the
restrictions of 14.3.
14.5 Merger, Consolidation or Asset Transfers.
14.5(a) General. In the case of any Plan merger or
consolidation
with, or transfer of assets or liabilities to or from,
any other
employee benefit plan, each person for whom an
Account then is
maintained shall be entitled to receive a benefit from
such plan,
if it is then terminated, which is equal to or greater
than the
benefit such person would have been entitled to receive
immediately
before such merger, consolidation or transfer, if this
Plan then
had been terminated.
14.5(b) Authorization. The Plan Administrator may
authorize the
Trustee to accept a transfer of assets from or transfer
Fund assets
to the trustee, custodian or insurance company of any
other plan
which satisfies the requirements of Code 401(a) in
connection with
a merger or consolidation with, or other transfer of
assets and
liabilities to or from any such plan, provided that
the transfer
will not affect the qualification of this Plan under
Code 401(a)
and the assets to be transferred are acceptable to the
Trustee.
14.5(c) Separate Account. The Plan Administrator may
establish
separate bookkeeping accounts for any assets
transferred to the
Trustee under this 14.5 and shall establish such
separate
bookkeeping accounts if required under this Plan.
If separate
accounts are maintained with respect to transferred
assets, no
contributions or Forfeitures under this Plan shall be
credited to
such separate accounts, but such accounts shall share in
the Fund
Earnings on the same basis as each other Account under
6.2. Any
individual for whom an Account is established under
this 14.5
shall become a Participant in this Plan as of the
effective date of
the merger, consolidation or asset transfer;
however, no
contributions shall be made by or on behalf of such
individual
under this Plan unless such individual is otherwise
entitled to
such contributions under the terms of this Plan.
14.5(d) Code 411(d)(6) Protected Benefits. All
optional forms of
benefit available under the transferor plan which must
be preserved
under Code 411(d)(6) shall be available to the
Participant under
this Plan unless such transfer meets the
requirements of Code
414(l) and the Participant has made an elective
transfer which
satisfies the requirements set forth in Q&A-3(b) of
1.411(d)-4 of
the Federal Income Tax Regulations. Further, such
optional forms
shall be described in the Adoption Agreement and,
generally, shall
apply to the Participant's entire Account balance.
Notwithstanding
the foregoing, if the Employer so specifies in
the Adoption
Agreement and separately accounts for such transferred
assets, the
optional forms which must be preserved may be
limited to such
separate account.
14.6 Termination.
14.6(a) Right to Terminate. The Employer may
terminate or
partially terminate this Plan or discontinue
contributions to this
Plan at any time by written action of the Board filed
with the
Trustee and the Prototype Sponsor. The Employer reserves
the right
to terminate the participation in this Plan by any
Participating
Affiliate at any time by written action.
Furthermore, a
Participating Affiliate's participation in this Plan
automatically
shall terminate if (and at such time as) its status as
an Affiliate
terminates for any reason whatsoever (other than through
a merger
or consolidation into another Participating Affiliate).
However, a
Participating Affiliate's termination of participation in
this Plan
shall not be deemed to be a termination or partial
termination of
the Plan except to the extent required under the
Code. Upon
complete termination of this Plan, any unallocated
amounts (other
than amounts in a Code 415 suspense account described
in 7.2(b))
shall be allocated in accordance with the Plan terms
but, if the
Plan terms do not address the allocation of such
amounts, they
shall be allocated in a nondiscriminatory manner
prior to
distribution of Plan assets.
14.6(b) Full Vesting Upon Termination. If this Plan is
terminated
or partially terminated under this 14.6 or if there is
a complete
discontinuance of contributions under this Plan, the
Account of
each affected Employee of the Employer or an Affiliate
shall become
nonforfeitable on the effective date of such termination
or partial
termination or complete discontinuance of
contributions, as the
case may be. In the event of a complete termination of
this Plan or
a complete discontinuance of contributions, each
other Account
(except to the extent otherwise nonforfeitable under the
terms of
this Plan) shall become a Forfeiture and shall be
allocated as such
under 6.3 as of the effective date of such complete
termination or
complete discontinuance as if such date was the last day
of a Plan
Year.
SECTION 15. ADMINISTRATION
15.1 Named Fiduciaries. The Plan Administrator and the
Employer (if
the Plan Administrator is not the Employer) shall be
the Named
Fiduciaries responsible to the extent of their
powers and
responsibilities assigned in the Plan for the control,
management and
administration of the Plan. The Plan Administrator, the
Employer and
the Trustee (other than Smith Barney Trust Company)
shall be the
Named Fiduciaries responsible to the extent of their
respective powers
and responsibilities assigned to them in the Trust
Agreement for the
safekeeping, control, management, investment and
administration of the
assets of the Fund. Any power or responsibility for
the control,
management or administration of the Plan or the Fund
which is not
expressly assigned to a Named Fiduciary under the Plan or
the Trust
Agreement, or with respect to which the proper assignment
is in doubt,
shall be deemed to have been assigned to the Employer
as a Named
Fiduciary. One Named Fiduciary shall have no responsibility
to inquire
into the acts and omissions of another Named Fiduciary in
the exercise
of powers or the discharge of responsibilities assigned to
such other
Named Fiduciary under the Plan or the Trust Agreement. Any
person may
serve in more than one fiduciary capacity under the Plan
or the Trust
Agreement and a fiduciary may be a Participant
provided such
individual otherwise satisfies the requirements of 4.
A Named Fiduciary, by written instrument filed by
the Plan
Administrator with the records of the Plan, may designate a
person who
is not a Named Fiduciary to carry out any of its
responsibilities
under the Plan or Trust Agreement, other than the
responsibilities of
the Trustee for the safekeeping, control, management,
investment and
administration of the assets of the Fund, except to the
extent the
Trustee's responsibility for investment decisions is
delegated to the
Employer, the Plan Administrator, or an investment manager.
15.2 Administrative Powers and Duties. Except to the
extent expressly
reserved under the Plan or the Trust Agreement to the
Employer, the
Board, or the Trustee, the Plan Administrator shall have
the exclusive
responsibility and complete discretionary authority to
control the
operation, management and administration of the Plan, with
all powers
necessary to enable it properly to carry out such
responsibilities,
including (but not limited to) the power to construe the
Plan, the
related Adoption Agreement, and the Trust Agreement, to
determine
eligibility for benefits and to resolve all interpretative,
equitable
or other questions that arise under the Plan or the Trust
Agreement.
The decisions of the Plan Administrator on all matters
within the
scope of its authority shall be final and binding. To the
extent a
discretionary power or responsibility under the Plan
or Trust
Agreement is expressly assigned to a person other than
the Plan
Administrator, such person shall have complete
discretionary authority
to carry out such power or responsibility and such
person's decisions
on all matters within the scope of such person's
authority shall be
final and binding.
15.3 Agent for Service of Process. The agent for service
of process
for this Plan shall be the person who is identified as the
agent for
service of process in the summary plan description for
this Plan.
Neither the Prototype Sponsor nor any of its affiliates
shall be the
agent for service of process for the Plan.
15.4 Reporting and Disclosure. All records regarding the
operation,
management and administration of this Plan shall be
maintained by the
Plan Administrator. The Plan Administrator shall satisfy
any federal
or state requirement to report and disclose any
information regarding
this Plan to any federal or state department or agency,
or to any
Participant or Beneficiary.
SECTION 16. MISCELLANEOUS
16.1 Spendthrift Clause and Qualified Domestic
Relations Orders.
Except to the extent permitted by law, no Account, benefit,
payment or
distribution under this Plan or Trust Agreement shall be
subject to
attachment, garnishment, levy, execution or any claim or
legal process
of any creditor of a Participant or Beneficiary, and no
Participant or
Beneficiary shall have any right to alienate, commute,
anticipate, or
assign all or any part of such individual's Account,
benefit, payment
or distribution under this Plan or Trust Agreement. The
preceding
sentence also shall apply to the creation, alienation,
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 ("QDRO")
within the meaning of Code 414(p) and such order is
entered on or
after January 1, 1985. The Plan Administrator shall
establish uniform
and nondiscriminatory procedures regarding the
determination of
whether a domestic relations order constitutes a QDRO, the
timing of
distributions made pursuant to a QDRO and the
treatment of any
separate account established under this Plan pursuant
to a QDRO.
Unless otherwise expressly specified in such procedures,
(1) the Plan
Administrator shall treat a domestic relations order
entered before
January 1, 1985 as a QDRO in accordance with Code 414(p)
and (2) a
distribution may be made to an alternate payee pursuant
to a QDRO
prior to the earliest date that a distribution could be
made to a
Participant under the terms of this Plan and prior to a
Participant's
"earliest retirement age" under Code 414(p). The
determinations and
the distributions made by, or at the direction of,
the Plan
Administrator under this 16.1 shall be final and
binding on the
Participant and on all other persons interested in such
order.
16.2 Benefits Supported Only by Trust Fund. Any person
having any
claim for any benefit under this Plan shall look solely to
the assets
of the Fund for the satisfaction of that claim. In no
event shall the
Prototype Sponsor, the Trustee, the Plan Administrator,
the Employer
or a Participating Affiliate or any of their employees,
officers,
directors or their agents be liable in their individual
capacities to
any person whomsoever for the payment of any benefits under
this Plan.
16.3 Discrimination. The Plan Administrator shall
administer the Plan
in a manner which it deems equitable under the
circumstances for all
similarly situated Employees, Participants, Spouses and
Beneficiaries;
provided, the Plan Administrator shall not permit
discrimination in
favor of Highly Compensated Employees of the
Employer or any
Participating Affiliate which would be prohibited under
Code 401(a).
16.4 Claims. Any payment to a Participant or Beneficiary
or to the
legal representative or heirs-at-law of any such
person made in
accordance with the provisions of this Plan shall to the
extent of
such payment be in full satisfaction of all claims under
this Plan
against the Trustee, Plan Administrator, a Named
Fiduciary, the
Employer and any Participating Affiliate, any of whom may
require such
person, such person's legal representative or heirs-at-
law, as a
condition precedent to such payment, to execute a receipt
and release
in such form as shall be determined by the
Trustee, Plan
Administrator, a Named Fiduciary, the Employer or a
Participating
Affiliate, as the case may be.
16.5 Nonreversion. Except as provided in 7.2(b) and in
this 16.5,
neither the Employer nor any Participating Affiliate shall
have any
present or prospective right, claim, or interest in the
Fund or in any
Employer contribution made to the Trustee.
To the extent permitted by the Code and ERISA,
the Employer
contributions described in this16.5, less any
losses on such
contributions, shall be returned by the Trustee to the
Employer or to
any Participating Affiliate upon the written direction of
the Plan
Administrator in the event that:
16.5(a) an Employer contribution is made by a mistake
of fact,
provided such return is effected within one year after
the payment
of such contribution;
16.5(b) a final judicial or Internal Revenue Service
determination
is made that this Plan fails to satisfy the
requirements of Code
401 with respect to its initial qualification
(provided, if the
Employer is not entitled to rely on the Prototype
Sponsor's opinion
letter, the application for the initial qualification of
the Plan
is made on or before the date 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 which event all Employer contributions
made before
such judicial or administrative determination
(whichever last
occurs) plus any earnings and minus any losses shall
be returned
within one year after such determination, all such
contributions
being hereby conditioned upon this Plan satisfying all
applicable
requirements under Code 401 from and after its adoption;
or
16.5(c) a deduction for an Employer contribution is
disallowed
under Code 404, in which event such contribution shall
be returned
within one year after such disallowance, all such
contributions
being hereby conditioned upon being deductible under Code
404.
16.6 Exclusive Benefit. The corpus or income of the Fund
shall not
be diverted to or used for any purpose other than the
exclusive
benefit of Participants or Beneficiaries.
16.7 Expenses. Any expenses of the Fund which are
properly allocable
to an individual's Account (including, but not limited
to, expenses
related to an individual's investment directions,
annuity contract
purchases and other transactional fees for processing
distributions)
may be charged directly against such individual's
Account if so
provided in the administrative procedures established by
the Plan
Administrator.
16.8 Section 16 of Securities Exchange Act of 1934. If
this Plan is
invested in employer securities and this Plan permits
employees of the
Employer who are subject to the reporting requirements of
16 of the
Securities Act of 1934, as amended ("Act") to receive
awards, then
notwithstanding any other provision of this Plan, the
provisions of
this Plan that set forth the formula or formulas that
determine the
amount, price or timing of awards to such persons and
any other
provisions of this Plan of the type referred to in 16b-
3(c)(2)(ii) of
the Act shall not be amended more than once every six
months, other
than to comport with changes in the Code, ERISA, or
the rules
thereunder. Further, to the extent required, the employees
described
in the preceding sentence shall be subject to such
withdrawal,
investment and other restrictions necessary to satisfy
Rule 16b-3
under the Act. This 16.8 is intended to comply with Rule
16b-3 under
the Act and shall be effective only to the extent
required by such
rule and shall be interpreted and administered in
accordance with such
rule.
16.9 Arbitration. Any claims or controversies with the
Prototype
Sponsor related to this Plan are subject to arbitration in
accordance
with the arbitration provisions of the Smith Barney
Qualified
Retirement Plan and IRA Client Agreement or any
successor to such
agreement, which provisions hereby are expressly
incorporated herein
by reference.
APPENDIX ONE TO THE SMITH BARNEY
PROTOTYPE DEFINED CONTRIBUTION PLAN
OBRA '93 ANNUAL COMPENSATION LIMIT
The Plan is amended by adding the following to the end of
2.10:
2.10 (h) OBRA '93 Annual Compensation Limit. In addition
to other
applicable limitations set forth in the Plan, and
notwithstanding any
other provision of the Plan to the contrary, for Plan
Years beginning
on or after January 1, 1994, the annual Compensation of
each Employee
taken into account under the Plan shall not exceed the OBRA
'93 annual
compensation limit. The OBRA '93 annual compensation
limit is
$150,000, as adjusted by the Commissioner for increases in
the cost of
living in accordance with Section 401(a)(17)(B) of
the Internal
Revenue Code. The cost-of-living adjustment in effect for
a calendar
year applies to any period, not exceeding 12 months,
over which
Compensation is determined (determination period)
beginning in such
calendar year. If a determination period consists of
fewer than 12
months, the OBRA '93 annual compensation limit will be
multiplied by a
fraction, the numerator of which is the number of
months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in
this Plan to the limitation under Section 401(a)(17) of the
Code shall
mean the OBRA '93 annual compensation limit set
forth in this
provision.
If Compensation for any prior determination period is
taken into
account in determining an Employee's benefits accruing in
the current
Plan Year, the Compensation for that prior determination
period is
subject to the OBRA '93 annual compensation limit in
effect for that
prior determination period. For this purpose, for
determination
periods beginning before the first day of the first
Plan Year
beginning on or after January 1, 1994, the OBRA
'93 annual
compensation limit is $150,000.
Waiver of 30-Day Notice Period
[Note to Employer: The following amendment will
apply only to
distributions from a Profit Sharing Plan or 401(k) Plan
that are not
subject to the qualified joint and survivor annuity rules
of Code
401(a)(11) and Code 417. In order for this amendment to
apply to a
Plan, the Employer must have selected Option IX.D3 in
the Adoption
Agreement and the distribution must satisfy the Safe Harbor
Rules in
10.5.]
The Plan is amended by adding the following to the end of 9.3:
9.3 (e) Waiver of 30-Day Notice Period. 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 1.41 1(a)-1 1(c) of
the Income
Tax Regulations is given, provided that:
9.3 (e) (1) 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
9.3 (e) (2) the Participant, after receiving
the notice,
affirmatively elects a distribution.
PART II:
SMITH BARNEY DEFINED CONTRIBUTION PLAN TRUST AGREEMENT
DOCUMENT #05
SECTION 1. INTRODUCTION AND CONSTRUCTION
1.1 Introduction. This Trust Agreement is a part of the
Smith Barney
Prototype Defined Contribution Plan and is entered into
between the
Employer and the Trustee effective as of the date
the Adoption
Agreement is executed by the Employer and the Trustee. If
the Plan is
adopted as an amendment and restatement of a Pre-Existing
Plan, this
Trust Agreement shall amend and restate the trust
agreement or other
funding arrangement for the Pre-Existing Plan.
1.2 Definitions. The terms in this Trust Agreement which
begin with a
capital letter shall have the meanings set forth in 2 of
the Plan.
For purposes of this Trust Agreement, "SBCTC" shall mean
Smith Barney
Corporate Trust Company and any successor in interest to
Smith Barney
Corporate Trust Company.
1.3 Controlling Laws. To the extent such laws are not
preempted by
federal law, this Trust Agreement shall be construed and
interpreted
under the laws of the state specified in the Adoption
Agreement;
provided, if SBCTC has been appointed as Trustee, this
Trust Agreement
shall be governed by and construed in accordance with the
laws of the
State of Delaware.
1.4 Construction. The headings and subheadings in
this Trust
Agreement have been inserted for convenience of reference
only and are
to be ignored in the construction of its
provisions. Wherever
appropriate, the masculine shall be read as the feminine,
the plural
as the singular, and the singular as the plural.
References in this
Trust Agreement to a section () shall be to a section in
this Trust
Agreement unless otherwise indicated. References in
this Trust
Agreement to a section of the Code, ERISA or any other
federal law
shall also refer to the regulations issued under such
section.
The Employer intends that the Plan and this Trust
Agreement and the
related Adoption Agreement which are part of the Plan
satisfy the
requirements for tax exempt status under Code 401(a),
Code 501(a)
and related Code sections and that the provisions of
this Trust
Agreement, the Plan and the related Adoption Agreement be
construed
and interpreted in accordance with the requirements of the
Code and
the regulations under the Code.
Further, except as expressly stated otherwise, no
provision of the
Plan or this Trust Agreement or the related Adoption
Agreement is
intended to nor shall grant any rights to
Participants or
Beneficiaries or any interest in the Fund in addition to
those minimum
rights or interests required to be provided under ERISA
and the Code
and the regulations under ERISA and the Code.
Nothing in the Plan or this Trust Agreement or the
related Adoption
Agreement shall be construed to prohibit the
adoption or the
maintenance of the Plan and Trust Agreement as an
individually
designed plan and trust agreement or the adoption of
this Trust
Agreement in connection with an individually designed
plan, but in
such event, the Employer may not rely on the opinion letter
issued to
the Prototype Sponsor and the Prototype Sponsor shall have
absolutely
no responsibility for such individually designed plan
and trust
agreement.
Finally, in the event of any conflict between the terms of
the Plan
and the terms of this Trust Agreement or the Adoption
Agreement, the
terms of the Plan shall control.
SECTION 2. GENERAL
All the Trustee's rights, power, authorities,
duties and
responsibilities of any kind or description whatsoever
respecting the
Fund shall be solely and exclusively as expressly stated
in the Plan
and in this Trust Agreement. Except to the extent the
Employer or Plan
Administrator also is the Trustee for the Plan, the Trustee
shall have
no responsibility whatsoever with respect to the
maintenance,
operation and administration of the Plan. No right, power,
authority,
duty or responsibility of any kind or description
whatsoever
respecting the Fund or the maintenance, operation or
administration of
the Plan shall be attributed to the Trustee on
account of any
ambiguity or inference which might be interpreted by any
person to
exist in the terms of the Plan or this Trust Agreement.
Finally, if
SBCTC is Trustee, any discretionary powers, duties or
responsibilities
assigned to the Trustee in this Trust Agreement shall be
exercised or
performed by SBCTC only upon the direction of the Plan
Administrator,
the Employer or an Investment Manager, and SBCTC shall
exercise no
discretion with respect to the investment or management of
the Fund
except to the extent that Fund assets are invested in a
common or
collective group trust maintained by SBCTC or an affiliate
of SBCTC.
SECTION 3. CONTRIBUTIONS AND TRUST FUND
The Employer and the Trustee shall establish reasonable
procedures for
making and accepting contributions to the Fund and any
asset transfers
pursuant to 9 of this Trust Agreement. The Trustee shall
accept any
contributions the Trustee reasonably believes are paid
to it in
accordance with such procedures, except that the Trustee
may refuse to
accept any non-cash contributions or assets which
either are not
acceptable to the Trustee or the acceptance of which
the Trustee
reasonably believes would constitute a prohibited
transaction under
ERISA or the Code. If this Trust Agreement is an
amendment and
restatement of a trust agreement or other funding
arrangement for a
Pre-Existing Plan, the assets held under such pre-
existing trust
agreement or other funding arrangement shall (to the extent
acceptable
to the Trustee and permissible under the prohibited
transaction rules
of ERISA and the Code) be transferred to the Trustee
pursuant to
reasonable transfer procedures established by the
Trustee, the
Employer and any predecessor trustee, custodian or
insurance carrier
and shall become assets of the Fund. The Trustee
shall have no
responsibility with respect to such transferred assets
except to
receive such assets and to hold and administer the same
thereafter in
accordance with this Trust Agreement. The Trustee
shall not be
responsible for any act or omission of a predecessor
trustee or any
other person with respect to assets that are
transferred to the
Trustee when the Fund is a continuation of a trust fund
or other
funding arrangement under a Pre-Existing Plan and
shall not be
required to make any claim or demand against any of
such persons
unless the Employer requests in writing that the Trustee
make such
claim or demand. The Fund shall consist of all such
contributions and
assets together with the income or gains on such
contributions and
assets, less any payments, distributions, transfers,
assessments and
losses from or on such contributions and assets. The Fund
shall be
managed and controlled by the Trustee pursuant to the
terms of this
Trust Agreement without distinction between principal and
income and
without liability for the payment of any interest on such
assets. The
Trustee shall not be responsible for the amount or the
collection of
any contributions to the Fund or for the determination of
the amount
or frequency of any contribution required by the Plan,
ERISA or the
Code and such responsibilities shall be borne solely by
the Employer
and the Participating Affiliates. Further, the Trustee, for
investment
purposes, may combine into one fund the Funds created under
each Plan
maintained by the Employer and Participating Affiliates
and (unless
otherwise specified) all references to the Fund in
this Trust
Agreement shall be references to the combined Funds;
provided that (a)
the Trustee shall maintain separate books and records of
the assets,
contributions, distributions and income or losses
allocable to each
such Fund and (b) no part of one Fund shall be used
to pay the
expenses, benefits or liabilities attributable to any other
Fund.
SECTION 4. MANAGEMENT OF TRUST FUND
4.1 Plan Administrator. With respect to the Fund,
the Plan
Administrator shall have those duties and responsibilities
specified
in this Trust Agreement and, additionally, shall have
the duty to
advise the Trustee and any other person of such facts and
issue such
directions as may be required to enable the Trustee and
such other
person to execute their duties and responsibilities
under this
Agreement.
4.2 Trustee. The Trustee shall have the sole and
exclusive power
(except as otherwise provided in this Trust
Agreement) in the
management and control of the Fund to do all things and
execute such
instruments as may be deemed necessary or proper, including
the powers
described in this section, all of which may be exercised
without order
of or report to any court. To the extent the exercise of
any such
power would require the exercise of discretion by SBCTC as
the Trustee
(other than the management and control of any assets
invested in any
common or collective trust maintained by SBCTC or its
affiliates),
SBCTC as Trustee shall exercise such power only in
accordance with the
specific direction of the Plan Administrator, the
Employer or an
Investment Manager.
4.2(a) To sell, exchange, or otherwise dispose of any
property at
any time held or acquired by the Fund, at public or
private sale,
for cash or on terms, without advertisement, including
the right to
lease for any term notwithstanding the period of
the Trust
Agreement;
4.2(b) To vote in person or by proxy any corporate stock
or other
security and to agree to or take, or refrain from taking,
any other
action necessary or appropriate for a shareholder or
owner in
regard to any reorganization, merger, consolidation,
liquidation,
bankruptcy or other procedure or proceeding affecting
any stock,
bond, note or other property;
4.2(c) To compromise, settle or adjust any claim or
demand by or
against the Fund and to agree to any rescission or
modification of
any contract or agreement affecting the Fund;
4.2(d) To borrow money, and to secure the same by
mortgaging,
pledging, or conveying the property of the Fund;
4.2(e) To deposit any stock, bond or other
security in any
depository or other similar institution and to register
any stock,
bond or other security in the name of a nominee or in
street name
provided such securities are held on behalf of the Fund
by a bank
or trust company, subject to supervision by the United
States or a
State, a broker or dealer registered under the
Securities Exchange
Act of 1934 ("Act") or a "clearing agency" as defined
in the Act,
or their nominees, without the addition of words
indicating that
such security is held in a fiduciary capacity, but
accurate records
shall be maintained showing that such security is a Fund
asset and
the Trustee shall be responsible for the acts of such
nominee;
4.2(f) To hold cash in such amounts as may be in
its opinion
reasonable for the proper operation of the Fund;
4.2(g) To invest any and all monies in such
stocks, bonds,
securities, investment company or trust shares or
mutual funds,
including mutual funds which invest in commodities,
mortgages,
notes, choses in action, real estate, improvements
thereon, and
other property as the Trustee may deem appropriate,
including
"employer securities" (whether or not such
securities are
"qualifying employer securities") or "employer real
property"
(whether or not such property is "qualifying
employer real
property"), as such terms are defined for purposes of
ERISA 407,
except to the extent prohibited under ERISA or the Code;
4.2(h) To grant, sell, purchase, or exercise any option
of any kind
or description whatsoever to purchase or sell any
security or other
property which is a permissible investment under
this 4(b),
provided the Trustee in no event shall grant or sell
any option
under which any person can require the Fund to sell any
security or
other property which the Fund at the time of such
grant or sale
does not hold in an amount sufficient to cover such
option and any
other outstanding option granted or sold by the
Trustee, and the
Trustee in no event shall dispose of any such security
or other
property covering any such option until such option is
exercised or
otherwise expires;
4.2(i) To invest all, or any part, of the assets of the
Fund in any
common, collective or group trust fund maintained under
Code 584
or Revenue Ruling 81-100, 1981-1 C.B. 326
exclusively for the
investment of the assets of tax exempt pension and
profit sharing
plans, the provisions of which upon such
investment shall
automatically be adopted and made a part of this Trust
Agreement
for the period such investment is made in such common,
collective
or group trust fund; provided, if SBCTC is the Trustee,
4.2(i)(1) the Trustee shall, upon receipt of written
investment
directions, invest some or all of the Fund in one or more
collective
trust funds (including, without limitation, any collective trust
fund
maintained by the Trustee or by any affiliate of the
Trustee) that are
exempt from taxation under Code 501(a);
4.2(i)(2) any such investment shall be subject
to all the
provisions of the declaration of trust creating such
collective trust
fund which is adopted in its entirety as an integral part
of the Plan
and of this Trust Agreement;
4.2(i)(3) the Employer, Plan Administrator or
Investment Manager
shall not have any right to vote or otherwise in any
manner control
the operation and management of any such collective trust
fund, the
operation of any party to any such collective trust
fund, or any
beneficiary of any such collective trust fund;
4.2(i)(4) the Trustee (or its affiliate) is authorized
to utilize
investment advice received from investment advisers for any
collective
trust fund maintained by the Trustee (or its affiliate)
including,
without limitation, such advice received from [SB Capital
Management
and SB Asset Management, each of which is a division of]
an affiliate
of the Trustee, and to utilize the brokerage services of
the Prototype
Sponsor, an affiliate of the Trustee; and
4.2(i)(5) the Employer, Plan Administrator or
Investment Manager,
as applicable, shall determine, prior to any direction by
either of
them to invest the Fund in any such collective trust
fund, that the
services provided to the Plan through the collective
trust fund
including, without limitation, any investment advisory
services
provided to the Trustee (or its affiliate) by [SB Capital
Management
or SB Asset Management] and brokerage services
provided by the
Prototype Sponsor are (A) necessary to the operation of the
Plan, (B)
furnished under a declaration of trust which is
reasonable and (C)
furnished for reasonable compensation;
4.2(j) To purchase, hold, sell, surrender or
distribute any
investment contract, life insurance contract or annuity
contract as
directed by a Participant or the Plan Administrator in
accordance
with the Plan;
4.2(k) To make a participant loan as directed by
the Plan
Administrator; and
4.2(l) To make such other investments as the
Trustee in its
discretion shall deem best or if SBCTC is the Trustee
or if the
Trustee is subject to the direction of another person,
as directed
by someone other than the Trustee, without regard to any
law now or
hereafter in force (other than ERISA) limiting the
investments of
trustees or other fiduciaries.
The Trustee shall not be required to make any inventory or
appraisal
or report to any court, nor to secure any order of
court for the
exercise of any power contained in this Trust Agreement,
and shall not
be required to give bond (except as required by ERISA).
Notwithstanding the foregoing, if SBCTC is the Trustee,
SBCTC shall
invest all assets of the Fund which are to be invested on
an interim
basis pending reinvestment, distribution or other
disbursement either
(1) in depository accounts bearing a reasonable rate of
interest which
are maintained by SBCTC or by any affiliate of SBCTC
or (2) in
commingled short-term investment funds which are maintained
by SBCTC
or by any affiliate of SBCTC, in which event the
provisions of
4(b)(9) of this Trust Agreement shall apply.
Except as agreed to in writing by the Trustee and the
Employer, the
Trustee shall not be liable and shall be indemnified and
held harmless
by the Employer for any liability, loss, damage, expense,
assessment
or other cost of any kind or description whatsoever, which
the Trustee
incurs as a result of or arising out of (1) any action
taken at the
direction of the Employer, the Plan Administrator or an
Investment
Manager, (2) any failure to act if, under the terms of
this Trust
Agreement, action can be taken only after receipt from the
Employer,
the Plan Administrator or an Investment Manager of
specific
directions, (3) any action or failure to act based on
advice of legal
counsel to the Employer or the Plan Administrator, or (4)
any failure
to act pending the receipt of direction from the
Employer, the Plan
Administrator or an Investment Manager, when the Trustee
has made a
written request for such direction, provided such action or
failure to
act is not attributable to fraud, misconduct, negligence
or error by
the Trustee. Further, if SBCTC is the Trustee, SBCTC may
from time to
time request the advice of counsel on any legal matter,
including the
interpretation of the Plan and this Trust Agreement, and
shall be
indemnified and held harmless for any and all liability,
loss, damage,
expense, assessment or other cost of any kind or
description resulting
from or on account of its services as Trustee under
the Plan,
including, but not limited to, any co-fiduciary liability
under ERISA
405 and any liability, damage, expense, assessment or
other cost
arising out of its actions in accordance with advice
of counsel.
Except as agreed to in writing by the Trustee and the
Employer, the
provisions of this paragraph shall survive the term of
this Trust
Agreement and may not be amended by any person or entity
other than
the Prototype Sponsor or terminated except with the
consent of the
Trustee.
4.3 Investment Manager. The Plan Administrator as a Named
Fiduciary
at any time may appoint in writing a person, or more than
one person,
including, subject to 4(i) of this Trust Agreement, the
Prototype
Sponsor or any of its affiliates, who either (1) is
registered as an
investment adviser under the Investment Advisers Act of
1940 ("Act"),
(2) is a bank, as defined in the Act, or (3) is an
insurance company
which, within the meaning of ERISA 3(38), is qualified
to manage,
acquire and dispose of the assets of an employee benefit
plan under
the laws of more than one state, as an investment manager
pursuant to
ERISA 3(38) ("Investment Manager") for all of the Fund
or for a
specified portion of the Fund allocated by the Plan
Administrator to
such Investment Manager's management account ("Management
Account").
The Plan Administrator shall notify the Trustee of such
appointment
and of the date such appointment becomes effective,
and such
Investment Manager shall have the sole responsibility and
duty and the
sole power, without prior consultation with the Board, the
Employer,
the Plan Administrator, the Trustee, or any other person,
to manage
and direct or effect the acquisition and disposition of the
assets of
the Fund allocated to such Management Account from the
date the
appointment as Investment Manager becomes effective.
The Plan
Administrator as a Named Fiduciary also may terminate the
appointment
of any person as an Investment Manager and may cause
assets of the
Fund to be added to or deleted from any Management Account.
The Investment Manager may exercise his or her
power through
procedures as agreed upon with the Trustee which
satisfy the
requirements of the securities laws and the rules of the
New York
Stock Exchange (and any other exchange on which securities
are traded
for such manager's Management Account), and the Trustee
shall not be
liable in any respect to any person, and shall be
indemnified and held
harmless by the Employer, for acting in accordance
with such
procedures. Pending receipt of directions from the
Investment Manager,
any cash received by the Trustee from time to time for
such manager's
Management Account may be retained in the Fund in
cash. If an
Investment Manager ceases to have investment
responsibility for the
Management Account, the Plan Administrator or the
Employer, as
authorized in accordance with 4(d) of this Trust
Agreement, shall
manage such assets in accordance with 4(d) or shall
appoint another
Investment Manager to manage such assets.
4.4 Plan Administrator or Employer Investment Directions.
The Board
at any time may authorize in writing the Plan
Administrator or the
Employer as a Named Fiduciary to manage and direct the
investment of
all or any specified portion of the assets of the Fund as
determined
by the Board, and the Board at any time may modify or
terminate such
authorization in writing. If SBCTC is appointed as
Trustee, the
Employer shall automatically be deemed to be so authorized
to manage
and direct the investment of the entire Fund; provided,
the Employer
may specify in the Adoption Agreement that such direction
shall be
made by the Plan Administrator. In the event the Plan
Administrator or
the Employer is authorized to manage and direct the
investment of Fund
assets under this 4(d), the provisions of 4(c) of
this Trust
Agreement shall apply in all respects as if the Plan
Administrator or
the Employer, as applicable, was an Investment Manager and
the portion
of the assets subject to such management and
direction was a
Management Account.
4.5 Participant Investment Directions. If the Plan
permits a
Participant or a Beneficiary to direct the
investment of such
individual's Account, the Plan Administrator shall direct
the Trustee
to establish the investment alternatives designated by
the Plan
Administrator and to accept directions to invest all or any
specified
portion of the Participant's Account among such
alternatives. The Plan
Administrator in consultation with the Trustee shall
establish such
reasonable rules for effecting the investment elections as
the Plan
Administrator deems necessary or appropriate and such rules
shall be
applied on a uniform and nondiscriminatory basis to all
similarly
situated individuals. Except as required under ERISA,
neither the Plan
Administrator, the Employer nor the Trustee shall be
responsible for
any investment decisions made by a Participant or a
Beneficiary. If a
Participant or Beneficiary fails to direct the
investment of the
Account, then the Employer or Plan Administrator (as
authorized in
accordance with 4(d) of this Trust Agreement) shall
assume the
investment responsibility for such Account.
4.6 Custodian. The Trustee (including SBCTC) at any time
and from
time to time may appoint one, or more than one, person,
including,
subject to 4(i) of this Trust Agreement, the Prototype
Sponsor or any
of its affiliates, to perform such custodial
safekeeping, record
keeping, securities execution and other nondiscretionary
functions of
the Trustee as the Trustee deems appropriate, and any
person who is
appointed to perform a custodial safekeeping function
may (in
connection with the performance of that function) hold Fund
securities
in a street name, provided that the Trustee shall
remain the
beneficial owner of all assets held by such person and such
person in
no event shall be granted any discretionary authority in
the capacity
as a custodian to manage and direct the acquisition and
disposition of
Fund assets.
4.7 Multiple Trustees. More than one person can serve at
the same
time as the Trustee, including any combination of
individuals and
banks or similar institutions, and in the event that more
than one
person does serve at the same time as Trustee under the
Plan and this
Trust Agreement, the references to "Trustee" in the Plan
and this
Trust Agreement wherever applicable shall be deemed
to be to
"Trustees" and such Trustees may allocate among
themselves by
unanimous written consent (signed by all Trustees)
such specific
Trustee duties, responsibilities and functions in the
management of
the Fund and otherwise under the Plan and this Trust
Agreement as the
Trustees deem appropriate under the circumstances. The
Trustees in all
unallocated duties, responsibilities and functions
shall act by
majority vote at a meeting at which a majority of the
Trustees are
present or by unanimous written consent (signed by all
Trustees) in
lieu of a meeting. Any person shall be entitled to rely
conclusively
upon any written action signed by all Trustees or by any
one or more
Trustees to whom the power to take such action has been
allocated by
unanimous written consent signed by all Trustees.
Finally, the
provisions of 8 of this Trust Agreement shall
apply to the
resignation or removal of any one of the Trustees, provided
that (1)
all notices required in such 8 also shall be given to any
remaining
Trustees, (2) the Employer only shall be required to
appoint successor
Trustees upon the resignation or removal of all Trustees
then serving,
and (3) the Employer or the remaining Trustees may demand
and receive
an accounting upon the resignation or removal of one or
more of the
Trustees. Notwithstanding the foregoing, if SBCTC is not
the sole
Trustee under the Plan, SBCTC shall serve in a
nondiscretionary,
custodial capacity only subject to the directions of the
Employer or
the Plan Administrator and SBCTC shall have no duties with
respect to
assets held by any other person including, without
limitation, any
other Trustee for the Fund. Further, the Employer hereby
agrees that
SBCTC shall not serve as, and shall not be deemed to be, a
co-trustee
under any circumstances.
4.8 Communications. The Employer, the Plan Administrator
and each
Investment Manager shall establish with the Trustee such
oral, written
or electronic communication procedures (or any
combination of such
communication procedures) or such other procedures as such
persons and
the Trustee deem reasonable and prudent under the
circumstances for
the orderly administration of the Fund. The Trustee and
each other
person shall be entitled to rely conclusively upon
any and all
communication from the Employer, the Plan Administrator
and each
Investment Manager reasonably believed to be
communicated in
accordance with such established procedures.
If the Trustee receives a direction which in the
Trustee's
determination is incomplete, was not communicated in
accordance with
established procedures or otherwise cannot reasonably be
executed, the
Trustee shall promptly inform the person responsible
for such
direction and shall take no further action pending receipt
of proper
directions from such person.
4.9 Prototype Sponsor. Nothing in the Plan or this Trust
Agreement
shall prevent the Prototype Sponsor or any of its
affiliates from
engaging in any transaction with the Plan or the Fund,
provided that
such transaction does not (in the opinion of the
Prototype Sponsor)
constitute a "prohibited transaction" under ERISA 406 or
Code 4975,
and the Employer shall provide such written
documentation as the
Prototype Sponsor deems necessary or appropriate to
determine that any
such transaction would not be a "prohibited transaction."
To the extent that ERISA or a prohibited transaction
exemption
requires action by an individual independent of the Plan
Sponsor and
its affiliates or their employers, officers and directors,
then the
Employer, the Plan Administrator, an Investment Manager, a
Participant
or a Beneficiary shall have full power and authority to
take action on
behalf of the Fund as necessary to satisfy ERISA or such
exemption
provided such person otherwise is authorized to act under
this Trust
Agreement.
4.10 Voting of Proxies. Except as provided in this 4(j),
the person
with the responsibility to manage and invest all or a
portion of the
Fund shall have the exclusive authority and responsibility
for voting
proxies with respect to investments held for such portion
of the Fund
and the Trustee shall be obligated to vote such
proxies only in
accordance with the directions of such person and shall be
precluded
from voting such proxies except in accordance with such
directions.
However, the Plan Administrator, as a Named Fiduciary, may
reserve to
itself the right to vote proxies with respect to any
investments which
are otherwise subject to the management and control of an
Investment
Manager and, in such event, the Investment Manager shall
be precluded
from voting such proxies.
SECTION 5. BENEFIT PAYMENTS
No disbursement from the Fund shall be made by the
Trustee for
purposes of the payment of any Plan benefit except on
the written
direction of the Plan Administrator, and the Trustee
shall have no
duty or obligation whatsoever to inquire as to the
accuracy of such
direction or its propriety in light of the provisions of
the Plan,
ERISA or the Code. Upon written direction (which may be a
continuing
direction) from the Plan Administrator as to the name of
any person to
whom payment is to be made from the Fund and when such
payment is to
be made and the amount and manner of such payment, and
consistent with
the income tax withholding requirements, the Trustee
shall draw
checks, purchase annuity contracts or distribute other
assets from the
Fund in the name of the person designated by the Employer
and deliver
such checks, contracts or other assets in such manner
and in such
amounts and at such times as the Plan Administrator shall
direct or,
if appropriate, the Trustee shall make an electronic
transfer to the
account of such person designated by the Plan
Administrator in such
amounts and at such times as the Plan Administrator shall
direct.
If SBCTC is the Trustee, all payments to be paid by means
of a check
from the Trustee shall be paid from a non-interest
bearing checking
account to be maintained with an affiliate of the Trustee.
Prior to
executing this Trust Agreement, the Employer shall
determine that such
checking account services are (1) necessary to the
operation of the
Plan, (2) furnished under an arrangement which is
reasonable and (3)
furnished for reasonable compensation.
In the event the Trustee shall deem it necessary to
withhold any
distribution pending compliance with legal requirements
with respect
to probate of wills, appointment of personal
representatives, payment
or provision for estate or inheritance taxes, or for death
duties or
otherwise, the Trustee shall notify the Plan Administrator
and shall
thereafter take no action pending receipt of the Plan
Administrator's
instructions to distribute and an agreement from
the Plan
Administrator, in form satisfactory to the Trustee,
protecting it from
any liability arising out of noncompliance with such
requirements.
The Plan Administrator may in its discretion direct, and
the Trustee
shall make payment on such direction, that Plan payments
be made (1)
directly to an incompetent or disabled person, whether
because of
minority or mental or physical disability, (2) to the
guardian or to
the person having custody of such person if a court of
competent
jurisdiction has appointed such guardian or custodian, or
(3) to any
person designated or authorized under any state statute
to receive
such payments on behalf of such incompetent or disabled
person without
further liability either on the part of the Employer,
the Plan
Administrator or the Trustee for the amount of such
payment to the
person on whose account such payment is made.
In the case of a termination, partial termination,
a complete
discontinuance of contributions or the termination of
participation by
a Participating Affiliate as described in 14.5 of the
Plan, the Plan
Administrator shall direct the Trustee precisely as to what
action to
take and the Trustee (subject to the terms of this Trust
Agreement and
the Plan and to such terms and conditions, if any, as
agreed upon
between the Plan Administrator and the Trustee) shall
follow such
directions.
The Plan Administrator shall determine anticipated
liquidity
requirements to meet projected benefit payments for each
Plan Year
and, if any adjustment from the practices and policies
agreed upon
between the Plan Administrator and the Trustee at the
adoption of this
Trust Agreement is deemed appropriate, notice of such
adjustment shall
be communicated by the Plan Administrator in writing
as soon as
practicable to the Trustee. The Trustee shall be under no
duty to make
any such adjustment prior to receiving such notice.
SECTION 6. VALUATION AND ACCOUNTING BY TRUSTEE
The Trustee as of each Valuation Date shall determine the
fair market
value of the assets of the Fund (or, if more than one Fund
is combined
for investment purposes, of each such Fund) based upon such
reasonable
accounting principles, practices and procedures as the
Trustee shall
adopt and consistently apply for this purpose, which
determination
shall be final and binding. At such times as agreed upon
between the
Trustee and the Plan Administrator, the Trustee shall file
with the
Plan Administrator a written report setting forth such
fair market
value and all investments, receipts and disbursements
and other
transactions of the Fund since the date of the last such
report.
Upon the expiration of 90 days from the filing of the
Trustee's report
and except as provided under ERISA, the Trustee shall
be forever
relieved and discharged from any liability or
accountability to anyone
with respect to the propriety of its actions or the
transactions shown
by such report except with respect to those acts or
transactions to
which the Plan Administrator or the Employer shall, within
such 90 day
period, have filed with the Trustee its written
disapproval, and
neither the Plan Administrator nor the Employer nor any
other person
shall have the right to demand or be entitled to any
further or
different accounting by the Trustee.
SECTION 7. EXPENSES
All reasonable and proper expenses of the Plan and the
Fund (within
the meaning of ERISA 403(c)(1) and 404(a)(1)(A)),
including any
taxes which may be levied or assessed against the Trustee
on account
of the Fund and the Trustee's compensation as agreed upon
from time to
time by the Employer and the Trustee, shall be paid from
the Fund
unless (a) the payment of such expense would constitute a
"prohibited
transaction" within the meaning of ERISA 406 or Code 4975
or (b) the
Employer pays such expenses. Any such expenses of the Fund
which are
properly allocable to an individual's Account
(including, but not
limited to, expenses related to an individual's investment
directions,
annuity contract purchases and other transactional fees for
processing
distributions) may be charged directly against such
individual's
Account if so provided in administrative procedures
established by the
Plan Administrator. No payments shall be made to a Trustee
who also
receives full-time pay from the Employer or from a
Participating
Affiliate except for his or her benefits, if any, from the
Plan and
the reimbursement of his or her reasonable and proper
expenses as a
Trustee which are not reimbursed by any other person.
SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time by delivering
its written
resignation to the Employer. The Employer shall within 60
days after
receipt of such resignation appoint a successor trustee
in writing
(acceptable for this purpose to the Employer and the
successor
trustee) delivered to the Trustee and to such successor
trustee. The
Employer may remove the Trustee at any time and appoint a
successor
trustee or trustees upon 60 days written notice to the
Trustee unless
the Trustee agrees to a shorter notice period. In either
event, on the
appointment of such successor, the Trustee shall promptly
turn over to
such successor all assets held by the Trustee and shall
make a final
accounting to the Plan Administrator and the Employer. The
successor
trustee shall have no responsibility except to receive such
money and
property from the Trustee and to hold and administer
the same
thereafter in accordance with this Trust Agreement and
shall not be
responsible for any act or omission of the Trustee, and
shall not be
required to make any claim or demand against the Trustee
unless the
Plan Administrator or the Employer shall in writing
request the
successor trustee to make a claim or demand against the
Trustee. Any
such successor trustee shall have and may exercise all
the rights,
powers, and duties of the Trustee as fully and to the same
extent as
if it had originally been named Trustee herein.
SECTION 9. MERGERS, CONSOLIDATIONS AND ASSET TRANSFERS
The Trustee upon written direction of the Plan
Administrator shall
transfer and deliver Fund assets to or accept the transfer
to the Fund
of assets acceptable to it from any trustee, custodian or
insurance
carrier maintaining any investment medium of a pension
or profit
sharing plan which is tax exempt under Code 401(a) into
which the
Plan (or any portion thereof) shall be merged or
consolidated.
In the case of any Plan merger or consolidation with, or
transfer of
assets or liabilities to or from, any other employee
benefit plan,
each person for whom an Account then is maintained shall
be entitled
to receive a benefit from such plan, if it is then
terminated, which
is equal to or greater than the benefit such person would
have been
entitled to receive immediately before such merger,
consolidation or
transfer, if the Plan then had been terminated. The
Trustee in
connection with either of the above described transfers
shall have no
liability or responsibility (1) to determine whether
such transfer
shall be in conformity with the provisions of the Plan,
any other
plan, ERISA or the Code or (2) to determine the
effect of such
transfer upon any Accounts. Any direction of the Plan
Administrator
respecting any of the foregoing shall constitute a
certification that
the transfer so directed is in conformity with the
provisions of the
Plan or any other plan, this Trust Agreement, ERISA and the
Code, and
the Trustee shall act in accordance with such direction.
SECTION 10. SINGLE TRUST - SEPARATE FUNDS
The assets of the Fund (or, if more than one Fund is
combined for
investment purposes, of each such Fund) shall be held,
administered,
invested and managed by the Trustee (except to the extent
investment
responsibility is allocated to another person under the
terms of this
Trust Agreement) consistent with the terms of this Trust
Agreement in
all respects as a single trust even though portions of such
assets may
be attributable to different employers or may be
allocable to the
payment of benefits for different employee groups.
The Plan
Administrator shall be responsible to maintain and
determine the
appropriate portion of the Fund held in respect of any such
group of
employees in the event that such maintenance or
determination shall
become necessary. The determination by the Plan
Administrator of the
portion of the Fund held in respect of any such employee
group shall
be final and conclusive upon all persons.
SECTION 11. NAMED FIDUCIARIES AND ADMINISTRATION
The Plan Administrator and the Employer (if the Plan
Administrator is
not the Employer) shall be the Named Fiduciaries
responsible to the
extent of their powers and responsibilities assigned in
the Plan for
the control, management and administration of the Plan.
The Plan
Administrator, the Employer and the Trustee (other than
SBCTC) shall
be the Named Fiduciaries responsible to the extent of their
respective
powers and responsibilities assigned to them in the Trust
Agreement
for the safekeeping, control, management,
investment and
administration of the assets of the Fund. Any power or
responsibility
for the control, management or administration of the Plan
or the Fund
which is not expressly assigned to a Named Fiduciary under
the Plan or
the Trust Agreement, or with respect to which the proper
assignment is
in doubt, shall be deemed to have been assigned to the
Employer as a
Named Fiduciary. One Named Fiduciary shall have no
responsibility to
inquire into the acts and omissions of another Named
Fiduciary in the
exercise of powers or the discharge of responsibilities
assigned to
such other Named Fiduciary under the Plan or the Trust
Agreement. Any
person may serve in more than one fiduciary capacity under
the Plan or
the Trust Agreement and a fiduciary may be a Participant
provided such
individual otherwise satisfies the requirements of 4.
A Named Fiduciary, by written instrument filed by
the Plan
Administrator with the records of the Plan, may designate a
person who
is not a Named Fiduciary to carry out any of its
responsibilities
under the Plan or Trust Agreement, other than the
responsibilities of
the Trustee for the safekeeping, control, management,
investment and
administration of the assets of the Fund, except to the
extent the
Trustee's responsibility for investment decisions is
delegated to the
Employer, the Plan Administrator, or an Investment Manager.
Except to the extent expressly reserved under the Plan or
the Trust
Agreement to the Employer, the Board, or the Trustee,
the Plan
Administrator shall have the exclusive responsibility
and complete
discretionary authority to control the operation,
management and
administration of the Plan, with all powers necessary to
enable it
properly to carry out such responsibilities, including
(but not
limited to) the power to construe the Plan, the
related Adoption
Agreement, and the Trust Agreement, to determine
eligibility for
benefits and to resolve all interpretative, equitable
or other
questions that arise under the Plan or the Trust
Agreement. The
decisions of the Plan Administrator on all matters within
the scope of
its authority shall be final and binding. To the
extent a
discretionary power or responsibility under the Plan
or Trust
Agreement is expressly assigned to a person other than
the Plan
Administrator, such person shall have complete
discretionary authority
to carry out such power or responsibility and such
person's decisions
on all matters within the scope of such person's
authority shall be
final and binding.
SECTION 12. MISCELLANEOUS
12.1 Spendthrift Clause and Qualified Domestic
Relations Orders.
Except to the extent permitted by law, no Account, benefit,
payment or
distribution under the Plan or this Trust Agreement shall
be subject
to attachment, garnishment, levy, execution, or any claim
or legal
process of any creditor of a Participant or
Beneficiary, and no
Participant or Beneficiary shall have any right to
alienate, commute,
anticipate, or assign all or any part of such
individual's Account,
benefit, payment or distribution under the Plan or
this Trust
Agreement. The preceding sentence also shall apply to the
creation,
alienation, 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 ("QDRO") within the meaning of Code 414(p)
and such
order is entered on or after January 1, 1985.
Notwithstanding the
foregoing, the Plan Administrator may treat a domestic
relations order
entered before January 1, 1985 as a QDRO in accordance
with Code
414(p) and 16.1 of the Plan.
12.2 Benefits Supported Only by Trust Fund. Any person
having any
claim for any benefit under the Plan shall look solely to
the assets
of the Fund for the satisfaction of that claim. In no
event will the
Prototype Sponsor, the Trustee, the Plan Administrator,
the Employer
or a Participating Affiliate or any of their employees,
officers,
directors or their agents be liable in their individual
capacities to
any person whomsoever for the payment of any benefits under
the Plan.
12.3 Claims. Any payment to a Participant or Beneficiary,
or to the
legal representative or heirs-at-law of any such
person made in
accordance with the provisions of the Plan shall to the
extent of such
payment be in full satisfaction of all claims under the
Plan against
the Trustee, Plan Administrator, a Named Fiduciary, the
Employer and
any Participating Affiliate, any of whom may require such
person, such
person's legal representative or heirs-at-law, as a
condition
precedent to such payment, to execute a receipt and
release in such
form as shall be determined by the Trustee, Plan
Administrator, a
Named Fiduciary, the Employer or a Participating
Affiliate, as the
case may be.
12.4 Nonreversion. Except as provided in 7.2(b) of the
Plan and in
this 12(d), neither the Employer nor any Participating
Affiliate
shall have any present or prospective right, claim, or
interest in the
Fund or in any Employer contribution made to the Trustee.
To the extent permitted by the Code and ERISA,
the Employer
contributions described in this 12(d), less any
losses on such
contributions, shall be returned by the Trustee to the
Employer or to
any Participating Affiliate upon the written direction of
the Plan
Administrator in the event that:
12.4(a) an Employer contribution is made by a mistake
of fact,
provided such return is effected within one year after
the payment
of such contribution;
12.4(b) a final judicial or Internal Revenue Service
determination
is made that the Plan fails to satisfy the
requirements of Code
401 with respect to its initial qualification
(provided, if the
Employer is not entitled to rely on the Prototype
Sponsor's opinion
letter, the application for the initial qualification of
the Plan
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
which event all Employer contributions made before such
judicial or
administrative determination (whichever last occurs)
plus any
earnings and minus any losses shall be returned within
one year
after such determination, all such contributions
being hereby
conditioned upon the Plan satisfying all applicable
requirements
under Code 401 from and after its adoption; or
12.4(c) a deduction for an Employer contribution is
disallowed
under Code 404, in which event such contribution shall
be returned
within one year after such disallowance, all such
contributions
being hereby conditioned upon being deductible under Code
404.
The Trustee shall have no obligation or responsibility
whatsoever to
determine whether the return of any such Employer
contributions is
permitted by the Code or ERISA and shall (to the extent
permissible
under law) be indemnified and held harmless by the Employer
for acting
in accordance with written directions given by the Plan
Administrator
pursuant to this 12(d).
12.5 Exclusive Benefit. The corpus or income of the Fund
shall not be
diverted to or used for any purpose other than the
exclusive benefit
of Participants or Beneficiaries.
FEE SCHEDULE
Employers who use a Smith Barney Prototype Defined
Contribution Plan
will be charged a $100 annual fee. In the event that the
plan
terminates or all plan assets are transferred from Smith
Barney, an
additional $100 fee will be charged. In accordance with the
Employee
Representations Section of the Adoption Agreement (see
Signature
Section), such fees will be charged against the brokerage
account
maintained for the plan.
These fees are subject to change and you will be notified
prior to the
time the change becomes effective.
Smith Barney Prototype
Standardized 401(k) Plan
Adoption Agreement #003
Adoption of a qualified plan has important legal and tax
implications. Failure to properly fill out the Adoption
Agreement may
result in disqualification of the Plan. Employers should
consult with
their counsel concerning the adoption of this Plan. To
obtain further
information about the Plan, contact Smith Barney through
your
Financial Consultant.
NOTE: Under the terms of the Plan, options marked
"Standard"
automatically will apply unless another option is selected.
If
additional space is needed to provide information requested
in this
Adoption Agreement, the information may be provided in an
addendum
attached to this Adoption Agreement which contains a
reference to the
appropriate Part(s) of the Adoption Agreement.
Adoption Agreement #003 may only be used in conjunction
with the
SMITH BARNEY PROTOTYPE DEFINED CONTRIBUTION PLAN - Plan
Document #05.
Capitalized terms refer to defined terms in Plan Document
#05. "
refers to sections of Plan Document #05; "Part" refers to
provisions
in this Adoption Agreement. The instructions and
descriptions in this
Adoption Agreement generally summarize the Plan Document
provisions,
but the Plan Document terms will be controlling in the
event of any
conflict.
TO BE COMPLETED BY SMITH BARNEY
FINANCIAL CONSULTANT: ________________ Telephone Number:
_______
Address:
________________________________________________________
___________________________________________________________
______
Smith Barney Inc. Account # for
Plan:____________________________
I. EMPLOYER INFORMATION.
Name:
___________________________________________________________
Address:
________________________________________________________
___________________________________________________________
______
Taxable Year: _______________ EIN: ___________________
II. PLAN INFORMATION.
A. Plan Name:
_____________________________________________
B. Plan Year: the period which ends on
____________________
C. Construction. Except as provided in 1.2, the Plan
and the
Trust Agreement will be subject to the laws of the State of
________________________________________
D. Plan Adoption. The Plan is hereby adopted as
[Check one. See
14.1.]
1. a new profit sharing plan (with cash or
deferred
arrangement).
2. an amendment and restatement of the
___________________________________ ("Pre-Existing Plan")
which was
originally effective _______________________________,
19____.
E. Effective Date of this Adoption Agreement:
____________________________________, 19_______.
III. ELIGIBILITY AND PARTICIPATION. [If the Employer
maintains
another defined contribution Paired Plan, the eligibility
and
participation requirements specified in this Part III for
Plan Years
beginning on and after the Final Compliance Date must be
the same as
those specified in the Adoption Agreement for such other
Paired Plan.]
A. Eligible Employees. All Employees of the Employer
and all
Employees of all Affiliates who satisfy the Participation
Requirement
generally are eligible to participate in the Plan except
certain
nonresident aliens. However, notwithstanding any contrary
language,
participation in this Plan by Employees who are covered by
a
collective bargaining agreement and the extent of such
participation,
if any, will be determined by collective bargaining. [See
2.19.]
B. Participation Requirement. In order to participate
in this
Plan, an Eligible Employee must [Check one. See 2.46, 4
and Part
V.B.1. Enter "N/A" if there will be no minimum age or no
waiting
period, as applicable.]
1. Standard: reach minimum age of 21 and complete
a waiting
period of 1 Year of Service.
2. no minimum age or waiting period.
3. reach minimum age of _____ [not to exceed 21]
and complete a
waiting period of ______ Year of Service [not to exceed 1].
4. reach minimum age of ____ [not to exceed 21] and
complete
a waiting period of ____ Year of Service [not to exceed 1]
; however,
each Employee who is an Eligible Employee on the Effective
Date will
be deemed to satisfy the Participation Requirement on the
Effective
Date regardless of such Employee's actual age or service.
C. Entry Date: [Check one. See 2.26 and 4.]
1. Standard: the first day of each Plan Year and
the first day
of the seventh month of each Plan Year.
2. the date on which the Participant satisfies the
Participation Requirement.
3. other:_____________________________ [Specify
date(s). If a
single Entry Date is entered, the minimum age in Part III.B
cannot
exceed 20 and the maximum waiting period in Part III.B
cannot exceed
= year.]
IV. VESTING.
A. Death, Disability or Retirement. [See 8.1(b).]
1. Standard: A Participant's Employer Account and
Matching
Account will be 100% vested if, while an Employee, that
Participant
dies, becomes Disabled, or reaches Normal Retirement Age
or, if
applicable, Early Retirement Age.
2. A Participant's Employer Account and Matching
Account will
be 100% vested if, while an Employee, that Participant
reaches Normal
Retirement Age or if the Participant satisfies the
following
condition: [Check one or more only if desired.]
a. dies while an Employee.
b. becomes Disabled while an Employee.
c. reaches Early Retirement Age while an Employee.
B. General Vesting Schedule. [See 8.1 and 14.3(c).
Generally,
the vesting schedule under this Plan must be at least as
favorable at
the completion of each year as the vesting schedule under
the Pre-
Existing Plan. The Top-Heavy Vesting Schedule selected in
Part XI.A
will apply for all Plan Years in which the Plan is a Top-
Heavy Plan.
See 12.4.]
1. Matching Account. [Check one. "Full and Immediate
Vesting" must
be selected if the 2-year requirement for Matching
Contributions is
selected in Part VII.A.2.b.3.]
a. Standard: Full and Immediate Vesting. 100% at
all times.
b. Cliff Vesting. 100% after completion of ____
Years of
Service [not to exceed 5].
c. Graded Vesting.
Years of Service Nonforfeitable Percentage
Less than 1 ___%
1 ___%
2 ___%
3 ___% [at least 20%]
4 ___% [at least 40%]
5 ___% [at least 60%]
6 ___% [at least 80%]
7 or more 100%
d. Top-Heavy. The Top-Heavy Vesting Schedule in
Part XI.A will
apply for all Plan Years.
2. Employer Account. [Check one. "Full and Immediate
Vesting" must
be selected if the 2-year requirement for Employer
Contributions is
selected in Part VII.D.2.b.2]
a. Standard: Full and Immediate Vesting. 100% at
all times.
b. Cliff Vesting. 100% after completion of ____
Years of
Service [not to exceed 5].
c. Graded Vesting.
Years of Service Nonforfeitable Percentage
Less than 1 ___%
1 ___%
2 ___%
3 ___% [at least 20%]
4 ___% [at least 40%]
5 ___% [at least 60%]
6 ___% [at least 80%]
7 or more 100%
d. Top-Heavy. The Top-Heavy Vesting Schedule in
Part XI.A will
apply for all Plan Years.
C. Normal Retirement Age: [Check one. See 2.43 and
Part XIII.B.]
1. Standard: age 65.
2. age ____ [not to exceed 65].
3. the later of age ____ [not to exceed 65] or the
___ [not to
exceed 5th] anniversary of the date on which the
Participant commenced
participation in the Plan.
D. Early Retirement Age: [The designation of an Early
Retirement
Age may accelerate vesting and distribution. Early
Retirement Age
cannot exceed Normal Retirement Age. Check one. See 2.13
and 9.1.]
1. Standard: No Early Retirement Age.
2. age ____
3. the later of age ____ or the completion of ___
Years of
Service (for vesting purposes).
V. SERVICE FOR PARTICIPATION AND VESTING.
A. Method for Crediting Service. [Check one. See 3.]
1. Standard: "Hour of Service" method. [See 3.1.]
a. Crediting Hours. Hours will be credited during
each Computation
Period [Check one. See 3.1(c).]
(1) Standard: by maintaining records of the actual
hours worked.
[See 3.1(c)(2)(i).]
(2) by using the following equivalency [Check one.
See
3.1(c)(2)(ii).]
10 Hours of Service for each day.
45 Hours of Service for each week.
95 Hours of Service for each semi-monthly
payroll period.
190 Hours of Service for each month.
b. Vesting Computation Period. The Computation Period
for vesting
purposes will be [Check one. See 3.1(b)(2).]
(1) Standard: the Plan Year.
(2) the 12 month period beginning on the
Participant's hire date
and each anniversary of that hire date.
c. Participation Computation Period. The initial
Computation
Period for participation purposes will be the 12 month
period
beginning on the Participant's hire date. Each subsequent
Computation
Period after the initial 12 months of employment will be
[Check one.
See 3.1(b)(3).]
(1) Standard: Plan Years beginning after the
Participant's hire
date.
(2) subsequent 12 month periods beginning on the
anniversaries
of the Participant's hire date.
d. Year of Service for Vesting. For vesting purposes,
an Employee
will be credited with a Year of Service if, during a
Computation
Period, the Employee completes at least [Check one. See
3.1(d).]
(1) Standard: 1,000 Hours of Service.
(2) ______ [not more than 1,000] Hours of Service.
e. Year of Service for Participation. For
participation purposes,
an Employee will be credited with a Year of Service [Check
one. See
3.1(b)(3) and 3.1(d).]
(1) Standard: at the end of the Computation Period
in which the
Employee completes at least 1,000 Hours of Service.
(2) on the date on which the Employee completes at
least ______
[not more than 1,000] Hours of Service.
(3) at the end of the Computation Period on which
the Employee
completes at least ______ [not more than 1,000] Hours of
Service.
Notwithstanding the foregoing, if a partial Year of
Service is
selected in Part III.B, no minimum number of Hours of
Service will be
required.
2. "Elapsed Time" method. [See 3.2.]
For purposes of determining whether a Participant is
entitled
to an allocation of contributions or forfeitures, the
Participant will
be deemed to have completed more than 500 Hours of Service
in a Plan
Year if the Participant completes the following period of
employment
in the Plan Year: [Check one. See 2.2(d) and Part VII.]
a. Standard: more than 91 consecutive calendar
days.
b. more than 3 consecutive months.
B. Special Rules.
1. Vesting Service Exclusions. [See 3.8.] In
addition to any
service that is disregarded under the Break in Service
rules described
below and in 3.7(c), the following service will be
excluded for
vesting purposes:
a. Standard: No other exclusions.
b. Years of Service before age 18.
c. Years of Service before the Employer or an
Affiliate
maintained this Plan or a predecessor plan.
d. Years of Service during a period for which the
Employee made
no mandatory contributions under a Pre-Existing Plan.
2. Predecessor Employer Service (Vesting and
Participation).
Generally, unless the Employer maintains the plan of a
predecessor
employer (for example, an acquired company), service for a
predecessor
employer will not be credited as service under this Plan.
[Check and
attach appropriate addendum only if desired. See 3.4.]
Service credit will be given under this Plan for
certain
predecessor employers for participation and/or vesting
purposes to the
extent provided in Addendum V.B.2.
3. Break in Service Rules. [See 3.7 and 8.2.]
Generally, all
service completed before a Break in Service will be
credited upon
reemployment. Certain service may be excluded under the
following
rules:
a. Standard: No exclusions. [See 3.7(a).]
b. "Rule of Parity." [See 3.7(b)(3).] This rule,
generally,
disregards vesting and participation service completed
before 5
uninterrupted Breaks in Service.
c. "Alternative Maternity/Paternity Rule." [Not
applicable if
"Elapsed Time" is selected. See 3.7(b)(4).] This rule,
generally,
increases the number of Breaks in Service from 5 to 6 for
all
Employees in lieu of crediting service for
maternity/paternity leave.
d. Alternative to "Buy Back Rule." [See 8.2(b).]
This rule,
generally, does not require former participants (less than
100%
vested) to pay back previous distributions upon
reemployment (vesting
only). A rehired Participant's vested interest in restored
amounts
will be determined under: [Check one. See 8.2(a), 8.2(b)
and
8.2(c).]
(1) Standard: Formula A
(2) Formula B
VI. EMPLOYEE CONTRIBUTIONS.
A. Elective Deferrals. Elective Deferrals [See
5.3(f). Check
one.]
1. Standard: will be allowed. [Complete formula
below; enter
"N/A" if not applicable.]
a. Minimum Amount. Not less than _____% of a
Participant's
Compensation or $_____.
b. Maximum Amount. For Plan Years ending on and
before
____________, not more than _____% of a Participant's
Compensation or
$_____, and for each Plan Year thereafter, not more than
_____% of a
Participant's Compensation or $ _____.
2. will not be allowed.
B. Employee Contributions. Employee Contributions
[See 5.3(g).
Check one.]
1. Standard: will not be allowed.
2. will be allowed. [Complete formula below; enter
"N/A" if not
applicable.]
a. Minimum Amount. Not less than _____% of a
Participant's
Compensation or $_____.
b. Maximum Amount. For Plan Years ending on and
before
____________, not more than _____% of a Participant's
Compensation or
$_____, and for each Plan Year thereafter, not more than
_____% of a
Participant's Compensation or $ _____.
C. Election Rules. [Check one. See 5.3(h).]
1. Standard: If a Participant does not elect to
begin Elective
Deferrals or Employee Contributions on the Participant's
Entry Date,
the Participant may elect to begin such contributions as of
any
following pay date. A Participant's election can be revised
(prospectively only) as of any pay date. A Participant who
terminates
contributions may elect to resume contributions
prospectively as of
any pay date.
2. Alternatives to Standard: A Participant's
elections may be
made as follows: [Must include at least one day in each
calendar
year.]
a. Commencement. [See 5.3(h)(2).] effective only
as of any
________________________________ following the
Participant's Entry
Date.
b. Revision. [See 5.3(h)(3).] effective only as
of any
following _______________________________.
c. Resumption. [See 5.3(h)(5).] effective only
as of any
following ___________________________.
D. Rollover Contributions. Rollover Contributions
[Check one. See
5.4.]
1. Standard: will be allowed and may be made by
[Check one.]
a. Standard: any Eligible Employee.
b. any Eligible Employee who is a Participant.
2. will not be allowed.
E. Limitations on Elective Deferrals.
1. Claims. Claims for a refund of Excess Elective
Deferrals must
be made no later than [See 7.3(f). Check one.]
a. Standard: March 1.
b. _____________ [no earlier than March 1 and no
later than
April 15.]
2. Deemed Claims. Corrections of Excess Elective
Deferrals will be
made [See 7.3(f)(2). Check one.]
a. Standard: from this Plan.
b. from the following plan(s): _______________.
3. "Gap Period" Income. The income or loss allocable
to the "gap
period" [Check one. See 7.3(e), 7.4(d)(2) and
7.5(d)(2).]
a. Standard: shall not be distributed.
b. shall be distributed.
4. Highly Compensated Employees. The following
special rules in
the temporary Code 414(q) regulations and in Code
414(q)(12) will
apply: [Check one. See 7.4(a)(5)(v).]
a. Standard: no special rules.
b. The special rules set forth in Addendum V.E.3.
5. Recharacterization. Recharacterization of Excess
Contributions
as Employee Contributions [See 7.4(e). Check one.]
a. Standard: will not be allowed.
b. [Do not check this option 2 if Employee
Contributions are
not allowed in Part VI.B.] will be allowed.
VII. EMPLOYER CONTRIBUTIONS.
A. Matching Contributions. [See 5.3(b) and Part
VII.F.]
1. Formula. [Check one.]
a. Standard: No Matching Contributions will be
made.
b. Matching Contributions will be made on account
of: [Check
one or both.]
83
Elective Deferrals
Employee Contributions
under the following formula: [Check and complete one.
Enter "N/A" if
not applicable. The formula selected and completed must not
provide a
higher rate of Matching Contributions for Participants who
make a
higher amount of contributions.]
____ % of the Participant's contributions which
do not
exceed $_____ or ____% of the Participant's Compensation
plus ____ %
of the Participant's contributions which exceed $_____ or
____ %, but
contributions in excess of $ __________ or ____% of the
Participant's
Compensation will not be matched.
such percentage of the Participant's
contributions as
determined by the Employer in its discretion for each Plan
Year.
in an amount
equal to
_________________
_____________________________________________
2. Eligible Participant. The Matching Contribution
for any
Allocation Date will be made only for each Participant who
makes
Elective Deferrals or Employee Contributions, as
applicable, during
the period ending on the Allocation Date and who satisfies
all of the
following requirements: [Check one.]
a. Standard: no additional requirements.
b. Alternative: [Check one or more.]
(1) the Participant is employed (or on an
authorized leave of
absence) on the last day of the Plan Year or (b) is not
employed as of
the last day of the Plan Year but is credited with more
than 500 Hours
of Service in such Plan Year. [Do not check if Allocation
Date is not
Standard Option. Special Hour of Service equivalencies
apply if
"Elapsed Time" is selected. See Part V.A.2.] However, a
Participant
who died, retired or became disabled during the Plan Year
will be
eligible: [Check one.]
without regard to the number of Hours of Service.
only if the Participant completes the Hours of
Service
specified above.
(2) the Participant is a Nonhighly Compensated
Employee.
(3) the Participant is credited with at least 2
Years of Service
(for participation purposes) on such Allocation Date.
(4) for Plan Years beginning before the __________
[Not later
than Final Compliance Date], the Participant [Check one or
more only
if Allocation Date is Standard Option.]
is employed (or on an authorized leave of absence)
on the
last day of the Plan Year;
is not employed on the last day of the Plan
Year
because the Participant died, retired or became
disabled
during such Plan Year;
if the "Hours of Service" method is selected,
is
credited with more than 1,000 Hours of Service
during such
Plan Year.
3. Allocation Date. Matching Contributions will be
made and
allocated as of [Check one.]
a. Standard: the last day of each Plan Year.
b. each ____________________.
4. Forfeitures. Forfeitures attributable to Matching
Accounts
[Check one. See 6.3(c)(2)(ii).]
a. Standard: will be applied to reduce Matching
Contributions
as of the Allocation Date: [Check one. See 8.2(e).]
(1) Standard: which immediately follows the date
the Forfeiture
occurs.
(2) which immediately follows the last day of the
Plan Year in
which the Forfeiture occurs.
b. will be reallocated to Active Participants as
of the last
day of each Plan Year. [Complete Part VII.D.2 to specify
who is an
Active Participant for this purpose.]
B. Qualified Matching Contributions. [See 5.3(c) and
Part VII.F.]
1. Formula. [Check one.]
a. Standard: No Qualified Matching Contributions
will be made.
b. Qualified Matching Contributions will be made
on account of:
[Check one or both.]
Elective Deferrals
Employee Contributions
under the following formula: [Check and complete one.
Enter "N/A"
if not applicable. The formula selected and completed must
not provide
a higher rate of Qualified Matching Contributions for
Participants who
make a higher amount of contributions.]
____ % of the Participant's contributions which
do not
exceed $_____ or ____% of the Participant's Compensation
plus ____ %
of the Participant's contributions which exceed $_____ or
____ %, but
contributions in excess of $ __________ or ____% of the
Participant's
Compensation will not be matched.
such percentage of the Participant's
contributions as
determined by the Employer in its discretion for each Plan
Year.
in an amount
equal to
__________________
2. Eligible Participant. The Qualified Matching
Contribution for
any Allocation Date will be made only for each Participant
who makes
Elective Deferrals or Employee Contributions, as
applicable, during
the period ending on the Allocation Date and who satisfies
all of the
following requirements: [Check one.]
a. Standard: no additional requirements.
b. Alternative: [Check one or more.]
(1) the Participant is employed (or on an
authorized leave of
absence) on the last day of the Plan Year or (b) is not
employed as of
the last day of the Plan Year but is credited with more
than 500 Hours
of Service in such Plan Year. [Do not check if Allocation
Date is not
Standard Option. Special Hour of Service equivalencies
apply if
"Elapsed Time" is selected. See Part V.A.2.] However, a
Participant
who died, retired or became disabled during the Plan Year
will be
eligible: [Check one.]
without regard to the number of Hours of Service.
only if the Participant completes the Hours of
Service
specified above.
(2) the Participant is a Nonhighly Compensated
Employee.
(3) the Participant is credited with at least 2
Years of Service
(for participation purposes) on such Allocation Date.
(4) for Plan Years beginning before the __________
[Not later
than Final Compliance Date], the Participant [Check one or
more only
if Allocation Date is Standard Option.]
is employed (or on an authorized leave of absence)
on the
last day of the Plan Year;
is not employed on the last day of the Plan
Year
because the Participant died, retired or became
disabled
during such Plan Year;
if the "Hours of Service" method is selected,
is
credited with more than 1,000 Hours of Service
during such
Plan Year.
3. Allocation Date. Qualified Matching Contributions
will be made
and allocated as of [Check one.]
a. Standard: the last day of each Plan Year.
b. each ____________________.
C. Qualified Nonelective Contributions. [See 5.3(d)
and Part
VII.F.]
1. Formula. In addition to the Qualified Nonelective
Contributions
which may be made for Nonhighly Compensated Employees to
satisfy the
ADP or ACP limits, [Check one.]
a. Standard: no additional Qualified Nonelective
Contributions
will be made.
b. additional Qualified Nonelective Contributions
will be made
in an amount equal to: [Specify nondiscriminatory formula
that
satisfies Code 401(a)(4) safe harbors.]
___________________________________________________________
______
___________________________________________________________
______
2. Eligible Participant. The Additional Qualified
Nonelective
Contribution described in this Part VII.C for any
Allocation Date will
be made only for each Participant who is an Eligible
Employee at any
time during the period ending on the Allocation Date and
who satisfies
all of the following requirements: [Check one.]
a. Standard: no additional requirements.
b. Alternative: [Check one or more.]
(1) the Participant is employed (or on an
authorized leave of
absence) on the last day of the Plan Year or (b) is not
employed as of
the last day of the Plan Year but is credited with more
than 500 Hours
of Service in such Plan Year. [Do not check if Allocation
Date is not
Standard option. Special hour of service equivalencies
apply if
"elapsed time" is selected. See part V.A.2.] However, a
participant
who died, retired or became disabled during the plan year
will be
eligible: [Check one.]
without regard to the number of Hours of Service.
only if the Participant completes the Hours of
Service
specified above.
(2) the Participant is a Nonhighly Compensated
Employee.
(3) the Participant is credited with at least 2
Years of Service
(for participation purposes) on such Allocation Date.
(4) for Plan Years beginning before the __________
[Not later
than Final Compliance Date], the Participant [Check one or
more only
if Allocation Date is Standard option.]
is employed (or on an authorized leave of absence)
on the
last day of the Plan year;
is not employed on the last day of the plan
year
because the participant died, retired or became
disabled
during such plan year;
if the "hours of service" method is selected,
is
credited with more than 1,000 hours of service
during such
plan year.
3. Allocation date. The qualified nonelective
contributions
described in this part vii.C will be made and allocated as
of [check
one.]
a. Standard: the last day of each Plan Year.
b. each ____________________.
D. Discretionary Employer Contributions.
1. Allocation Formula. The discretionary Employer
Contributions
will be allocated among Active Participants as follows:
[Check one.
See 5.3(e), 6.3(a), 6.3(c)(4) and Part VII.F. Do not
select an
integrated formula for Plan Years beginning on and after
the Final
Compliance Date if the Employer also maintains another
integrated plan
for such Plan Year.]
a. Standard: Nonintegrated. [See 6.3(a)(1) and
6.3(c)(4)(i)(A).]
b. Integrated. [See 6.3(a)(2), 6.3(c)(4)(i)(B) and
12.3(h).]
(1) Integration Percentage. [Check one. If the
Integration Level is
less than the Taxable Wage Base, the Maximum Disparity Rate
must be
reduced. See 2.39.]
Standard: the Maximum Disparity Rate.
____% [not to exceed the Maximum Disparity Rate.]
(2) Integration Level. [Check one. See 2.35.]
Standard: the Taxable Wage Base.
$________ or ____ % of the Taxable Wage Base [not
to exceed
the Taxable Wage Base.]
2. Active Participant.
a. General. The discretionary Employer Contri-butions
and
Forfeitures, if applicable, will only be allocated to: [If
the
Employer maintains another defined contribution Paired
Plan, the
allocation requirements specified in this Part VII.D.2 for
Plan Years
beginning on and after the Final Compliance Date must be
the same as
those specified in the Adoption Agreement for such other
Paired Plan.
Check one. See 2.2, 5.3(e) and Part VII.F.]
(1) Standard: each Participant who is an Eligible
Employee at
any time during the Plan Year and who (1) is employed (or
on an
authorized leave of absence) on the last day of the Plan
Year, (2)
terminated employment during the Plan Year due to death,
disability or
retirement, or (3) was not employed on the last day of the
Plan Year
but was credited with more than 500 Hours of Service during
the Plan
Year. [Special Hour of Service equivalencies apply if
"Elapsed Time"
is selected.]
(2) Alternatives to Standard: [Check one or more.]
The Participant must also be credited with at
least 2
Years of Service by the last day of the Plan Year.
The last day employment requirement will not
apply.
The 500 hours requirement will not apply.
The exceptions for death, disability and
retirement will not
apply.
b. Years Before Final Compliance Date. For Plan Years
beginning
before __________ [Not later than the Final Compliance
Date], the
discretionary Employer Contributions and Forfeitures will
only be
allocated to: [Complete only if desired. See 2.2. Check
one.]
(1) Standard: each Participant who is an Eligible
Employee at
any time during the Plan Year and (1) who is employed (or
on an
authorized leave of absence) on the last day of the Plan
Year and (if
the "Hours of Service" method is selected) who is credited
with 1,000
Hours of Service during the Plan Year or (2) who died,
retired or
became disabled during the Plan Year.
(2) Alternatives to Standard: [Check one or more.]
The last day employment requirement will not
apply.
The 1,000 hours requirement will not apply. [Not
applicable
if "Elapsed Time" is selected.]
The Participant must also be credited with at
least 2 Years
of Service by the last day of the Plan Year.
The exceptions for death, disability and
retirement will not
apply.
3. Forfeitures. Forfeitures attributable to Employer
Accounts
[Check one. See 5.3(i) and 6.3(c)(4)(ii).]
a. Standard: will be reallocated to Active
Participants as of
the last day of each Plan Year in the same manner as
Employer
Contributions.
b. will be applied to reduce Matching
Contributions, Qualified
Matching Contributions and/or Qualified Nonelective
Contributions.
E. Net Profits.
1. General. [Check one. See 5.3(a).]
a. Standard: All Employer contributions other than
Elective
Deferrals will be made out of Net Profits.
b. Alternatives to Standard: In addition to
Elective Deferrals,
the following contributions will be made without regard to
Net
Profits: [Check one or more.]
(1) Matching Contributions
(2) Qualified Matching Contributions
(3) Qualified Nonelective Contributions
(4) Discretionary Employer Contributions
(5) Definition. For this purpose, Net Profits will be
as defined
[Check one. See 2.41.]
c. Standard: in 2.41(a).
d. in the attached Addendum VII.E.2.
F. Minimum Allocations. Each Active Participant
(determined
without regard to the Participant's completed
Hours of Service) who is not a Key Employee, generally,
will receive
the minimum top-heavy allocation if the Plan is top-heavy.
[See
6.3(e) and 12.]
VIII. COMPENSATION. Compensation for any Plan Year
generally
means total compensation (not to exceed $200,000 indexed
for inflation
after 1989) actually paid to a Participant during such Plan
Year
(unless another determination period is selected). [See
2.10.]
A. Basic Definition: Total compensation means: [Check
one. See
2.10(a).]
1. Standard: wages, tips and other compensation
reportable on
Form W-2. [See 2.10(a)(1).]
2. wages subject to federal income tax
withholding. [See
2.10(a)(2)(i).]
3. general Code 415 compensation. [See
2.10(a)(2)(ii) and
7.2(a)(2)(ii)(B).]
Reimbursements or other expense allowances, fringe
benefits
(cash and noncash), moving expenses, deferred compensation
and welfare
benefits (even if includible in gross income): [Check one.
See
2.10(a)(2)(iv).]
Standard: will
will not
be included in Compensation as determined in accordance
with the
definition selected above.
B. Determination Period: [Check one. See 2.10(d).]
1. Standard: the Plan Year.
2. the calendar year ending in the Plan Year.
3. a period beginning each ______________ [Enter
the day and
month the period begins. The determination period must end
with or
within the Plan Year, must be at least 12 consecutive
months in
duration and must apply uniformly to all Employees in the
Plan.]
C. Salary Reductions. Participant salary reduction
contributions
(for example, 401(k) or benefit plan contributions)
[Check one. See
2.10(f).]
1. Standard: will
2. will not
be included in total compensation.
D. Special Rules. [Complete only if desired. See
2.10(g).]
1. Compensation for periods ending before the
Entry Date on
which an Eligible Employee becomes a Participant will be
excluded.
[See 2.10(g)(1).]
2. If this is an amendment to a Pre-Existing Plan,
the
definition of Compensation will be effective as of
_______________ [No
later than the first day of the first Plan Year after this
Plan is
adopted. See 2.10(g)(2). The definition in the Pre-
Existing Plan will
continue to apply until that date.]
IX. DISTRIBUTIONS.
A. Timing. Vested Plan benefits, generally, will be
distributed as
follows: [Check one. See 9.1(a).]
1. Standard: as soon as practical after the
Participant
separates from service subject to the Participant's
consent, if
required.
2. no earlier than the Participant's Normal
Retirement Age,
Early Retirement Age or Disability, whichever is earlier.
B. Elections to Defer. A Participant whose Account is
more than
$3500 may elect that distribution of vested Plan benefits
be deferred
until: [Check one. See 9.1(e).]
1. Standard: the Participant's Required Beginning
Date
(generally age 70).
2. the later of the Participant's Normal
Retirement Age or age
62.
C. In-Service Distributions. [See 9.2(b).]
1. Elective Deferral Accounts. In-service
distributions from
Elective Deferral Accounts will be allowed as follows:
[Check
applicable box(es).]
a. Standard: no distributions before separation
from service.
b. on or after age 59. [See 9.2(b)(4).]
c. for the following financial hardship(s):
[See9.2(b)(3).
Check one or more.]
(1) medical expenses [See 9.2(b)(3)(ii)(A).]
(2) purchase of principal residence [See
9.2(b)(3)(ii)(B).]
(3) tuition [See 9.2(b)(3)(ii)(C).]
(4) foreclosure or eviction [See
9.2(b)(3)(ii)(D).]
(5) other IRS "deemed" financial hardship [See
9.2(b)(3)(ii)(E).]
2. Matching Accounts. In-service distributions from
Matching
Accounts will be allowed as follows: [Check applicable
box(es).]
a. Standard: no distributions before separation
from service.
b. on or after age _____.
c. after the ________ anniversary of Plan
participation.
d. for a financial hardship under the safe harbor
tests. [See
9.2(b)(3).]
e. in accordance with the rules set forth in
Addendum IX.C.2.
[See 9.2(b)(5). The addendum should describe
nondiscriminatory
objective standards for an in-service distribution after a
fixed
number of years or upon the prior occurrence of some event
such as
layoff, illness or hardship.]
3. Employer Accounts. In-service distributions from
Employer
Accounts will be allowed as follows: [Check applicable
box(es).]
a. Standard: no distributions before separation
from service.
b. on or after age _____.
c. after the ________ anniversary of Plan
participation.
d. for a financial hardship under the safe harbor
tests. [See
9.2(b)(3).]
e. in accordance with the rules set forth in
Addendum IX.C.3.
[See9.2(b)(5). The addendum should describe
nondiscriminatory
objective standards for an in-service distribution after a
fixed
number of years or upon the prior occurrence of some event
such as
layoff, illness or hardship.]
4. Qualified Nonelective and Qualified Matching
Accounts. In-
service distributions from Qualified Nonelective and
Qualified
Matching Accounts will be allowed as follows: [Check
applicable
box(es).]
a. Standard: no distributions before separation
from service.
b. on or after age 59.
c. for financial hardship (pre-89 amounts only).
[See
9.2(b)(3).]
5. Employee Accounts. Withdrawals from Employee
Accounts [See
9.2(d). Check one.]
a. Standard: will be allowed.
b. will not be allowed.
D. Joint and Survivor Annuity Rules. [Check one. See
'10.]
1. Standard: The entire vested balance will be
paid (a) to
married Participants as a 50% joint and survivor annuity,
(b) to
single Participants as a 100% life annuity and (c) to the
surviving
Spouse of a married Participant who dies before retirement
as a 100%
preretirement survivor annuity.
2. The entire vested balance will be paid under
the standard
joint and survivor annuity rules except the percentages
will be:
[Percentages must be not less than 50% nor more than 100%.]
a. Qualified Joint and Survivor Annuity: _____% [See
10.1(f).]
b. Qualified Preretirement Survivor Annuity: ___%
[See 10.1(g).]
3. The standard joint and survivor annuity rules
will not
apply. [Check only if the safe harbor rule described in
10.5 will be
satisfied. This option generally is not available if this
Plan or a
Pre-Existing Plan provides annuities and separate accounts
are not
maintained for such Pre-Existing Plan balances. Under this
option, the
entire vested balance eligible for the safe harbor will be
paid to the
surviving Spouse of a married Participant who dies before
retirement.
See 10.5.]
E. Optional Distribution Forms. [See 10.6(c).] In
addition to
single sum distributions in cash, Participants may also
request:
1. Installments [See 10.6(c)(2)(ii).]
2. Annuity contracts [See 10.6(c)(2)(iii).]
3. The optional forms or in kind distribution
offered under a
Pre-Existing Plan as described in Addendum XIII.A.
4. Single sum distributions in kind [See
10.6(e).]
X. INVESTMENT PROVISIONS.
A. Individually Directed Investments. An individual's
direction of
the investment of that individual's Account [Check one.
See 13.2.]
1. Standard: will not be allowed
2. will be allowed and will apply: [Check one.]
a. Standard: to the entire Account
b. only to the following: _____________________
B. Participant Loans. Participant loans [Check one.
See 13.3.]
1. Standard: will not be allowed.
2. will be allowed.
a. Accounting. Loans will be treated as an asset of
[See 13.3(e).
Check one.]
(1) Standard: the Participant's Account.
(2) the Fund.
b. Amounts. The $10,000 exception for loans in excess
of 50% of
Account value [Check one. See 13.3(f)(2).]
(1) Standard: shall not apply.
(2) shall apply. [Note: Loans under this exception
must be
secured by collateral in addition to the Participant's
vested
Account.]
C. Insurance. A Participant's direction to purchase
insurance
contracts [Check one. See 13.1.]
1. Standard: will not be allowed.
2. will be allowed.
XI. TOP-HEAVY RULES. [SEE 12.]
A. Top-Heavy Vesting Schedule. The vesting schedule
for any Plan
Year in which this Plan is a Top-Heavy Plan will be: [Check
one. See
2.4.]
1. Standard: Full and Immediate. 100% of all
times.
2. Cliff. 100% after completion of ____ Years of
Service [not
to exceed 3].
3. Graded.
Years of Service Nonforfeitable Percentage
Less than 1 ____%
1 ____%
2 ____% [at least 20%]
3 ____% [at least 40%]
4 ____% [at least 60%]
5 ____% [at least 80%]
6 or more 100%
B. Other Paired Plan. [Complete only if the
Employer maintains
another Smith Barney defined contribution Paired Plan. See
2.45 and
12.3(c).] The minimum top-heavy contributions or benefit,
if any,
will be made under the following Paired Plans in the
following order:
[Check one.]
1. Standard: Money Purchase Pension Plan, Target
Benefit
Pension Plan, Profit Sharing Plan, 401(k) Plan.
2. Other: ______________________________.
C. Other Plans. [Complete only if the Employer
maintains or has
ever maintained another plan that is not a Paired Plan.]
1. Minimum Allocation. The minimum top-heavy
contributions or
benefit, if any, will be made under [Check one. See
12.3(d) and (g).]
a. Standard: this Plan.
b. the following plan(s): __________________.
2. Present Value. [See 12.2(f)(3)(iii). Complete
only if Employer
maintains a defined benefit plan.] "Present value" will be
determined
using an interest rate of ___% and the following mortality
table:
_____________________________________________.
3. Valuation Date. The Top-Heavy Valuation Date for
each other
plan will be: [See 12.2(g). Check one.]
a. Standard: the most recent valuation date.
b. Other: _______________________________
XII. LIMITATIONS ON ALLOCATIONS (CODE415). [See 7.2.]
A. Compensation. For Code 415 purposes, Compensation
means:
[Check one. See 7.2(a)(2).]
1. Standard: wages, tips and other compensation
reportable on
Form W-2. [See 7.2(a)(2)(i).]
2. wages subject to federal income tax
withholding. [See
7.2(a)(2)(ii)(A) and 2.10(a)(2)(i).]
3. general Code 415 compensation. [See
7.2(a)(2)(ii)(B).]
B. Limitation Year. The Limitation Year will be:
[Check one. See
7.2(a)(9).]
1. Standard: the Plan Year.
2. the 12 consecutive month period which ends on
each
__________________.
C. Other Paired Plan. [Complete only if the Employer
maintains
another Smith Barney defined contribution Paired Plan. See
2.45 and
7.2(c)(1).] The allocation adjustment will be made under
the
following plans in the following order: [Check one.]
1. Standard: Profit Sharing Plan, Money Purchase
Pension Plan,
Target Benefit Pension Plan, 401(k) Plan.
2. Other: _______________________________.
D. Other Plans. [Complete only if the Employer
maintains or has
ever maintained another plan that is not a Paired Plan.]
1. Other Defined Contribution Plan. The Annual
Additions
attributable to this Plan will be determined: [Check one.
See
7.2(d).]
a. Standard: by treating the other plan as a
Master or
Prototype Plan.
b. by using the method described in Addendum
XII.D.1.b.
2. Defined Benefit Plan. [Check and attach
appropriate addendum
only if applicable. See 7.2(a)(3), 7.2(a)(11), 7.2(e) and
12.3(g).]
The Annual Additions attributable to this Plan
will be
limited by using the method described in Addendum XII.D.2.
XIII. SPECIAL PROVISIONS FOR AMENDMENT AND RESTATEMENT
OF PRE-
EXISTING PLAN, MERGERS OR TRANSFERS.
A. Vesting or Distribution Rules. [Check and attach
appropriate
description only if applicable. See 10.6, 14.1(b) and
14.5.]
The special vesting or distribution rules which
must be
preserved under Code 411 are described in Addendum XIII.A.
B. Normal Retirement Age. [Check only if the normal
retirement age
under the Pre-Existing Plan was determined with reference
to the
participation commencement date and the special
transitional rule in
2.43 is desired. See 2.43.]
The Normal Retirement Age of a Participant who
commenced
participation in the Pre-Existing Plan in a Plan Year
beginning before
1988 will be determined under the transitional rule
described in
2.43.
C. Effective Dates. [Check and attach appropriate
addendum only if
any of the selections made in this Adoption Agreement will
become
effective as of a date other than the Effective Date set
forth in Part
II.E. However, the addendum shall in no event delay the
effective date
of any Plan provisions beyond the latest effective date
required for
such provision under TRA 86 or other applicable law or
regulations.]
Certain elections in this Adoption Agreement shall
be
effective as of the date(s) specified in Addendum XIII.C.
XIV. TRUSTEE APPOINTMENT AND TRUST AGREEMENT. [Check one.
See 2.66
and 2.68.]
A. Standard Trust Agreement. The standard Trust
Agreement will
apply and the Trustee will be the following individual(s),
bank(s) or
other person(s) who can serve as a fiduciary and trustee
under the
laws of the State shown in Part II.C.
___________________________________________
___________________________________________
[If Smith Barney Corporate Trust Company ("SBCTC") is
the
Trustee, SBCTC will charge a fee and may require the
Employer to
complete other documents prior to accepting its appointment
as
Trustee. Further, SBCTC will act only as a nondiscretionary
Trustee
and the investment of the Fund will be made as directed by
the Plan
Administrator or the Employer. See 15 and the Trust
Agreement.]
B. Alternate Trust Agreement. The alternate Trust
Agreement for
401(k) Plans will apply and the Trustee will be
_______________________, which is a bank or trust company
organized
under the laws of the State of _____________ and which is
authorized
to serve as a fiduciary and trustee under the laws of such
State.
[The Trustee will charge a fee and will require the
Employer to
complete other documents, including execution of the
alternate Trust
Agreement, prior to accepting its appointment as Trustee.
Except as
described in the Trust Agreement, the Trustee will act only
as a
nondiscretionary Trustee and will be subject to the
directions of the
Plan Administrator as a named fiduciary under the Plan in
the control
and management of the assets of the Fund. Such directions
will be
communicated to the Trustee by the Recordkeeper as
described in the
Trust Agreement.]
XV. IRS APPROVAL.
This Plan is designed to operate as a "standardized"
plan and an
adopting Employer may rely on the opinion letter issued to
the
Prototype Sponsor and may not have to apply for a favorable
determination letter on this Plan if the only plans ever
maintained
(or later adopted) by the Employer are Paired Plans which
satisfy
2.45.
Any Employer who has ever maintained or who later
adopts any plan
(including, after December 31, 1985, a welfare benefit
fund, as
defined in Code 419(e), which provides post-retirement
medical
benefits allocated to separate accounts for key employees,
as defined
in Code 419A(d)(3), or an individual medical account as
defined in
Code 415(l)(2)) in addition to this Plan (other than a
Paired Plan
which satisfies 2.45) may not rely on the opinion letter
issued to
the Prototype Sponsor by the National Office of the
Internal Revenue
Service as evidence that this Plan is qualified under Code
401.
Any Employer who adopts or maintains multiple plans
(other than
Paired Plans) must apply to the appropriate Key District
Office for a
favorable determination letter on this Plan to obtain
reliance that
this Plan as adopted by the Employer is qualified.
An Employer may not rely on the opinion letter issued
by the
National Office of the Internal Revenue Service as evidence
that this
Plan is qualified under Code 401 unless the terms of the
Plan, as
herein adopted or amended, that pertain to the requirements
of Code
401(a)(4), 401(a)(17), 401(l), 401(a)(5), 410(b) and
414(s), as
amended by the Tax Reform Act of 1986, or later laws, (a)
are made
effective retroactively to the first day of the first Plan
Year
beginning after December 31, 1988 (or such later date on
which these
requirements first become effective with respect to this
Plan) or (b)
are made effective no later than the first day on which the
Employer
is no longer entitled, under regulations, to rely on a
reasonable,
good faith interpretation of these requirements, and the
prior
provisions of the plan constitute such an interpretation.
Smith Barney will notify each adopting Employer of any
amendments
that have been made to the Plan by Smith Barney as
Prototype Sponsor
or of any intention to discontinue or abandon its
sponsorship of the
Plan as a prototype plan.
SIGNATURES
IMPORTANT:
In order to have a valid plan and trust, this Adoption
Agreement
must be signed by individuals authorized to sign for the
Employer and,
if applicable, the Trustee and each Participating
Affiliate. If the
alternate Trust Agreement is specified in Part XIV.B., the
Trust
Agreement must be signed by the Employer, the Trustee and,
if
applicable, each Participating Affiliate.
This Adoption Agreement will not become effective as a
prototype
plan unless and until it is accepted by Smith Barney as the
Prototype
Sponsor but, upon such acceptance, will be effective as a
prototype
plan retroactive to the Effective Date.
Each Affiliate (i.e., each member of a controlled
group of
corporations, commonly controlled group of trades or
businesses, or an
affiliated service group within the meaning of Code 414)
must adopt
this Plan as a Participating Affiliate.
EMPLOYER REPRESENTATIONS. The undersigned hereby
certifies that
the adoption of the Plan and the Trust Agreement is
authorized by
(1) a Board of Directors' resolution for an Employer which
is a
corporation, or (2) a written authorization by the person
or persons
duly authorized to act on behalf of an Employer which is
not a
corporation. If this Adoption Agreement amends and restates
a Pre-
Existing Plan, the undersigned hereby certifies that such
amendment is
duly authorized by the Employer. The undersigned hereby
acknowledges
that the Prototype Sponsor (1) is not responsible for the
elections
made in this Adoption Agreement, (2) shall have no
responsibility
whatsoever with respect to the Fund or the operation and
administration of this Plan, and (3) has advised the
Employer to
consult with legal counsel for the Employer regarding the
adoption and
operation of this Plan. The undersigned further
acknowledges that the
Employer is solely responsible for the elections made in
this Adoption
Agreement and for the operation and administration of this
Plan.
Finally, the undersigned acknowledges that the Prototype
Sponsor will
charge an annual prototype maintenance fee and hereby
authorizes the
Prototype Sponsor to charge such fees against any brokerage
account
maintained for the Plan.
EMPLOYER EXECUTION. Subject to the terms and
conditions of the
Plan, the Trust Agreement and this Adoption Agreement, the
undersigned
hereby has executed this Adoption Agreement to evidence its
adoption
(or, if applicable, amendment) of the Plan and the Trust
Agreement.
Signature: __________________________________
Title: _______________________ Date: __________
TRUSTEE EXECUTION. Subject to the terms and conditions
of the
Plan, the Trust Agreement and this Adoption Agreement, the
undersigned
hereby accepts its appointment as Trustee and has executed
this
Adoption Agreement to evidence its adoption of the Trust
Agreement.
[Attach additional signature pages if there are more than
three
Trustees. If the alternate Trust Agreement is specified in
Part
XIV.B., the Trustee should execute the alternate Trust
Agreement in
lieu of executing the Adoption Agreement in this section.]
Signature: ________________________ Date: ________
Signature: ________________________ Date: ________
Signature: ________________________ Date: ________
PARTICIPATING AFFILIATES EXECUTION. [Attach additional
signature
pages if there are more than three Participating
Affiliates. An
organization which becomes an Affiliate after this Adoption
Agreement
is executed should evidence its adoption of this Plan by
executing and
attaching to this Adoption Agreement a signature page which
includes
the information set forth below.]
Subject to the terms and conditions of the Plan, the
Trust Agreement
and this Adoption Agreement, the undersigned hereby has
executed this
Adoption Agreement to evidence its adoption (or, if
applicable,
amendment) of the Plan and the Trust Agreement.
AFFILIATE NAME: _______________________________
Signature: ________________________ Date: _________
Effective Date of Adoption of Plan by Affiliate (if
different from
the Effective Date in Part II.E.): _________________
AFFILIATE NAME: _______________________________
Signature: ________________________ Date: _________
Effective Date of Adoption of Plan by Affiliate (if
different from
the Effective Date in Part II.E.):_________________
AFFILIATE NAME: ______________________________
Signature: ________________________ Date: _________
Effective Date of Adoption of Plan by Affiliate (if
different from
the Effective Date in Part II.E.): _________________
PROTOTYPE SPONSOR ACCEPTANCE. Subject to the terms and
conditions
of the Plan, the Trust Agreement and this Adoption
Agreement, this
Adoption Agreement is accepted by the Prototype Sponsor.
Authorized Signature: _____________________________
Date: __________________________________________
Smith Barney Prototype
Standardized 401(k) Plan
Adoption Agreement #003
Adoption of a qualified plan has important legal and tax
implications. Failure to properly fill out the Adoption
Agreement may
result in disqualification of the Plan. Employers should
consult with
their counsel concerning the adoption of this Plan. To
obtain further
information about the Plan, contact Smith Barney through
your
Financial Consultant.
NOTE: Under the terms of the Plan, options marked
"Standard"
automatically will apply unless another option is selected.
If
additional space is needed to provide information requested
in this
Adoption Agreement, the information may be provided in an
addendum
attached to this Adoption Agreement which contains a
reference to the
appropriate Part(s) of the Adoption Agreement.
Adoption Agreement #003 may only be used in conjunction
with the
SMITH BARNEY PROTOTYPE DEFINED CONTRIBUTION PLAN - Plan
Document #05.
Capitalized terms refer to defined terms in Plan Document
#05. ""
refers to sections of Plan Document #05; "Part" refers to
provisions
in this Adoption Agreement. The instructions and
descriptions in this
Adoption Agreement generally summarize the Plan Document
provisions,
but the Plan Document terms will be controlling in the
event of any
conflict.
TO BE COMPLETED BY SMITH BARNEY
FINANCIAL CONSULTANT: ________________ Telephone Number:
_______
Address:
________________________________________________________
___________________________________________________________
______
Smith Barney Inc. Account # for
Plan:____________________________
I. EMPLOYER INFORMATION.
Name:
___________________________________________________________
Address:
________________________________________________________
___________________________________________________________
______
Taxable Year: _______________ EIN: ___________________
II. PLAN INFORMATION.
A. Plan Name:
_____________________________________________
B. Plan Year: the period which ends on
____________________
C. Construction. Except as provided in 1.2, the Plan
and the
Trust Agreement will be subject to the laws of the State of
________________________________________
D. Plan Adoption. The Plan is hereby adopted as
[Check one. See
14.1.]
1. a new profit sharing plan (with cash or
deferred
arrangement).
2. an amendment and restatement of the
___________________________________ ("Pre-Existing Plan")
which was
originally effective _______________________________,
19____.
E. Effective Date of this Adoption Agreement:
____________________________________, 19_______.
III. ELIGIBILITY AND PARTICIPATION. [If the Employer
maintains
another defined contribution Paired Plan, the eligibility
and
participation requirements specified in this Part III for
Plan Years
beginning on and after the Final Compliance Date must be
the same as
those specified in the Adoption Agreement for such other
Paired Plan.]
A. Eligible Employees. All Employees of the Employer
and all
Employees of all Affiliates who satisfy the Participation
Requirement
generally are eligible to participate in the Plan except
certain
nonresident aliens. However, notwithstanding any contrary
language,
participation in this Plan by Employees who are covered by
a
collective bargaining agreement and the extent of such
participation,
if any, will be determined by collective bargaining. [See
2.19.]
B. Participation Requirement. In order to participate
in this
Plan, an Eligible Employee must [Check one. See 2.46, 4
and Part
V.B.1. Enter "N/A" if there will be no minimum age or no
waiting
period, as applicable.]
1. Standard: reach minimum age of 21 and complete
a waiting
period of 1 Year of Service.
2. no minimum age or waiting period.
3. reach minimum age of _____ [not to exceed 21]
and complete a
waiting period of ______ Year of Service [not to exceed 1].
4. reach minimum age of ____ [not to exceed 21] and
complete
a waiting period of ____ Year of Service [not to exceed 1]
; however,
each Employee who is an Eligible Employee on the Effective
Date will
be deemed to satisfy the Participation Requirement on the
Effective
Date regardless of such Employee's actual age or service.
C. Entry Date: [Check one. See 2.26 and 4.]
1. Standard: the first day of each Plan Year and
the first day
of the seventh month of each Plan Year.
2. the date on which the Participant satisfies the
Participation Requirement.
3. other:_____________________________ [Specify
date(s). If a
single Entry Date is entered, the minimum age in Part III.B
cannot
exceed 20 and the maximum waiting period in Part III.B
cannot exceed
= year.]
IV. VESTING.
A. Death, Disability or Retirement. [See 8.1(b).]
1. Standard: A Participant's Employer Account and
Matching
Account will be 100% vested if, while an Employee, that
Participant
dies, becomes Disabled, or reaches Normal Retirement Age
or, if
applicable, Early Retirement Age.
2. A Participant's Employer Account and Matching
Account will
be 100% vested if, while an Employee, that Participant
reaches Normal
Retirement Age or if the Participant satisfies the
following
condition: [Check one or more only if desired.]
a. dies while an Employee.
b. becomes Disabled while an Employee.
c. reaches Early Retirement Age while an Employee.
B. General Vesting Schedule. [See 8.1 and 14.3(c).
Generally,
the vesting schedule under this Plan must be at least as
favorable at
the completion of each year as the vesting schedule under
the Pre-
Existing Plan. The Top-Heavy Vesting Schedule selected in
Part XI.A
will apply for all Plan Years in which the Plan is a Top-
Heavy Plan.
See 12.4.]
1. Matching Account. [Check one. "Full and Immediate
Vesting" must
be selected if the 2-year requirement for Matching
Contributions is
selected in Part VII.A.2.b.3.]
a. Standard: Full and Immediate Vesting. 100% at
all times.
b. Cliff Vesting. 100% after completion of ____
Years of
Service [not to exceed 5].
c. Graded Vesting.
Years of Service Nonforfeitable Percentage
Less than 1 ___%
1 ___%
2 ___%
3 ___% [at least 20%]
4 ___% [at least 40%]
5 ___% [at least 60%]
6 ___% [at least 80%]
7 or more 100%
d. Top-Heavy. The Top-Heavy Vesting Schedule in
Part XI.A will
apply for all Plan Years.
2. Employer Account. [Check one. "Full and Immediate
Vesting" must
be selected if the 2-year requirement for Employer
Contributions is
selected in Part VII.D.2.b.2]
a. Standard: Full and Immediate Vesting. 100% at
all times.
b. Cliff Vesting. 100% after completion of ____
Years of
Service [not to exceed 5].
c. Graded Vesting.
Years of Service Nonforfeitable Percentage
Less than 1 ___%
1 ___%
2 ___%
3 ___% [at least 20%]
4 ___% [at least 40%]
5 ___% [at least 60%]
6 ___% [at least 80%]
7 or more 100%
d. Top-Heavy. The Top-Heavy Vesting Schedule in
Part XI.A will
apply for all Plan Years.
C. Normal Retirement Age: [Check one. See 2.43 and
Part XIII.B.]
1. Standard: age 65.
2. age ____ [not to exceed 65].
3. the later of age ____ [not to exceed 65] or the
___ [not to
exceed 5th] anniversary of the date on which the
Participant commenced
participation in the Plan.
D. Early Retirement Age: [The designation of an Early
Retirement
Age may accelerate vesting and distribution. Early
Retirement Age
cannot exceed Normal Retirement Age. Check one. See 2.13
and 9.1.]
1. Standard: No Early Retirement Age.
2. age ____
3. the later of age ____ or the completion of ___
Years of
Service (for vesting purposes).
V. SERVICE FOR PARTICIPATION AND VESTING.
A. Method for Crediting Service. [Check one. See 3.]
1. Standard: "Hour of Service" method. [See 3.1.]
a. Crediting Hours. Hours will be credited during
each Computation
Period [Check one. See 3.1(c).]
(1) Standard: by maintaining records of the actual
hours worked.
[See 3.1(c)(2)(i).]
(2) by using the following equivalency [Check one.
See
3.1(c)(2)(ii).]
10 Hours of Service for each day.
45 Hours of Service for each week.
95 Hours of Service for each semi-monthly
payroll period.
190 Hours of Service for each month.
b. Vesting Computation Period. The Computation Period
for vesting
purposes will be [Check one. See 3.1(b)(2).]
(1) Standard: the Plan Year.
(2) the 12 month period beginning on the
Participant's hire date
and each anniversary of that hire date.
c. Participation Computation Period. The initial
Computation
Period for participation purposes will be the 12 month
period
beginning on the Participant's hire date. Each subsequent
Computation
Period after the initial 12 months of employment will be
[Check one.
See 3.1(b)(3).]
(1) Standard: Plan Years beginning after the
Participant's hire
date.
(2) subsequent 12 month periods beginning on the
anniversaries
of the Participant's hire date.
d. Year of Service for Vesting. For vesting purposes,
an Employee
will be credited with a Year of Service if, during a
Computation
Period, the Employee completes at least [Check one. See
3.1(d).]
(1) Standard: 1,000 Hours of Service.
(2) ______ [not more than 1,000] Hours of Service.
e. Year of Service for Participation. For
participation purposes,
an Employee will be credited with a Year of Service [Check
one. See
3.1(b)(3) and 3.1(d).]
(1) Standard: at the end of the Computation Period
in which the
Employee completes at least 1,000 Hours of Service.
(2) on the date on which the Employee completes at
least ______
[not more than 1,000] Hours of Service.
(3) at the end of the Computation Period on which
the Employee
completes at least ______ [not more than 1,000] Hours of
Service.
Notwithstanding the foregoing, if a partial Year of
Service is
selected in Part III.B, no minimum number of Hours of
Service will be
required.
2. "Elapsed Time" method. [See 3.2.]
For purposes of determining whether a Participant is
entitled
to an allocation of contributions or forfeitures, the
Participant will
be deemed to have completed more than 500 Hours of Service
in a Plan
Year if the Participant completes the following period of
employment
in the Plan Year: [Check one. See 2.2(d) and Part VII.]
a. Standard: more than 91 consecutive calendar
days.
b. more than 3 consecutive months.
B. Special Rules.
1. Vesting Service Exclusions. [See 3.8.] In
addition to any
service that is disregarded under the Break in Service
rules described
below and in 3.7(c), the following service will be
excluded for
vesting purposes:
a. Standard: No other exclusions.
b. Years of Service before age 18.
c. Years of Service before the Employer or an
Affiliate
maintained this Plan or a predecessor plan.
d. Years of Service during a period for which the
Employee made
no mandatory contributions under a Pre-Existing Plan.
2. Predecessor Employer Service (Vesting and
Participation).
Generally, unless the Employer maintains the plan of a
predecessor
employer (for example, an acquired company), service for a
predecessor
employer will not be credited as service under this Plan.
[Check and
attach appropriate addendum only if desired. See 3.4.]
Service credit will be given under this Plan for
certain
predecessor employers for participation and/or vesting
purposes to the
extent provided in Addendum V.B.2.
3. Break in Service Rules. [See 3.7 and 8.2.]
Generally, all
service completed before a Break in Service will be
credited upon
reemployment. Certain service may be excluded under the
following
rules:
a. Standard: No exclusions. [See 3.7(a).]
b. "Rule of Parity." [See 3.7(b)(3).] This rule,
generally,
disregards vesting and participation service completed
before 5
uninterrupted Breaks in Service.
c. "Alternative Maternity/Paternity Rule." [Not
applicable if
"Elapsed Time" is selected. See 3.7(b)(4).] This rule,
generally,
increases the number of Breaks in Service from 5 to 6 for
all
Employees in lieu of crediting service for
maternity/paternity leave.
d. Alternative to "Buy Back Rule." [See8.2(b).]
This rule,
generally, does not require former participants (less than
100%
vested) to pay back previous distributions upon
reemployment (vesting
only). A rehired Participant's vested interest in restored
amounts
will be determined under: [Check one. See 8.2(a), 8.2(b)
and
8.2(c).]
(1) Standard: Formula A
(2) Formula B
VI. EMPLOYEE CONTRIBUTIONS.
A. Elective Deferrals. Elective Deferrals [See
5.3(f). Check
one.]
1. Standard: will be allowed. [Complete formula
below; enter
"N/A" if not applicable.]
a. Minimum Amount. Not less than _____% of a
Participant's
Compensation or $_____.
b. Maximum Amount. For Plan Years ending on and
before
____________, not more than _____% of a Participant's
Compensation or
$_____, and for each Plan Year thereafter, not more than
_____% of a
Participant's Compensation or $ _____.
2. will not be allowed.
B. Employee Contributions. Employee Contributions
[See 5.3(g).
Check one.]
1. Standard: will not be allowed.
2. will be allowed. [Complete formula below; enter
"N/A" if not
applicable.]
a. Minimum Amount. Not less than _____% of a
Participant's
Compensation or $_____.
b. Maximum Amount. For Plan Years ending on and
before
____________, not more than _____% of a Participant's
Compensation or
$_____, and for each Plan Year thereafter, not more than
_____% of a
Participant's Compensation or $ _____.
C. Election Rules. [Check one. See 5.3(h).]
1. Standard: If a Participant does not elect to
begin Elective
Deferrals or Employee Contributions on the Participant's
Entry Date,
the Participant may elect to begin such contributions as of
any
following pay date. A Participant's election can be revised
(prospectively only) as of any pay date. A Participant who
terminates
contributions may elect to resume contributions
prospectively as of
any pay date.
2. Alternatives to Standard: A Participant's
elections may be
made as follows: [Must include at least one day in each
calendar
year.]
a. Commencement. [See 5.3(h)(2).] effective only
as of any
________________________________ following the
Participant's Entry
Date.
b. Revision. [See 5.3(h)(3).] effective only as
of any
following _______________________________.
c. Resumption. [See 5.3(h)(5).] effective only
as of any
following ___________________________.
D. Rollover Contributions. Rollover Contributions
[Check one. See
5.4.]
1. Standard: will be allowed and may be made by
[Check one.]
a. Standard: any Eligible Employee.
b. any Eligible Employee who is a Participant.
2. will not be allowed.
E. Limitations on Elective Deferrals.
1. Claims. Claims for a refund of Excess Elective
Deferrals must
be made no later than [See 7.3(f). Check one.]
a. Standard: March 1.
b. _____________ [no earlier than March 1 and no
later than
April 15.]
2. Deemed Claims. Corrections of Excess Elective
Deferrals will be
made [See 7.3(f)(2). Check one.]
a. Standard: from this Plan.
b. from the following plan(s): _______________.
3. "Gap Period" Income. The income or loss allocable
to the "gap
period" [Check one. See 7.3(e), 7.4(d)(2) and
7.5(d)(2).]
a. Standard: shall not be distributed.
b. shall be distributed.
4. Highly Compensated Employees. The following
special rules in
the temporary Code 414(q) regulations and in Code
414(q)(12) will
apply: [Check one. See 7.4(a)(5)(v).]
a. Standard: no special rules.
b. The special rules set forth in Addendum V.E.3.
5. Recharacterization. Recharacterization of Excess
Contributions
as Employee Contributions [See 7.4(e). Check one.]
a. Standard: will not be allowed.
b. [Do not check this option 2 if Employee
Contributions are
not allowed in Part VI.B.] will be allowed.
VII. EMPLOYER CONTRIBUTIONS.
A. Matching Contributions. [See 5.3(b) and Part
VII.F.]
1. Formula. [Check one.]
a. Standard: No Matching Contributions will be
made.
b. Matching Contributions will be made on account
of: [Check
one or both.]
Smith Barney
Individual Retirement Account
Disclosure Statement
This Disclosure Statement is a general review of the
terms and
conditions and the federal income tax law applicable to
your
Smith Barney Mutual Funds Individual Retirement Account
("IRA")
so that you can fully understand your rights and privileges
under
it. You should carefully study the following information.
You will be permitted to revoke your IRA within seven (7)
days
after the date on which your IRA is established by giving
written
notice to Smith Barney Corporate Trust Company,
Custodian, 201
North Walnut Street, Suite 905, Wilmington, Delaware 19801.
Upon
such revocation, you will be entitled to a return of the
entire
amount of the consideration paid to the IRA,
without any
adjustment.
I. General
(1) An IRA is a trust or custodial account
created or
organized in the United States for the exclusive benefit
of an
individual or his beneficiaries. The Internal Revenue Code
(the
"Code") permits you, if you qualify, to establish an IRA to
which
you may make contributions each year in an amount up
to the
lesser of $2,000 or 100% of your gross annual compensation.
Compensation includes wages, salary, commissions, bonuses,
tips,
etc., but does not include income from interest,
dividends or
other earnings or profits from property, or amounts not
included
in your gross income. It also includes your earned income
if you
are self-employed (reduced by deductible Keogh
plan
contributions) and taxable alimony. Subject to the
limitations
discussed in paragraph (2), contributions to your IRA
(other than
rollover contributions described in paragraph (13)
below) are
deductible from your gross income on your federal
income tax
return and may be deducted even if you do not itemize
your
deductions. No part of your IRA contributions or the
earnings
thereon is subject to any forfeiture provisions. Further,
your
IRA is tax-exempt, which means that you are not taxed on
earnings
from your IRA contributions until distribution.
However, no
deduction for IRA contributions will be allowed for the
year in
which you reach age 70 or any year thereafter.
(2) If neither you nor your spouse is an active
participant
in a retirement plan (as defined below) you may
make a
contribution of up to the lesser of $2,000 (or $2,250 in
the case
of a spousal IRA see paragraph (3) below) or
100% of
compensation and deduct the entire amount of your
contribution.
Furthermore, if you are an active participant but have
adjusted
gross income ("AGI") below a certain level, called the
threshold
level, you may also fully deduct your IRA
contribution. If,
however, you or your spouse is an active participant
in a
retirement plan and your combined adjusted gross income is
above
the threshold level, the amount of the deductible
contribution
you may make to an IRA is phased out and eventually
eliminated.
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,
starting with the 1987 tax 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
even if you were only with the employer for part of the
year. If
you are married but file a separate tax return, your
spouse's
active participation does not affect your ability to
make
deductible contributions.
As stated above, 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 contribution. Your tax return will
show you
how to calculate your AGI for this purpose. If you are
at or
below the threshold AGI level you are treated as if you
were not
an active participant. Therefore, you can make a
deductible
contribution under the same rules as a person who is
not an
active participant, i.e., up to the lesser of $2,000 or
100% of
compensation. If you are single, your threshold AGI
level is
$25,000. If you are married and file a joint tax return,
your
threshold AGI level is $40,000. If you are married but
file a
separate tax return, your threshold AGI level is $0. If
your AGI
is less than $10,000 above your threshold level, you can
still
make a deductible contribution, but it will be limited in
amount.
You can estimate your deduction limit by using a table
provided
by the IRS in Announcement 86-121 or you can calculate
your
deduction limit using the following formula:
$10,000 excess AGI x $2,000 = deduction limit
$10,000 ($2,250 for spousal IRA)
Excess AGI means the amount by which your AGI exceeds
your
threshold level.
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: Ms. Smith, a single person, is an active
participant and
has an AGI of $31,619. She calculates her
deductible IRA
contribution as follows:
Her AGI is $31,619.
Her threshold level is $25,000.
Her Excess AGI is (AGI threshold level) or
($31,619 $25,000) = $6,619.
So her IRA deduction limit is:
$10,000 $6,619 x $2,000 = $676 (rounded to $680).
$10,000
(3) Even if you are
above the
threshold level described in paragraph (2) and thus may not
make
a deductible contribution of $2,000 ($2,250 for a spousal
IRA),
you may still contribute up to the lesser of 100% of
compensation
or $2,000 to an IRA ($2,250 for a Spousal IRA). The
amount of
your contribution which is not deductible will be a
nondeductible
contribution to the IRA. 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 contribution, whether from deductible or
nondeductible
contributions, will not be taxed until taken out of your
IRA and
distributed to you.
If you make a nondeductible contribution to an IRA 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.
You may withdraw an IRA 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. 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.
(4) If you have a non-
working
spouse or a spouse who does not make a contribution to an
IRA,
you may establish a separate IRA for your spouse
(called a
spousal IRA). If you maintain IRAs for yourself and your
spouse,
you may make combined contributions each year in an amount
up to
the lesser of $2,250 or 100% of your gross annual
compensation;
however, no IRA contributions (other than rollover
contributions
described in paragraph (13) below) in excess of $2,000 per
year
may be made to either of such IRAs (i.e., at least $250
must be
contributed to one of the IRAs in order to take advantage
of the
full $2,250 limit). If you establish a spousal IRA, the
rules
concerning IRAs which are described in the following
paragraphs
apply equally to your spouse.
(5) Contributions to
your IRA
must be made in cash, and in no case will the Custodian,
accept
contributions on your behalf in excess of $2,000 ($2,250
if you
maintain an IRA and a spousal IRA) for any taxable year,
unless
the contribution is designated as a rollover.
(6) Any contributions
to your
IRA over and above the permissible limits set forth
above are
considered "excess contributions" subject to an annual
excise tax
of 6% of the amount of the excess contributions for each
year.
Such excess contributions may be corrected (so that the 6%
excise
tax will not apply) either by withdrawal of the
excess
contributions from the IRA or, in years subsequent to the
year in
which the initial excise tax is imposed, by
foregoing IRA
contributions in those years until the excess is
charged off
against permissible contributions for those later years.
(7) An IRA is
intended to
provide income for you when you retire. For this reason,
there
are certain restrictions on IRA withdrawals. You may
withdraw the
funds in your IRA without penalty after the date you
attain age
59 or become permanently disabled. (See paragraph (10)
below.)
You must begin to receive distributions no later than
April 1
following the year in which you attain age 70. The
distribution
of funds in your account at that time can be (i) in a
single lump
sum payment, (ii) in the form of periodic payments for a
period
certain extending up to your life expectancy or the joint
life
expectancy of you and your beneficiary or (iii) in an
annuity
contract over your life or the joint lives of you and
your
beneficiary. If you die after distribution to you has
begun, the
remaining funds in your IRA must continue to be
distributed at
least as rapidly as before your death. If you die
before
distribution has begun, the funds in your IRA must be
distributed
in accordance with one of the following two options.
First, they
can all be distributed to your beneficiary within five
years of
your death. Second, they can be paid as equal periodic
payments
to your beneficiary, beginning no later than one year
after your
death, for a period not exceeding the beneficiary's
life
expectancy. If the beneficiary is your spouse then the
following
two additional options are also available. Your spouse may
elect
that the funds be paid as equal periodic payments over a
period
not exceeding his or her life expectancy, with
distribution to
begin no later than the date on which you would have
attained age
70. Alternatively, your spouse may elect to treat the IRA
as his
or her own IRA subject to the regular IRA
distribution
requirements. Such election is automatic if your spouse
makes a
regular IRA contribution to the account, makes a rollover
to or
from the account or fails to elect any of the other
three
options. If, after you attain age 70, the amount
distributed to
you in any year is less than the minimum amount required
by law
to be distributed, the Internal Revenue Code imposes a tax
equal
to 50% of any such deficiency.
(8) Except to the
extent
attributable to nondeductible IRA contributions,
distributions
from an IRA (that are not rolled over) are taxed as
ordinary
income to the individual participant receiving such
distributions
and are not eligible for capital gains treatment. The
special
five-year forward income averaging treatment accorded
lump sum
distributions from tax-qualified pension and profit sharing
plans
does not apply to lump sum distributions from an IRA.
However,
the general income averaging rules under the Internal
Revenue
Code are available to an individual participant
receiving IRA
distributions.
If you make nondeductible IRA contributions, a portion of
your
distributions from the IRA will be non-taxable (as a
return of
your nondeductible contributions) and a portion will be
taxable
(as a return of deductible contributions, if any, and
account
earnings). The following formula is used to
determine the
non-taxable portion of your distribution for a taxable
year.
Remaining Total Nontaxable
Nondeductible x Distributions =
distributions
contributions (for the year) (for the year)
Year-end total IRA
account balances
To figure the year-end total IRA account balance you treat
all of
your IRAs 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: Mr. Brown makes the following contributions to his
IRA:
Year Deductible Nondeductible
1983 $2,000
1984 1,800
1987 1,000 $1,000
1989 600 1,400
$5,400 $2,400
In addition, his IRAs earn $1,200 through the end of
1991. In
1991 Mr. Brown takes a distribution of $3,000. He
calculates the
nontaxable portion of the distribution as follows:
His remaining deductible contributions =
$2,400
His deductible contributions =
$5,400
His IRA earnings =
$1,200
His year-end total IRA account balances (as of
12/31/91,
including 1991 distribution) = $9,000
Therefore, applying the formula mentioned above, the
nontaxable
portion of his distribution is $800:
$2,400 x $3,000 = $800
$9,000
Thus, $800 of the $3,000 distribution in 1991 will
not be
included in Mr. Brown's taxable income. The remaining
$2,200 will
be taxable to him in 1991.
(9) Any distribution from an IRA to you or your
beneficiary is
subject to withholding of federal income tax at the rate
of 10%
unless you or your beneficiary elects to have no
withholding
apply to the distribution. The Custodian will furnish you
with
the proper information and election form when any
IRA
distribution is requested.
(10) In general, a taxable distribution from an IRA
before
an individual attains age 59 is considered a
premature
distribution subject to an additional penalty tax equal to
10% of
the taxable portion of the distribution. The 10% penalty
tax,
however, does not apply to (a) distributions made
to the
beneficiary of an individual (or to the individual's
estate) on
or after the individual's death, (b) distributions
attributable
to the individual's being disabled, (c) distributions
that are
part of a series of substantially equal periodic payments
that
are made at least annually for the life of the individual
or the
joint lives of the individual and his beneficiary,
and (d)
certain distributions pursuant to a divorce decree (a
QDRO).
(11) Generally, for federal estate tax purposes,
amounts
held in an IRA are included in the individual's gross
estate.
However, if your spouse is your beneficiary, the IRA will
qualify
for the marital deduction.
(12) The Code provides that the transfer of your
interest in
an IRA to a former spouse under a divorce decree or a
written
instrument incident to such divorce is not to be
considered a
taxable transfer. After the transfer the IRA will be
treated as
maintained for the benefit of the former spouse.
(13) If you receive in one taxable year (A) a
lump sum
distribution of your entire interest in a qualified plan
after
you reach age 59, become disabled (if self-employed)
or on
account of your separation from service (if not self-
employed),
death of your spouse or a termination of such plan, or
(B) a
distribution of at least 50% of your interest in a
qualified plan
on account of disability, death of your spouse or your
separation
from service, you may transfer, or "rollover," all or any
part of
such distribution (exclusive of any employee
contributions) tax
free into an IRA. Such a rollover is permissible even
though you
have already made the maximum $2,000 contribution to
an IRA
during the year. This transfer must be completed within 60
days
after you receive the distribution and if property other
than
cash is distributed, the same property or its proceeds
may be
rolled over.
Similarly, part or all of the amount distributed from an
IRA may
be rolled over tax free into another IRA or an
individual
retirement annuity. Furthermore, if the entire balance in
an IRA
is distributed and no portion of the distribution is
attributable
to sources other than a lump sum distribution from a
qualified
plan, part or all of the amount distributed may be rolled
over
tax free to another qualified plan, if the plan so
permits.
However, rollover contributions from one IRA to another
IRA may
occur only once a year and money or property which is
distributed
from an IRA must be rolled over within sixty days from the
date
the distribution is received.
Generally, such rollover amounts are not tax-deductible
by the
individual participant and are not subject to the excise
tax on
excess contributions described in paragraph (6) above.
(14) Excess distributions made from IRAs,
qualified
retirement plans and tax-sheltered annuities are subject to
a 15%
excise tax. Generally, an excess distribution for a year
is a
distribution in excess of the greater of $150,000 or
$112,500
(indexed). The following distributions, however, are
excluded for
purposes of determining this excise tax: (1) distributions
made
with respect to an individual after his or her
death, (2)
distributions payable to an alternate payee (such as a
former
spouse) under a qualified domestic relations order
if the
distribution is includible in the income of the alternate
payee,
(3) distributions attributable to after-tax
contributions, and
(4) distributions not includible in income by reason
of a
rollover contribution. All distributions made with respect
to any
individual during a calendar year are aggregated for
purposes of
determining the amount of the excess distributions for such
year.
The tax is reduced by any payment of the 10% penalty tax on
early
withdrawals. (See paragraph (10) above.)
An individual may elect to be covered by a special
grandfather
rule which exempts from the excise tax benefits
which are
attributable to an accrued benefit as of August 1, 1986.
This
election may only be made if the individual's accrued
benefit as
of August 1, 1986 exceeds $562,500.
In lieu of subjecting post-death distributions to the
tax on
excess distributions, the Code adds an additional
estate tax
equal to 15% of the individual's excess retirement
accumulation.
The "excess retirement accumulation" is the excess (if
any) of
(A) the value of the decedent's interests in all
qualified
retirement plans, tax-sheltered annuities and IRAs over
(B) the
present value of (i) annual payments equal to the annual
ceiling,
multiplied by (ii) the individual's life expectancy
determined
immediately before his or her death. The excess
distributions tax
may not be offset by any credits against the estate tax.
(15) IRA funds are subject to certain
investment
restrictions. No part of your IRA contributions may be
invested
in life insurance contracts, nor in art works, rugs,
antiques,
metals, gems, coins (other than gold or silver coins
issued by
the United States), stamps, alcoholic beverages or any
other
tangible personal property which the Internal Revenue
Service
classes as a "collectible." Contributions to your IRA,
and the
earnings thereon, are invested in shares of one or more
of the
Smith Barney Mutual Funds selected by you. The assets in
your
account are held in a custodial account exclusively for
your
benefit and the benefit of such beneficiaries as
you may
designate in writing delivered to the custodian. The
balance in
your IRA represents a separate account which is
clearly
identified as your property and generally may not be
combined for
investment with the property of another individual. Your
right to
the entire balance in your account is nonforfeitable. No
part of
the assets of your account may be invested in life
insurance
contracts.
(16) If you or your beneficiary engage in so-
called
"prohibited transactions" with respect to your IRA, the IRA
will
be disqualified and lose its exemption from federal income
tax.
In this event, the fair market value of the assets in
your IRA
will be included in your gross income for the taxable
year in
which disqualification occurs. In addition, if your
IRA is
disqualified in a year before or during which you attain
age 59,
you may be subject to an additional tax equal to 10%
of the
amount included in your gross income by reason of
such
disqualification. In general, a "prohibited transaction"
means
any direct or indirect (1) sale or exchange, or leasing,
of any
property; (2) lending of money or other extension of
credit; or
(3) furnishing of goods, services or facilities
between the
individual or his beneficiary or other disqualified
person and
the IRA; (4) transfer to, or use by or for the benefit
of, the
individual or his beneficiary or other disqualified
person, of
the income or assets of the IRA; (5) dealing by the
individual or
his beneficiary or other disqualified person with the
assets of
the IRA in his own interest or for his own account;
or (6)
receipt of any consideration for his own personal account
by any
disqualified person who is a fiduciary from any party
dealing
with the IRA in connection with a transaction
involving the
income or assets of the IRA.
(17) If you pledge amounts in your IRA as security
for a
loan, then the amounts pledged are considered to be
distributed
to you and this amount must be included in your gross
income.
Further, you may be subject to an additional tax equal to
10% of
the amount pledged if you pledge your IRA before you
attain age
59.
(18) SBS Trust Company, as Custodian of your IRA,
charges an
initial acceptance fee of $10.00 per account, and an
annual
maintenance fee for your account of $10.00 per fund
with a
maximum charge of $15.00. (In the case of mutual funds
that
charge a sales commission on the purchase of their
shares,
assuming level annual contributions of $1,000 on the first
day of
each year, there will be charged against each such
contribution a
sales commission equal to the applicable percent of
such
contribution described in the mutual fund Prospectus.
Thus, the
IRA would have charged against each $1,000 annual
contribution
and the earnings in the account a sales
commission, if
applicable, and an annual maintenance fee for your
account of
$10.00 per fund position with a maximum charge of $15.00
(plus an
additional $10.00 acceptance fee for the first
year's
contribution). Information on load and no-load
charges is
contained in the mutual fund Prospectuses. The
custodian may
change any of the above fees on written notice.
Further
information regarding charges in connection with
the
administration of your IRA is contained in the
Application and
mutual fund Prospectus.
At least once each year, the Custodian will send you a
written
report specifying the current value of your IRA assets.
Growth in
the value of your IRA is neither guaranteed nor projected.
(19) You are required to file Form 5329
(Return for
Individual Retirement Arrangement Taxes) with the IRS with
your
federal income tax return for each taxable year during
which you
are subject to (i) a 6% penalty for excess contributions
(see
paragraph (6) above), (ii) a 50% excise tax for
failure to
distribute by April 1 following the year in which you
attain age
70 (see paragraph (7) above), or (iii) a 10% excise
tax for
premature distributions (see paragraph (10) above).
(20) The form of your IRA has been approved by the
Internal
Revenue Service, but such approval applies only to the
form of
the IRA and does not represent a determination of the
IRA's
merits as an investment.
(21) Further information concerning IRAs may be
obtained
from any district office of the IRS. You should
ask for
Publication 590.
II. Special Rules Applicable Only To An IRA Established
As Part
Of An Employer's SEP (Simplified Employee Pension Plan)
Program
If your IRA has been established as part of a SEP
program
maintained by your employer, it differs in a number of
important
respects from an ordinary IRA. These differences are as
follows:
(1) The Internal Revenue Code permits an employer to
contribute
annually to your SEP-IRA up to $30,000 or 15% of
your
compensation (not to exceed $150,000), whichever is
less. For
purposes of determining the 15% limitation, the amount
of the
employer's contribution to the SEP-IRA is excluded
from
compensation.
(2) The employer contributions must be made under a
written
allocation formula, which cannot discriminate in
favor of
employees who are highly compensated. Employer
contributions are
considered discriminatory unless they bear a uniform
relationship
to the first $150,000 of each participating employee's
total
compensation.
(3) Your employer must cover in a SEP each employee
who has
attained age 21 and has performed service for it during at
least
3 of the immediately preceding 5 years. However,
employees who
earn less than $300 a year (adjusted for cost of
living),
employees covered by a collective bargaining
agreement, and
nonresident aliens may be excluded from consideration. Any
excess
contributions made by you or your employer to your SEP-IRA
should
be withdrawn prior to the due date of your tax return in
order to
avoid imposition of the 6% penalty tax on the excess
amount and
its earnings.
(4) Contributions made by your employer to your SEP-IRA
for a
year up to the $30,000/15% of compensation limit are
deductible
by the employer and are excludable from your gross
income. In
addition, you may contribute on your own behalf to your
SEP-IRA
(or another IRA) an amount up to the lesser of 100% of
your
compensation or $2,000 subject to the rules on
deductibility
applicable to active participants discussed in the
General IRA
rules, paragraph (2) above.
(5) Your employer may contribute to your SEP-IRA in and
after
the taxable year in which you attain age 70 and you may
exclude
your employer's contribution from income in those taxable
years.
(6) There is no provision in the law for maintaining a
spousal
IRA under a SEP.
(7) If you are covered under certain other plans in
addition to
a SEP, the Internal Revenue Code imposes additional
restrictions
on the contributions and benefits which may be allocable
to you.
You should check with your employer if you think that these
rules
may affect you.
(8) Your rights to withdraw amounts held in a SEP-IRA
cannot be
restricted by your employer. Except as provided above,
your
SEP-IRA is subject to the rules governing an
"Individual
Participant" IRA.
Questions and Answers
Who may contribute to an Individual Retirement Account?
If you have compensation that must be included in your
income for
the year, including salary, commissions and earnings
from
self-employment, and will not have reached age 70 by the
end of
the year, you can contribute to an IRA.
How much may I contribute to my IRA?
You may contribute 100% of your compensation up to a
maximum of
$2,000.
How much of my contribution is deductible?
If you are not covered by an employee pension plan,
your
contribution is fully deductible up to the $2,000 limit.
If you
are covered by an employee pension plan then the amount of
your
contribution that is deductible depends on your adjusted
gross
income, as follows:
If you are married, file a joint return and your adjusted
gross
income does not exceed $40,000, your contribution is
fully
deductible. If it is above that, but not above $50,000,
your
contribution is partially deductible.
If you are single and your adjusted gross income does not
exceed
$25,000, your contribution is fully deductible. If it is
above
that, but not above $35,000, your contribution is
partially
deductible.
If you are married, file separate returns and your adjusted
gross
income does not exceed $10,000, your contribution is
partially
deductible.
Whether or not your contributions are tax deductible,
earnings
accumulate tax-deferred. You do not pay any taxes on
earnings in
your IRA until you make withdrawals.
Can my spouse also contribute to an IRA?
If your spouse also works, he or she may also contribute
up to
the 100% of compensation/$2,000 maximum. If your spouse
does not
work, or even if he or she does, but does not contribute
to an
IRA, you may contribute to your own IRA and to a
separate IRA
established for your spouse (a "spousal IRA") up to $2,250.
Your
contribution may be divided between your own IRA and the
spousal
IRA any way you want, except that no more than $2,000
can be
contributed into either one of the two in any year.
When may I make withdrawals from my IRA?
Withdrawals may be made without penalty after you reach age
59.
Generally, withdrawals made prior to this date are subject
to a
10% tax penalty.
When must I make withdrawals from my IRA?
You must start withdrawing your IRA by April 1 following
the year
that you reach age 70. Withdrawals can, however, be
spread out
over your life expectancy or over the life expectancy of
you and
your beneficiary.
What investments are permitted through an Easy IRA?
Contributions may be invested in shares of one or more
of the
Smith Barney Mutual Funds as selected by you.
I understand that my contributions may be tax deductible
and that
earnings accumulate tax-deferred, but how much can I
accumulate?
There is no limit to how large your Easy IRA can grow,
although
Smith Barney cannot guarantee any growth. However, tax-
deferred
compounding can amount to a surprisingly large amount.
Under the tax laws there is a cap on the amount of
distributions
which you may receive annually from all of your retirement
plans,
including IRAs and Keogh plans. Distributions in excess
of the
maximum amount which, generally, is $150,000 may be
subject
to a 15% excise tax.
Is there a deadline for opening an Easy IRA?
Your IRA contribution for any year must be made by April
15 of
the following year. However, the earlier you set
up and
contribute to your IRA, the sooner you can take
advantage of
tax-deferred earnings on your investments.
For further information contact your Smith Barney
Financial
Consultant.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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JAN-31-1996
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<PERIOD-TYPE> YEAR <FISCAL-YEAR-END>
JAN-31-1996
<PERIOD-END> JAN-31-1996
[INVESTMENTS-AT-COST] 161,807,297
[INVESTMENTS-AT-VALUE] 216,593,748
[RECEIVABLES] 891,298
[ASSETS-OTHER] 8,554,469
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 226,039,515
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[SHARES-COMMON-PRIOR] 9,553,177
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[ACCUM-APPREC-OR-DEPREC] 54,786,450
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[DIVIDEND-INCOME] 4,772,452
[INTEREST-INCOME] 1,130,671
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[EXPENSES-NET] 2,842,475
[NET-INVESTMENT-INCOME] 3,060,649
[REALIZED-GAINS-CURRENT] 3,447,017
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[DISTRIBUTIONS-OF-INCOME] (1,331,232)
[DISTRIBUTIONS-OF-GAINS] (1,823,336)
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[NUMBER-OF-SHARES-SOLD] 16,587,042
[NUMBER-OF-SHARES-REDEEMED] (21,878,316)
[SHARES-REINVESTED] 2,793,248
[NET-CHANGE-IN-ASSETS] (10,359,516)
[ACCUMULATED-NII-PRIOR] 169,140
[ACCUMULATED-GAINS-PRIOR] 494,119
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[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 918,110
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[GROSS-EXPENSE] 2,842,475
[AVERAGE-NET-ASSETS] 101,139,353
[PER-SHARE-NAV-BEGIN] 9.65
[PER-SHARE-NII] 0.14
[PER-SHARE-GAIN-APPREC] 2.75
[PER-SHARE-DIVIDEND] (0.15)
[PER-SHARE-DISTRIBUTIONS] (0.20)
[RETURNS-OF-CAPITAL] 0
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[INVESTMENTS-AT-COST] 161,807,297
[INVESTMENTS-AT-VALUE] 216,593,748
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[ASSETS-OTHER] 8,554,469
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[TOTAL-ASSETS] 226,039,515
[PAYABLE-FOR-SECURITIES] 1,633,752
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[OTHER-ITEMS-LIABILITIES] 459,338
[TOTAL-LIABILITIES] 2,093,090
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 168,844,212
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[SHARES-COMMON-PRIOR] 8,857
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[OVERDISTRIBUTION-GAINS] 0
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[DIVIDEND-INCOME] 4,772,452
[INTEREST-INCOME] 1,130,671
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[EXPENSES-NET] 2,842,475
[NET-INVESTMENT-INCOME] 3,060,649
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[DISTRIBUTIONS-OF-INCOME] (6,052)
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JAN-31-1996
<PERIOD-END> JAN-31-1996
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[INVESTMENTS-AT-VALUE] 403,012,553
[RECEIVABLES] 2,882,772
[ASSETS-OTHER] 231,517
[OTHER-ITEMS-ASSETS] 0
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[PAYABLE-FOR-SECURITIES] 545,000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 818,846
[TOTAL-LIABILITIES] 1,363,846
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 337,135,662
[SHARES-COMMON-STOCK] 9,210,887
[SHARES-COMMON-PRIOR] 10,012,321
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[ACCUMULATED-NET-GAINS] 5,616,446
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 60,421,558
[NET-ASSETS] 404,762,996
[DIVIDEND-INCOME] 5,156,736
[INTEREST-INCOME] 11,507,493
[OTHER-INCOME] 0
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[NET-INVESTMENT-INCOME] 10,396,146
[REALIZED-GAINS-CURRENT] 15,912,267
[APPREC-INCREASE-CURRENT] 63,677,310
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 4,794,402
[DISTRIBUTIONS-OF-GAINS] 4,657,750
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 541,718
[NUMBER-OF-SHARES-REDEEMED] 1,845,569
[SHARES-REINVESTED] 502,417
[NET-CHANGE-IN-ASSETS] 27,509,401
[ACCUMULATED-NII-PRIOR] 1,367,230
[ACCUMULATED-GAINS-PRIOR] 1,213,519
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,856,886
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,268,083
[AVERAGE-NET-ASSETS] 164,487,070
[PER-SHARE-NAV-BEGIN] 15.91
[PER-SHARE-NII] 0.61
[PER-SHARE-GAIN-APPREC] 3.52
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (1.04)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 19.00
[EXPENSE-RATIO] 1.21
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<ARTICLE> 6
<CIK> 0000787514
<NAME> SMITH BARNEY EQUITY FUNDS
<SERIES>
[NUMBER] 1
<NAME> STRATEGIC INVESTORS FUND - CLASS B
<S> <C>
<PERIOD-TYPE> YEAR <FISCAL-YEAR-END>
JAN-31-1996
<PERIOD-END> JAN-31-1996
[INVESTMENTS-AT-COST] 342,590,995
[INVESTMENTS-AT-VALUE] 403,012,553
[RECEIVABLES] 2,882,772
[ASSETS-OTHER] 231,517
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 406,126,842
[PAYABLE-FOR-SECURITIES] 545,000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 818,846
[TOTAL-LIABILITIES] 1,363,846
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 337,135,662
[SHARES-COMMON-STOCK] 11,883,207
[SHARES-COMMON-PRIOR] 13,527,240
[ACCUMULATED-NII-CURRENT] 1,589,330
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 5,616,446
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 60,421,558
[NET-ASSETS] 404,762,996
[DIVIDEND-INCOME] 5,156,736
[INTEREST-INCOME] 11,507,493
[OTHER-INCOME] 0
[EXPENSES-NET] 6,268,083
[NET-INVESTMENT-INCOME] 10,396,146
[REALIZED-GAINS-CURRENT] 15,912,267
[APPREC-INCREASE-CURRENT] 63,677,310
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5,223,352
[DISTRIBUTIONS-OF-GAINS] 6,253,844
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,095,309
[NUMBER-OF-SHARES-REDEEMED] 3,328,074
[SHARES-REINVESTED] 588,732
[NET-CHANGE-IN-ASSETS] 27,509,401
[ACCUMULATED-NII-PRIOR] 1,367,230
[ACCUMULATED-GAINS-PRIOR] 1,213,519
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,856,886
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,268,083
[AVERAGE-NET-ASSETS] 223,500,946
[PER-SHARE-NAV-BEGIN] 15.97
[PER-SHARE-NII] 0.49
[PER-SHARE-GAIN-APPREC] 3.53
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.94)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 19.05
[EXPENSE-RATIO] 1.94
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<ARTICLE> 6
<CIK> 0000787514
<NAME> SMITH BARNEY EQUITY FUNDS
<SERIES>
[NUMBER] 1
<NAME> STRATEGIC INVESTORS FUND - CLASS C
<S> <C>
<PERIOD-TYPE> YEAR <FISCAL-YEAR-END>
JAN-31-1996
<PERIOD-END> JAN-31-1996
[INVESTMENTS-AT-COST] 342,590,995
[INVESTMENTS-AT-VALUE] 403,012,553
[RECEIVABLES] 2,882,772
[ASSETS-OTHER] 231,517
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 406,126,842
[PAYABLE-FOR-SECURITIES] 545,000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 818,846
[TOTAL-LIABILITIES] 1,363,846
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 337,135,662
[SHARES-COMMON-STOCK] 177,973
[SHARES-COMMON-PRIOR] 123,475
[ACCUMULATED-NII-CURRENT] 1,589,330
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 5,616,446
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 60,421,558
[NET-ASSETS] 404,762,996
[DIVIDEND-INCOME] 5,156,736
[INTEREST-INCOME] 11,507,493
[OTHER-INCOME] 0
[EXPENSES-NET] 6,268,083
[NET-INVESTMENT-INCOME] 10,396,146
[REALIZED-GAINS-CURRENT] 15,912,267
[APPREC-INCREASE-CURRENT] 63,677,310
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 60,558
[DISTRIBUTIONS-OF-GAINS] 83,748
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 111,657
[NUMBER-OF-SHARES-REDEEMED] 64,317
[SHARES-REINVESTED] 7,158
[NET-CHANGE-IN-ASSETS] 27,509,401
[ACCUMULATED-NII-PRIOR] 1,367,230
[ACCUMULATED-GAINS-PRIOR] 1,213,519
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,856,886
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,268,083
[AVERAGE-NET-ASSETS] 2,497,529
[PER-SHARE-NAV-BEGIN] 15.97
[PER-SHARE-NII] 0.45
[PER-SHARE-GAIN-APPREC] 3.60
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.94)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 19.08
[EXPENSE-RATIO] 1.94
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
